Is a Trust Better Than a Will in California?

No matter if you are a wealthy individual, entrepreneur, or a business owner, it is beneficial for you and your loved ones to create an estate plan. Everyone’s estate plan looks different, and some may be less complicated than others. A will is enough to disperse your assets, but complex estates benefit from a trust. To determine whether you could benefit more from a will or a trust, consult with a California estate planning attorney.

The Difference Between a Will and a Trust

A will is created to have your last wishes carried out upon your death. It typically includes:

• Naming an executor, the individual designated to carry out tasks within the will
• Beneficiaries or heirs of assets
• Details for transferring assets to beneficiaries
• Guardianship for minor children

It is important to have named beneficiaries that will inherit assets within your will. If assets are unable to be transferred to beneficiaries, your will states who is to receive what with any other special instructions. Whether you have a will executed or not, your estate is still subject to probate (the legal process for settling an estate). In most cases, assets that can be transferred to a beneficiary will not have to go through this process.

A trust is a way to manage an intricate estate and can also eliminate or lower the estate’s taxes. It allows for a third party, also called a trustee, to have access to assets for a beneficiary or beneficiaries. Each trust varies as to how and when the assets will be passed on to these beneficiaries.

Types of Trusts Available

As trusts typically avoid probate, those who are beneficiaries tend to have quicker access to the assets than if they were using a will. There are a variety of trusts that serve different purposes.

Below are several types of trusts to consider:

• “A” trust, or a Marriage trust: Provides benefits to the living spouse
• “B” trust, or Bypass trust: The living spouse’s estate is bypassed to qualify for a federal estate tax exemption
• Testamentary trust: This is drafted within a will and is carried out after the death; funds are subject to probate
• Charitable lead trust: Allocates funds to a charity with the remainder allocated to beneficiaries
• Charitable remainder trust: Funds are sent to you for an allotment of time; afterward, those funds are sent to a charity
• Generation-skipping trust: This trust utilizes the generation-skipping tax exemption, which allows assets to be passed down to generations, also avoiding taxes
• Qualified Terminable Interest Property trust (QTIP): Income for a surviving spouse is provided by this type of trust

Revocable and Irrevocable Trusts

A revocable trust, or a living trust, is created by one or two grantors (creators of a trust). The purpose of this type of trust is to pass assets to avoid probate while the grantor maintains access during his or her lifetime.

Revocable trusts can be revised or dissolved while the grantor is still living. While it typically avoids probate, it still is subject to estate taxes.

An irrevocable trust cannot be changed or dissolved once it is created, taking control of the assets from you, the grantor. Irrevocable trusts are preferable to revocable trusts as they reduce estate taxes, with the removal of assets from your estate.

When You Can Benefit from a Trust

There are many instances in which you could benefit from a trust when creating your estate plan:

• Provides privacy: When you only include a will in your estate plan, your beneficiaries cannot receive the inheritance until probate has concluded. As probate is a public record, anyone can find the contact information of your beneficiaries. A trust provides privacy for all involved.
• Maintain control of assets: A revocable trust allows the grantor the ability to manage assets while alive. In other words, you have the power to control where your money goes.
• Managing properties in other states: Establishing a trust to manage multiple real estate properties creates a smooth transfer to beneficiaries. Without placing them in a trust, properties undergo the probate process depending on where they are located, which is a lengthy and expensive process.
• Managing unusual assets: If you have assets that are difficult to place value on, such as mineral rights, then it is wise to create a trust to name beneficiaries.

FAQs

Q: Does a Will Override a Trust in California?

A: A will cannot override a trust if a trust has already been created. Once assets have been placed in a trust, they are no longer part of the estate and, therefore, cannot be overridden by anything stated in a will. Many estate plans include both trusts and wills and are meant to work cohesively together.

Q: Does a Trust Cost More to Create than a Will?

A: Typically, it is more expensive to create a trust than to create a will, especially if you have a large estate. A living trust usually involves set-up costs and lifetime maintenance fees. On the other hand, because a will is a simple document, it is less expensive to create.

Q: Who Owns the Property in a Trust in California?

A: After an asset has been placed in a trust, that property is owned by the trust itself. Once it is transferred into a trust, the grantor no longer has access to the property. The assets within a trust eventually transfer into ownership of the beneficiary, as the grantor has stipulated within the trust’s stipulations.

Q: Does a Trust Avoid Probate in California?

A: A living trust can avoid probate if assets have been named beneficiaries during the grantor’s life. Likewise, a revocable trust can also avoid probate if the assets are properly transferred. If there are no named beneficiaries, your estate will certainly undergo the probate process, causing a delay in the distribution of your assets to your loved ones.

Consult With an Estate Planning Attorney in California

Determining whether to create a will or a trust for your estate planning needs depends on the complexity of your estate. To help you choose to establish a will or a trust in the state of California, contact Kevin Rice, Attorneys at Law. It is their goal to help you develop a comprehensive estate plan, potentially avoiding the courtroom.