There are many reasons why Californians shouldn’t just put an estate plan in place and forget about it. Although crafting an estate plan is a crucial step toward protecting your loved ones and your legacy that far too many people neglect, it’s not typically a one-and-done accomplishment.
Estate plans should be reviewed fairly regularly, and occasionally modified for various reasons. Your family, your assets and your wishes may change over time. Further, federal and state laws change. There might be a new estate planning tool that’s appropriate for you that wasn’t around when you established your plan/
For example, just last year, the California Uniform Directed Trust Act (CUDTA) was enacted. It amended existing state law to allow Californians to establish directed trusts. Other states have similar laws that allow this type of trust.
What is a directed trust?
A directed trust is one wherein a trust has one or more “directors” or advisors with authority to make decisions and take actions that would otherwise be solely the responsibility of a single trustee. Not every trust needs to be a directed trust. However, those with substantial and/or complex assets such as investments or real estate can benefit from having a trust that is established this way – particularly if someone who is to be named as its trustee doesn’t necessarily have the experience or knowledge to manage it as the grantor intends.
For example, maybe a grantor establishes a trust for an adult child who seems intent on following their passion – even if it means likely being a mostly unemployed actor — to help ensure they’ll always have some financial support. The grantor may appoint an older sibling of that child to be the trustee. However, they feel more comfortable having financial, real estate, tax or other professionals making decisions about the assets that the trustee doesn’t have the expertise to make.
The CUDTA specifies the “duties and responsibilities of the trust director and … directed trustee, including specifying what powers may be given to a trust director and the information required to be exchanged by the trust director and the directed trustee.”
As noted, every trust set up for a beneficiary doesn’t need to be a directed trust. However, it’s important to know that it’s now an option in California. With experienced estate planning guidance, you can determine what estate planning tools are available and which best meet your needs.