California estate planning at it’s simplest is about planning for you and your spouse. However, in many cases, the bigger benefit in estate planning is how you can leave things for your children, grandchildren and other subsequent generations with advantages you can’t set up for yourselves.
You want to avoid estate taxes, avoid capital gains taxes, avoid probate costs, avoid delays, avoid burocracy, and in general leave things for your kids in a clean and easy maner. The fact is that with proper estate planning you can leave stuff for your kids in a better way than you can do for yourselves!
There is no “magic trust” in California. A magic trust is a term I use to describe the ultimate creditor and liability protected trust. Basically your assets would be immune from creditors if the magic trust existed. You could drive like a maniac and not worry about getting sued after you got in a car accident. There is no such thing. However, you can set up a trust for your children and future generations that has pretty good creditor protection. Maybe not impervious to lawsuits but certainly well protected. While you certainly do not want to set something up that will cause your children to be reckless you probably do want to give them all the protections the law allows.
Leaving assets in trust, for life, if the terms are right can do this. At a minimum you give them protection which would allow them to negotiate with their creditors and reduce any payouts. Additionally you can give them protection should they get divorced to protect your family money and keep it in your family. Also, if set up right, you can avoid unnecessary estate taxes without causing the generation skipping tax to take hold against your money.
Often we set up trusts for children and grandchildren that allow them to become their own trustee at a suitable age (between 25 and 40 is common), have complete control over investment choices, have complete control to give it away at their death, and spend it all if they want. Basically it’s as if it’s their money. However, keeping it in the trust set up by you can give them some creditor protection they can not set up for themselves.
Talk to a qualified California estate planning attorney about how you can protect yourself and, even more so, protect your children and grandchildren.
I am available for consultations on these subjects.