Getting started with estate planning can seem like a daunting task. The various documents and the vocabulary can be confusing if you’ve never seen them before. Here’s a guide to the basics of a foundational estate plan:
Trust: A trust is an agreement that makes it easier to manage assets during your lifetime and after your death. The person creating the trust is called the settlor or the trustor, and the person who manages the trust is the trustee. A trust can have more than one settlor and more than one trustee – in a community property state like California, married couples often create a joint trust, where they are each a settlor and each a trustee. People can also have more than one trust – sometimes couples will create a joint trust for their community property, and each will also have an individual trust for his or her separate property.
A trust can be either revocable or irrevocable. For basic estate planning, people generally create revocable trusts (also called living trusts or inter vivos trusts) during their lifetime, which means that they can change or completely revoke the trust at any time. After their death, the trust becomes irrevocable, which means it cannot be changed. Irrevocable trusts can also be used during a settlor’s lifetime for complex tax planning.