One of the most common questions people often ask us about estate planning in California is, which is what is the difference between a trust and a will, and which one do I need?
Let’s start with a will. A will, or last will and testament, in the simplest terms is a legal document that specifies how your property will be distributed after you die. A will names an executor, guardians for your children if you have them, and names beneficiaries, or the people who will receive your assets after you pass away. An executor or personal representative is the person who will manage your estate after you pass away until the probate process is complete and assets have been distributed to those beneficiaries.
Guardians, of course, are those people who are legally responsible for the care of your children until they become of legal age. If you have minor children, naming a guardian or guardians for them in a will is critical. In the terrible scenario where you could potentially pass away prior to your children becoming adults, you wouldn’t want to put a guardianship decision in the hands of a probate judge. After all, you are the best person to decide who should care for your children if you are no longer able to.
The key thing to remember about a will is that it really only becomes effective in most cases when it is filed with the probate court and a judge approves action based on your will.
That brings us to trusts, which most commonly you might hear referred to as living trusts, family trusts, or revocable trusts. A trust is a legal agreement that allows you, the grantor, or person putting assets into the trust, to appoint a trustee to manage those trust assets on behalf of the beneficiary(ies). In the vast majority of trust agreements, you will continue to be the trustee and beneficiary of your lifetime, and your designated successors will then replace you as trustees and beneficiaries after you pass away.
A trust is sort of like a wallet in that it’s purpose is to hold all sorts of different assets. Once we create a trust, we often will retitle property like your house to the trust. Sometimes we will also either title financial accounts to the trust or name the trust as a payable on death beneficiary of your accounts.
One key difference between a will and a trust is that a living trust keeps significant assets out of probate court where a will does not. This makes it much easier and quicker to manage your affairs under a trust. It also keeps information about your estate private unlike a public probate court record.
Trustees of a trust can manage assets for an extended period of time after you pass away, potentially when we have a beneficiary who is a minor or is legally incapacitated, or any other scenario where we would not want a beneficiary to receive your property with no restrictions on its use. With a will, on the other hand, executors of a will manage assets only until the probate case has concluded.
One final difference between a will and a trust is that a trust can be used to establish care for you if you become incapacitated at any point prior to passing away whereas a will is only effective after you die. A trust includes provisions for your trustee to step in to manage your assets for your benefit and care if you are unable to do so for any reason.
If you have any additional questions about wills, trusts, and estate planning here in California, please feel free to reach out to our office, the McGovern Law Group.