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Trusts: Not only helpful for heirs

Many people set up trusts to help alleviate tax burdens or ensure appropriate management of estate assets after their death. The State Bar of California points out that trusts can also be valuable should you become incapacitated at any point in your life.

Individuals might set up a trust for use during their lifetime to help shelter assets from creditors, taxes or business partners. In some cases, trusts might even reduce the complexity of dealing with numerous assets. In these cases, the individual is likely to appoint him or herself as the trustee of what is called a living trust. This means the individual setting up the trust also manages the trust and has access to money and assets as allowed by the rules of the trust.

When setting up a living trust, you generally choose a successor trustee. This is a person that you believe will handle the assets and your trusts in keeping with your wishes. The successor trustee would take over trustee duties upon your death, but he or she would also take over if you became incapacitated due to mental illness, injury or other issues.

California provides different rules regarding who can manage what type of property if you are incapacitated or pass away. Your spouse can manage anything deemed community property, but non-community property is managed by someone you provide with power of attorney or trustee appointment. That person may be your spouse or it may not be.

Doing the work to set up a trust and appoint someone you believe will act in the best interests of you and your heirs is important. Outside of such planning, your assets could end up in probate litigation, and the court could assign a trustee. When this happens, you or your heirs may not be as happy with the outcome.

Source: The State Bar of California, "How could a living trust be helpful if I become incapacitated?," accessed April. 21, 2015

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