There are many documents that comprise an effective Estate Plan, each providing clarity about your decisions concerning everything from the management and distribution of your assets upon your passing, to your directives concerning medical decisions if you are unable to make those for yourself.
Two of these documents include a Will and Trust, about which we are frequently asked, what’s the difference?
What Is A Will?
Simply stated, a Will is a document that describes to what person, people, or organizations you want to leave your assets upon your death. Without a Will, your assets will be distributed to the pecking order of recipients that our legislature has determined, which may or may not coincide with your wishes. A Will gives you the power to decide what percentage, and/or which assets specifically go to whom, when, and upon what conditions, if any. A Will also allows you to designate the person responsible for managing and distributing your estate, which is known as the “executor.”Upon death, the Will must be filed with the probate court and the executor must work with a judge to distribute the assets as part of the probate process.
What Is A Trust?
A Trust is a legal entity, which you control, designed to hold and protect your assets. The main purpose of having a Trust is to provide legal protection, to avoid probate and to lower or eliminate estate or inheritance taxes and potential legal costs associated with the distribution of your assets. Also, having your assets owned by your Trust affords you some protection in the event you are incapacitated and unable to manage your own affairs. In this situation, you will have designated someone you trust to act on your behalf, providing them with directions about how to manage your estate.
Do You Need Both A Will & A Trust?
Not everyone needs both. For people with modest assets below the amount that would trigger a probate in California, ($184,500 in 2022) a will may be sufficient. However, if a person’s assets exceed that amount, then a trust may be a better option to minimize taxes and expenses down the road. Additionally, a trust can provided added protection when it comes to providing supervision over an inheritance allocated to a minor child, a spendaholic beneficiary or someone ill equipped to make good financial decisions.
While not everyone who needs a will needs a trust, everyone who needs a trust needs a will. A trust should be accompanied by a document known as a pour-over will, which is a will that serves the specific function of acting as a safety net to ensure that any assets that were inadvertently left out of the trust can be added or “poured” into the trust after a person passes away. It’s important to keep in mind that as life changes, so should your estate plan. While a will may have made sense years ago when it was created, it may no longer be the best option if your assets have increased or your family has grown.
Finally, for those trying to keep cost and frustration at a minimum, a trust is a natural choice to avoid the expense and delay that comes with court involvement and probate. In order to ensure that a trust works as expected and provides the intended protection, it’s critical to keep it current-which means making sure it gets updated to reflect important life events, like marriages, divorces, births and deaths.
For more information about Wills and Trusts as well as Durable Powers of Attorney, Medical Directives, and other Estate Planning essentials, contact the lawyers at Family Security Law Group, serving families throughout the State of California.