Today, trusts are not used only by the very wealthy. People of a wide variety of income levels use them as estate planning tools. Trusts are complex and costly to set up and run, requiring a higher level of services from an attorney than wills. They are useful in accomplishing various estate planning and financial planning goals.

A trust owns its own property (holds the title). When it is set up, the trust appears on official papers and records as the legal owner of any property that is placed into it. The trust’s principal is the property that the trust owns, as distinguished from the interest or dividends earned by that property.  The terms of the trust dictate who will get the benefit of the income from the trust property, how long the trust will last, and so on.

The trustee is the person or entity whose job it is to administer and manage the trust: make investment decisions, pay taxes, make sure the terms of the trust are carried out, and take care of the trust’s property. Generally speaking, the trust must pay income tax on any of its undistributed interest or other income.

There are basically two types of trust:

• An irrevocable trust is a separate entity, for both legal and tax purposes, and pays its own taxes. The irrevocable trust cannot be revoked or changed.
• A revocable trust is not considered a separate entity for tax purposes, although it may be considered a separate legal entity. The revocable trust can be changed or revoked—taken back—by the creator of the trust.

Another way to categorize trusts: A living (or inter vivos) trust is set up by a living person while a testamentary trust is created by a will.

1. Give property to children.
2. Reduce estate taxes.
3. Leave assets to a spouse.
4. Provide for life insurance used to pay estate tax.

UMAX Mortgage offers mortgages in Ventura County, Los Angeles County, and throughout the state of California. Julie Cline is licensed by the CA Department of Real Estate #01743818.

If you have any questions about California jumbo loans, California jumbo conforming loans, or California FHA jumbo loans, feel free to contact Julie Cline at 866-599-8480 or on the web at http://www.umaxmortgagecalifornia.com.

Please note: this article is not intended as tax, financial or legal advice. Please obtain advice about your specific situation before making financial or legal decisions.