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Tax laws, trusts and estate planning

Some California residents might wonder whether they should make an estate plan when there might be a change in federal estate tax law. However, there are generally benefits to estate planning that are independent of that. Among them are setting up an irrevocable trust that will protect assets in the event of a divorce, from creditors, and in other situations.

Flexible trusts make it easier to make changes that reflect tax laws although it is important to keep in mind that even if changes in the law do occur, they may not be permanent. People may want to consider a trust protector. This role is separate from the trustee, and the individual in this position has the power to replace the trustee if necessary among other powers.

Individuals can also take steps to ensure that they benefit from the trust. For example, those who are married can make their spouse the beneficiary so they may use trust distributions. Unmarried individuals may be able to set up a domestic asset protection trust. California is not one of the states that allows DAPTs, but they can be created in other states. A loan provision may make it possible to borrow trust assets, and individuals may want to set up grantor trusts that allow for swapping assets in and out.

Estate planning may encompass a number of other aspects in addition to creating a will and a trust. For example, people may have retirement accounts, life insurance policies and other assets that use beneficiary designations to distribute assets. This is another form of estate planning, and since beneficiary designations override wills, it is important that these remain up-to-date.

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