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What Are The Benefits And Disadvantages Of A Trust?


There are many benefits of a trust, the biggest of which is the ability to avoid probate. Just like a corporation, a trust is a separate entity unto itself. The settlors are the people who created the trust, and when they pass away, the trust continues to operate. The successor trustee has access to the funds, allowing them to continue the operation of a business and pay the decedent’s outstanding bills and funeral costs. If there is a rental property, they can collect the rents, pay the mortgages, pay for repairs and then distribute the assets according to the beneficiary’s wishes.

A trust is more expensive than a will to create but eliminates costly probate fees to settle the estate of the decedent. One disadvantage of a trust might arise if the person expects there to be litigation after they pass. For example, if a person decides to disinherit their entire family and give everything to charity, then they may expect litigation. In these cases, I recommend that people just use a will and let it go to probate because they know they will end up in court anyway.

What Components Make Up An Effective Trust?

One component of an effective trust is the trust itself, which determines how the estate will be administered once the person passes. That would be the trust estate, not the probate estate. There is also a pour-over will, which is the mechanism by which assets outside of the trust are added to the trust. The most important component of a trust is the funding of a trust, which means transferring deeds, property documents, stock ownership and property into the trust. A trust that is not funded is worth exactly the same amount as the paper on which it is printed: not very much.

Can I Have More Than One Trust?

A person can create as many trusts as they want; there is no limit.

How Do You Advise Clients Who Are Afraid Of Losing Control Over Assets By Putting Them In A Trust?

If a client is afraid that they will lose control over assets by putting them in a trust, I will explain to them that they will not lose control over their assets if they put them in a revocable trust. A revocable trust allows a person to put their assets in a trust but still have ownership of them and still have the ability to revoke or change that trust.

Are Assets That Are Held In a Trust Protected From Creditors?

Whether or not assets that are held in a trust are protected from creditors will depend on whether or not they are in an irrevocable trust; if they are, then they will be minimally protected from creditors. In California, the creditors can only reach 25 percent of what’s available to the beneficiary (provided that the beneficiary doesn’t need that for their support). So, having an irrevocable trust creates one more step for the creditor before they can reach the assets in that trust.

Is A Will Just As Good As A Trust? Why Should I Choose One Over The Other?

A will is just as good as a trust if a person is trying to determine how to distribute their assets. Sub-trusts can be created with a will or a trust, and we can create special needs trusts for beneficiaries who require them. There is nothing that can be done with a trust that cannot also be done with a will. The main reason why trusts are preferable to wills is because of the ability to avoid probate so that there will be no delay in continuing to operate the business and distribute assets. It is a streamlined process of administering a trust and allows for much more freedom. In addition, it is better to have a trust open for years rather than a probate open for years. This is because the executor of a will would have to have provide the formal accounting to the court and pay a lot of fees associated with the will. That is not the case for the successor trustee of a trust.

For more information on Benefits & Disadvantages Of Trust, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (916) 915-8866 today.

California Probate Lawyer Peter Cianchetta

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