California Doctors Only:

A Trust is a legal entity which holds title to the assets included therein but which is controlled by a designated Trustee. In other words, a property's title may actually name the Trust as the owner, while the Trustee controls the property. The Trustor, or Settlor, is the original owner of the property who created the Trust and specified the Trustee. The Trustee is usually the Trustor -- which allows the Trustor the ability to maintain control over the assets in the Trust even though the Trust actually holds the title. However, the Trustee can be almost anyone the Trustor designates who is over 18 years of age, and there can be co-Trustees who operate together in managing the Trust assets.

There are many forms of Trusts and you may need to use different types depending on the specific needs of your estate. For purposes of this article, I will focus on the Living Trust which is also referred to as a Revocable trust, or Revocable Living Trust. This type of Trust is created during your lifetime in a separate document, not in your Will. It is revocable which means it can be completely revoked and or revised, unless you designate it as irrevocable.

One of the greatest benefits of a Living Trust is its ability to avoid probate for those assets contained within it, provided the Trust is drafted and maintained correctly. Probate avoidance is very beneficial for your estate and heirs because it often takes between one and a half to three years before assets are distributed to your intended beneficiaries. Moreover, probate fees are determined by statute and based on a percentage of the estate's value. For example, probate fees on a $100,000 estate could be approximately $12,000. They are mandatory and taken from the estate before any assets are distributed. A Will is subject to probate, a Trust is not.

Since probate is avoided for those assets contained in the Trust, such assets may pass to the beneficiaries immediately upon death. This is especially important for assets which need constant supervision or management such as a dental practice or stocks and bonds whose value can fluctuate rapidly.

A Trust has many other beneficial attributes. Provided the Trust is funded, a Trust avoids the problems of heirs contesting your Trust. Furthermore, financial support can be established for minor or disabled children or family members through the use of a Trust by naming a Trustee to manage the assets and provide for those individuals under specified guidelines.

However, a Trust only pertains to those assets in the Trust itself. Since a dental practice cannot be owned by or transferred to an unlicensed individual or entity, a dentist cannot leave his or her interest in a dental practice to a Trust, although other assets belonging to a dentist can. Also, pension plans and life insurance policies are governed by the respective forms and are therefore not included in a Trust. It is therefore imperative for the dentist to insure that his or her distribution goals and beneficiaries contained in a Will, Trust, pension plan, and life insurance policy do not contradict each other.

To properly coordinate distribution goals and beneficiaries, a dentist should have any document revised and or replaced any time there is a new partner in the practice, a marriage, a divorce, a new child in the family either natural or through marriage, an increase in the market value of the practice, a beneficiary has pre-deceased the dentist, or any other change which may affect the Will, Trust, pension plan, or life insurance policy. This protects the wishes of the dentist upon death and the beneficiaries thereof by coordinating these various documents.