Establishing a trust is a significant step in estate planning, and a common concern for individuals like yourself is whether you can maintain control over how your assets are invested within that trust – the answer is generally yes, with careful planning, but it requires understanding the different roles and responsibilities involved.
What Happens if I Don’t Plan Ahead?
Many people assume that simply creating a trust automatically means relinquishing all control, but that’s not necessarily true. A trust document can be tailored to allow you, as the grantor (the person creating the trust), to retain a significant degree of control, especially during your lifetime. However, if a trust is structured improperly, or without clear instructions, it can lead to unintended consequences. For example, without specifying investment powers, a trustee might be unduly restricted in their ability to respond to market changes or pursue profitable opportunities. In California, approximately 60% of estates that go through probate could have been avoided with proper trust planning, demonstrating the importance of proactive estate planning. This could result in slower growth or even a loss of value for your beneficiaries.
How Can I Retain Investment Control?
Several methods allow you to retain investment control. You can serve as the trustee yourself, giving you direct authority over all investment decisions. Alternatively, you can designate a co-trustee – someone you trust to work with you in making investment choices. Another option is to grant your trustee specific investment powers in the trust document. This could include the authority to invest in particular types of assets, such as stocks, bonds, or real estate, and to make decisions based on a defined investment strategy. According to the California Prudent Investor Act, trustees have a duty to diversify investments, manage risk, and act with reasonable care, skill, and caution. This law ensures that trustees make informed decisions, but it also allows them some flexibility in managing trust assets. It’s crucial to document your investment philosophy and objectives within the trust document to guide the trustee’s actions.
What About After I’m No Longer Able to Manage Investments?
Even if you initially retain control, you’ll want to plan for a scenario where you’re no longer able to manage the investments yourself. This is where a successor trustee comes in. Your trust document should clearly outline the circumstances under which the successor trustee takes over and the extent of their investment authority. You can grant the successor trustee the same investment powers you had, or you can specify a different level of control. It’s also advisable to include provisions for periodic reviews of the investment strategy and performance, ensuring that the trust continues to meet your long-term goals. Remember that community property, acquired during marriage, is owned 50/50, and the surviving spouse benefits from a “double step-up” in basis for tax purposes, meaning the assets are valued at the time of the second spouse’s death, potentially reducing capital gains taxes.
What Happens If I Don’t Like the Trustee’s Investment Choices?
While you can retain control or grant investment powers, disputes can still arise. If you disagree with the trustee’s investment decisions, you have the right to consult with legal counsel and explore your options. However, it’s important to remember that trustees have a fiduciary duty to act in the best interests of the beneficiaries, and courts will generally defer to their judgment unless there’s evidence of negligence or breach of duty. California law allows for the removal of a trustee who is not fulfilling their responsibilities properly. No-contest clauses in trusts and wills are narrowly enforced and only apply if a beneficiary files a direct contest without “probable cause”. Therefore, it’s important to address any concerns through proper legal channels and avoid frivolous challenges.
Planning your estate with a trust doesn’t mean giving up control; it means carefully defining the level of control you want to maintain and ensuring that your wishes are carried out effectively. Formal probate is required for estates over $184,500, and statutory fees for executors and attorneys can be substantial, making probate avoidance a significant benefit of trust planning. For expert guidance on creating a trust that meets your specific needs and goals, contact Steven F. Bliss ESQ. at (951) 582-3800. Visit us at
765 N Main St #124, Corona, CA 92878.