When people begin to look into estate planning, one common question that arises is whether to use a will, trust, or both. The answer depends on your goals and the asset in question. In the State of California, both wills and trusts serve critical roles in building an effective estate plan and are often used in tandem to great effect, but understanding their differences and specific purposes will be essential for making informed decisions as you build a legally binding estate plan with your attorney.
Wills and trusts are both powerful legal instruments that can help to facilitate the transfer of assets to beneficiaries after someone’s passing. Both types of documents can potentially also have implications during the lifetime of the person who creates them, with certain types of wills and trusts. Both also require that you name a party to act as your agent in carrying out the terms of the document. While both tools are similar in that they are a way to define what happens to specific assets after someone’s passing and provide a legal framework for getting that accomplished, they have distinct characteristics and serve specific, different purposes.
Understanding Wills in California
When people talk about “wills” in the context of estate planning, they are almost always referring to a last will & testament, which is a powerful document outlining many important end-of-life decisions:
- A will is a legally binding document (when prepared and filed correctly) that outlines an individual’s last wishes and various instructions regarding the distribution of assets, but its scope is not limited to financial matters in the way a trust is.
- A will allows the individual to designate beneficiaries (i.e., heirs) who will inherit property, personal effects, wealth, and various other assets.
- A will also names an executor who will carry out the various items in the will and “execute” the decedent’s estate (under the supervision of the probate court) by disbursing assets to the named beneficiaries.
- A will additionally enables an individual to name a guardian for their minor children in the unfortunate event that they should pass before said children reach the age of adulthood. This is one function that goes well beyond the scope of a trust, which is a purely fiscal sort of legal tool and has no family law implications of this sort.
- A last will & testament must go through the probate process, which is a court-supervised distribution of assets that is mandated by law for most estates in California and other states. That being said, having a solid, legally binding will in place is almost certain to make the probate process go much faster and smoother than it would without a will.
Understanding Trusts in California
As you can see, a will can do many things, including defining who will receive your assets after your death, as well as who will be in charge of that process. So what makes trusts different? Several things:
- A trust is a special legal arrangement where you name a trustee (similar in some ways to your will’s executor) who holds and manages your assets for the benefit of your designated beneficiaries. By placing assets into a trust, you are technically transferring legal ownership to the trustee, but with extremely specific terms and limitations. A trust is a legal arrangement that, in some sense, creates a separate legal entity to hold your assets.
- Unlike a last will & testament, your trust takes effect immediately upon its creation. It can be utilized throughout the remainder of your lifetime as well as after your passing.
- One major advantage of using a trust is the ability to totally bypass the probate court system, which can be tedious and frustrating. Because the assets held in trust are no longer part of your personal estate, they can be distributed to your beneficiaries completely outside of the probate court system.
- Trusts also offer greater flexibility for the management and distribution of assets. For instance, you can set very specific terms for disbursements, like a scholarship trust that only pays out to your heirs once they have enrolled in a university or trade school or a trust that pays out annually to certain charities.
FAQs
Estate planning is a complex process, and it’s natural to have questions about what strategies will work for you. Here are some more common concerns.
Q: How Do I Avoid Probate in California Without a Trust?
A: Placing your assets in trust is really the smartest way to keep them out of probate court after your passing. Probate court is a legally mandated process, and it is not something your family can simply opt out of, even if you have a very good will in place. Having a great estate plan and great legal representation is your smartest bet for eliminating or expediting the probate process.
Q: Should I Have a Trust in California?
A: Whether or not you need a trust in California is totally up to your goals and the types of assets you’re dealing with. Speak openly with your attorney and your family as you work through these decisions so that everyone is on the same page.
Q: Does a Trust Supersede a Will in California?
A: No, this question represents a misunderstanding of how these instruments work. Assets successfully placed in trust are no longer part of your own personal estate, so your will is not relevant to those assets at all. Neither document has to “supersede” the other because they do not deal with the same assets.
Q: What Is the Advantage of a Trust Versus a Will?
A: Trusts are different from wills in many ways, and these can be advantageous depending on your goals and circumstances. Trusts allow you to set very specific criteria for the disbursement of assets, for example. They also go into effect right away, so they can be used during your lifetime.
Fishman Larsen Callister – Fresno, CA Will and Trust Attorneys
If you need high-quality assistance implementing a will or trust in the State of California, contact the team at Fishman Larsen Callister. We’re ready to leverage our deep knowledge of wills, trusts, and the California court system to help you protect your life’s work and establish a secure future for your heirs with our full range of estate planning services.