There are a variety of estate planning tools one might choose for the purpose of transferring assets upon death. There’s no one prime way to move generational wealth. Each tool has its advantages and disadvantages.
Many Californians are opting for revocable trusts
A revocable trust is an estate planning tool designed to sidestep the inconvenience and expense of probate. It’s a private document accessible only to close associates of the grantor and to the beneficiaries. It’s not subject to recording, so it will not be a matter of public record what was transferred and to whom.
Like a will, the revocable living trust contains instructions as to how assets should be distributed upon death. It often also has instructions as to how assets should be managed should the grantor be incapacitated.
How does it work?
The grantor transfers designated assets to the trust and then assigns managerial and administrative responsibilities to the named trustee (who may be the grantor or someone else). Because this is a revocable trust, the grantor/trustee retains control over these assets and can modify instructions at will within it as life circumstances change.
Income earned from the assets in the trust goes to the grantor during their lifetime and is taxable. Ownership of the assets is not transferred to the beneficiaries until the grantor has passed on.
For people who are marrying who already have substantial wealth, the revocable trust can help segregate assets and keep concerns to a minimum as to what is and isn’t community property.
A revocable trust is much more expensive than a will to set up and is somewhat high maintenance, as at minimum there’s an annual review to be done. Further, some assets, such as retirement assets, health saving account balances, assets held in other countries, vehicles and cash cannot be placed in a revocable trust.
As with all estate issues, it’s wise to seek the guidance of skilled counsel experienced in this area of the law, so that a solid plan tailored to your needs and circumstances can be created.