Will Or Trust? Which Is Right for You?
Over the last fifteen years, I have had many clients ask the same question, “What is the difference between a will and a trust?” Wills and trusts often achieve the same basic goals but there are distinct differences between the two. A primary difference is how and when these legal documents take effect. Wills do not take effect until a person passes away. On the other hand, trusts take effect immediately upon signing and “funding.”
Wills are more simplistic and less time consuming to create. As such, the cost of creating a will is less than creating a trust. Wills allow you to:
- Nominate Guardians of minor children
- Distribute your estate to specific beneficiaries
- Provide for final arrangements upon death
While creating a will is an easier process, wills come with some drawbacks. Wills, unlike trusts, require an executor to probate the estate in court. Probate is a public court proceeding resulting in the disclosure of the will in the court’s public records. In California, attorney’s fees in probate matters are set by statute as a percentage of the overall fair market value of the estate. Executors are paid for their services as well. These costs can result in significant fees paid by the estate.
A trust is a more complicated document to create. Utilizing a trust can achieve the same objectives as wills, above, as well as provide the following added benefits. Trusts:
- Offer the creator (“Settlor”) greater control over the distribution of assets
- Control the distribution of all assets funded in the trust
- Provide cost and estate tax savings to the creator
- Allow for a successor trustee to take over during the creator’s lifetime in the event of the creator’s incapacity
When creating a trust, it is essential to “fund” the trust with the creator’s assets. This can be achieved by transferring real property to the trust through a deed or retitling financial assets in the name of the trust. Properly funded assets transfer ownership of the assets to the trust, thus avoiding the necessity to probate the assets upon death.
Do Wills Require Probate?
Wills require probate. In fact, the word “probate” means “to prove the will.” When an individual dies with a will, the nominated executor must probate the creator’s estate to distribute your assets. A typical probate in California takes a year or longer to administer and can result in costly attorney’s fees and expenses.
Do Trusts Require Probate?
Trusts generally do not require probate. Exceptions to this rule include situations where the Trustee needs a court to assist in interpreting the trust or if a third party contests the trust. However, a well drafted trust will avoid probate entirely as the trust owns the creator’s property. The nominated successor trustee takes over the administration of the trust upon your passing. Utilizing a trust can reduce attorney’s fees and expenses, provide privacy, and speed up asset distribution because no court involvement is necessary.
Will or Trust? Which Is Right for you?
Individuals have different needs regarding their estate and family circumstances. The determination of which legal document to create depends on your individual circumstances. Consulting with an experienced estate planning attorney can provide you with a wealth of knowledge and ensure that the appropriate actions are taken to best protect your estate.
If you have questions regarding wills or trusts, our office is here to assist you. Call us at (916) 436-5210 or email Thomas@reidestatelaw.com today to schedule a complementary, in-person or remote one-hour consultation.