Disposing of my Estate: Do I Need a Will or a Trust?

If you have given thought to how you want to dispose of your assets in the event of your death, you could find yourself scratching your head and asking, “Do I need a will or do I need a trust?  In fact, what are the main differences between wills and trust instruments?”

These are important questions and our experienced attorneys at Business, Estate and Tax Attorneys P.C. can help you sort through the critical issues that will enable you to define what estate planning instruments are right for you and your family. Often the answer may not be a will or a trust but both, depending upon your age, family, assets and estate disposition objectives.

First, let’s address some basic differences between wills and trusts:

  • A will identifies to whom and how your assets will be distributed after your death.
  • A trust can identify how and to whom your assets can be distributed during your life as well as after your death.
  • A will is administered after your death by the person you named in the will as your executor. The executor handles administration of your will by following a legal set of procedures called probate. The probate process can be time-consuming and expensive.
  • A trust is not subject to the probate process. Trusts are typically privately administered by the trustee named in the trust instrument. A trust is not subject to court supervision unless objections are raised by beneficiaries or other interested parties to the trust. Trusts can also administer assets long after the person who established the trust has passed away.
  • A will in California must be signed by the testator and two witnesses unless it is a holographic (handwritten) will… handwritten wills only need to be signed by the testator.
  • A trust in California does not need to be witnessed although most are notarized, a step that is not required for a valid will.
  • A will must be admitted to probate in California to be legally recognized and subsequently administered through probate under the court’s supervision.
  • A trust does not need to go through probate to be considered as valid so a trust can be administered more rapidly and inexpensively.

In light of the above checklist, why would anyone ever use a will?  Keep in mind that wills are historically valid legal instruments recognized by the courts as effective tools for disposing of assets according to the decedent’s wishes.  Also, factors such as the testator’s age and family needs may dictate that a will be drafted, such as when the testator has minor children and needs to appoint a guardian to take the children in the event that the parents were to pass away prematurely.

Trusts, on the other hand, can be used to address a broader range of estate planning issues.  As such, the creation of one or more trusts may be best suited to your individual situation. To work through your unique estate planning needs, set up a free consultation to confer with one of our estate and trust experts at Business Estate and Tax Attorneys P.C. Their experience and knowledge is available to help you sort through your estate disposition preferences and options.

Common Types of Trusts

If a trust is a valuable estate planning tool, what types of trusts are often used to dispose of assets, both during the grantor’s life and after death? Set forth below are just a few of the trust structures that may be appropriate for your estate plans, depending upon a variety of factors including your age, family, estate size, tax exposure and your disposition objectives:

  • Revocable Living Trust: Revocable living trusts are designed to permit the grantor/settlor to maintain control over the trust assets during the person’s life but they can also distribute  trust assets after the grantor passes. Trusts can be desirable estate planning tools because they avoid time and expense of the statutory probate process required for a will. Further, the grantor can modify a revocable living (inter vivos) trust at any point before death.
  • Irrevocable Trust: An irrevocable trust is just that . . . once created, it cannot be revoked. Revocable living trusts will also become irrevocable at the time of the grantor’s death. Irrevocable trusts can minimize tax exposure and also help protect assets from creditors.
  • Life Insurance Trust:  A life insurance trust assumes ownership of life insurance policies to help beneficiaries minimize tax exposure when benefits are paid out under the policies.
  • Marital Trust: Marital trusts are generally designed to provide for the surviving spouse and to protect the inheritances of the children, often in blended families.  Assets are typically moved to the trust after the death of the first spouse to provide income for the surviving spouse until his/her death. At that point, the trust often distributes the remaining assets to the children who are named as beneficiaries.
  • Charitable Trusts:  Charitable trusts allow a grantor to donate assets to a favorite charity at the time of death. Charitable trusts can also provide tax deductions for estates allocating assets to recognized charitable institutions.
  • Trust for a Minor: Giving assets to a minor under a will may not be advisable, given the minor’s lack of legal capacity and life experience to make decisions about those assets. As a consequence, it may be wise to establish a trust for the minor to allow the assigned trustee to control the assets until the minor reaches a specific age. There may also be strategic tax benefits to be gained with such a trust.
  • Testamentary Trust:  A testamentary trust is established under the terms of the testator’s  last will and testament. Property assigned to the trust is allowed to sidestep the probate process thus enabling a more rapid distribution under the trust.
  • Special Needs Trust: In order to avoid having a person with special needs be disqualified  from public services and benefits, such as health care, a special needs trust may permit a trustee to take control of the assets designed to benefit the person receiving government aid.

Don’t try to ‘guess’ what estate planning instruments you should use by downloading some online form for a will or a trust.  Consult with our expert estate planning attorneys at Business, Estate and Tax Attorneys P.C.  We will help you design an estate plan that protects your assets and beneficiaries while also minimizing taxes, expenses and the delays that can plague the distribution of your estate.

Leighton Burrey

Attorney Leighton Burrey has a deep background in the often-intertwined fields of estate planning, tax law, business law, and litigation. He founded Business Estate & Tax Attorneys, P.C., as a full-service law firm for businesses and families that need sophisticated legal guidance in planning for the future and navigating complex challenges. The law firm provides tailored legal strategies that take into account all aspects of a business owner’s or family’s financial interests.

Disclaimer: The information in this article is for general purposes only, and it is not intended as a substitute for legal advice.