Wills Vs. Trusts: Which One Is Right For You?
Sept. 16, 2022
If you have yet to begin the estate planning process, you’re probably not alone. Various surveys show that 40 percent or fewer of all Americans have created a last will and testament. A will, of course, is a legal document that names who will receive which of your assets when you pass away. It is the basic building block of estate planning. When asked why they haven’t started estate planning or even written a will, many respondents answer, “I don’t know how.” Others say they don’t have enough wealth to leave behind to anyone.
The word “estate” often conjures up images of gated communities and chauffeured limousines. The truth is, everyone who works will end up accumulating assets—cash, investments, real property like cars and automobiles, home furnishings, art collections, family heirlooms—that comprise their “estate.”
The type of legal document you use to set your last wishes in motion plays a big part in estate planning. A will can accomplish the goal of naming beneficiaries, but it comes with some downsides, one being that it must go through probate court proceedings. A living trust, on the other hand, not only avoids probate proceedings, but also never becomes a matter of public record. In addition, it provides protections for you and your assets should you become incapacitated, whereas a will does not. It is sometimes important to have both a will and a trust in place.
If you’re beginning the estate planning process in or around Los Alamitos, California, contact me at Law Offices of Lawrence H. Nemirow PC. As an estate planning attorney, I will give you and your loved ones the individual attention you deserve, helping you create the legal instruments that will provide peace of mind. I’m proud to serve clients in Los Alamitos and throughout Los Angeles and Orange Counties, including Huntington Beach, Newport Beach, Cerritos, Santa Ana, Anaheim, and Long Beach.
Why Estate Planning Is Important
If you die without a will or trust, under the law you’re considered to have passed away intestate— that is, without a legal document to designate what should be done with your assets and to whom they should be given. In this case, your family and loved ones must still go through probate court proceedings, but the court will ultimately decide on the distribution of your assets.
The court will award your assets to the state only if you die without a family. If you have a family but no will or trust, it will use a hierarchical table to distribute everything. Your spouse and children top the list, but others may also be given shares, including parents, stepchildren, foster children, and even “half-relatives,” such as a sister you share with a father, but not with a mother.
This type of situation is something you want to avoid. The question then becomes, “Will, trust, or both?”
Similarities and Differences Between Wills and Trusts
The greatest similarity between a will and a trust is that they both designate who among your heirs and loved ones get what. They also both name someone who will oversee the distribution of your assets when you’re gone, but it’s here where the similarities end.
In a last will and testament, you name a personal representative who will be responsible for taking your death certificate and will to the county probate court, which will then name that person the executor of your estate. During probate, the executor must work closely with the court to make sure everything goes according to legal procedures.
In a trust, you as the trustee, or grantor, name a successor trustee, while you remain the trustee of all your assets placed in the trust so long as you are capable of being so. If you become incapacitated, then the successor trustee can manage your financial affairs. A personal representative in a will, on the other hand, has no authority over your assets until you’re gone and the court names them executor.
A will goes through probate while a trust does not. This frees the trustee to manage your estate, pay creditors, and distribute assets essentially without court supervision. It also has the effect of lessening the challenges that wills often face since a trust is a living document that can be updated whenever the need arises. Finally, a trust protects the privacy of all. There are no public courtroom proceedings, and no public record is generated.
When a Will and Trust Are Both Needed
There are various types of wills, and the trust referred to here is a living, or revocable, trust. A will is needed together with a living trust for a few important purposes. One such purpose is if you have minor children for whom you are the only parent. You can use a will to name a guardian for them. Otherwise, a court will appoint a guardian.
Another purpose of a will is to designate that any assets you forgot to place in your trust will end up in your trust. A “pour-over” will, though it still must go through probate, will transfer back to the trust any asset overlooked during the grantor’s lifetime. For instance, if a piece of property were refinanced and then not retitled into the trust, the pour-over will accomplish the task.
Is a Will or Trust Better For You?
Deciding between a will or a trust can be a challenging proposition. A will is generally a simpler document to complete, but it has the downside of probate. A trust, which will require some more legal help to accomplish, has several benefits over wills and is also a living document. It’s in effect both while you’re alive and once you’re gone. A will only takes effect after death. With a living trust, if you end up in a hospital unable to speak, your successor trustee will make all financial and asset decisions for you. A personal representative named in a will can never have any say over your assets while you’re alive.
Prepare for Tomorrow. Call Today.
Whichever route you decide to take—a will, a trust, or both—you need to start planning now. If you already have a will or other document in place, today is always a good time to review it.
Estate planning should be a lifetime commitment, not just a one-time event. Your life and its circumstances can change at a moment’s notice, and your estate planning documents should reflect those changes.
Let’s make sure you have a comprehensive estate plan in place for you and your loved ones. Call me at Law Offices of Lawrence H. Nemirow PC. I will walk you through your options and help you make a decision that brings you and everyone peace of mind as you journey through life.