A Will or a Trust?
In California, both trusts and wills are common estate planning tools, but they have distinct purposes and functions. Here's a breakdown of the main differences between a trust and a will in California:
Distribution of Assets: A will becomes effective only upon your death and dictates how your assets will be distributed. It allows you to specify beneficiaries for your property and appoint an executor to oversee the administration of your estate. However, assets distributed through a will must go through the probate process, which can be time-consuming and expensive in California.
A trust, on the other hand, is a legal entity that holds and manages assets during your lifetime and can continue to exist after your death. When you create a trust, you transfer ownership of your assets to the trust. You can then designate beneficiaries to receive the assets upon your death. Since the assets are owned by the trust, they generally avoid probate, which can save time and money.
Privacy: Wills in California are generally subject to public record, meaning the details of your estate, beneficiaries, and distribution plan can be accessed by anyone. This lack of privacy can be a concern for some individuals.
Trusts, however, are private documents. They do not become public record, which means the terms of the trust and the distribution of assets can remain confidential.
Incapacity Planning: A will only takes effect after your death and does not address the management of your assets in the event of incapacity. If you become unable to manage your affairs due to illness, injury, or other reasons, a will cannot provide instructions for handling your financial matters.
A trust, specifically a revocable living trust, can include provisions for incapacity planning. You can appoint a successor trustee who will step in and manage the trust assets on your behalf if you become incapacitated. This can ensure a smooth transition without the need for court-appointed guardianship or conservatorship.
Probate Avoidance: As mentioned earlier, assets distributed through a will generally go through the probate process, which can be costly and time-consuming in California. The probate court oversees the distribution of assets according to the terms of the will and resolves any disputes.
Trusts, particularly revocable living trusts, are commonly used to avoid probate. Since the assets are owned by the trust, they can be distributed according to the trust's terms without going through probate, saving time and expenses.
Flexibility and Control: Wills allow you to name guardians for minor children, specify funeral arrangements, and provide instructions for the distribution of assets. However, once your will is admitted to probate, it becomes a public document and can be subject to challenges or modifications by interested parties.
Trusts offer more flexibility and control. They can include detailed instructions on how assets should be managed and distributed, including conditions for beneficiaries, such as age or achievement milestones. Trusts also provide greater protection against potential challenges to your estate plan.
It's important to note that both trusts and wills have their own advantages and disadvantages, and the appropriate choice depends on your specific circumstances and goals. Consulting with an experienced estate planning attorney in California can help you determine the best approach for your estate plan.