Understanding Wills vs. Trusts in Estate Planning
Understanding Wills vs. Trusts in Estate Planning
When starting your estate plan, one of the most common questions is:
“Do I need a will, a trust, or both?”
Wills and trusts are two of the most important legal tools of estate planning, but it’s important to know the differences between them. Both serve an important role and are designed to protect your assets and carry out your wishes.
What Is a Will?
A will, or last will and testament, is a legal document that specifies who will inherit your assets after you pass away. It will name an executor who will manage your estate. If you have minor children, it will name a guardian for them. Everybody should have a will but the type of will a person needs will vary. A last will and testament is a stand-alone document, which can be a good option for people with a modest estate. However, this type of will goes through probate after you pass away unless the estate is under $208,850 as of April 1, 2025 in California. For larger estates, a living trust is the better option with the inclusion of a pour over will. A pour over will is a document that states that any property left over that has not been specifically put into the trust should go into the trust upon the death of the creator.
What Is a Trust?
At FC360 Legal, we like to describe a trust as a giant bucket. Essentially, this bucket is a legal entity that holds your assets for you during your lifetime. While you’re alive, you hold the bucket and control what comes in and out of it. But after you die, you will want someone else to hold that bucket and take care of the items inside. Most importantly, you will want your instructions for the items in that bucket to be followed.
The most common type is a revocable living trust. There are many benefits to having a trust. A revocable living trust takes effect as soon as it’s created. Once your bucket is made, you can begin placing your items (house, financial accounts) into the name of the trust. You control this trust as long as you’re alive and well. If you are ever incapacitated, you will have named successor trustees to help manage the trust assets for you. After you die, it avoids the probate process and your beneficiaries can receive their inheritances much faster.
So… Do You Need a Will, a Trust, or Both?
A will might be the right choice for you if you have a modest estate. An attorney can give you advice on whether a will is a better option for your personal circumstances. On the other hand, a trust may be the better option if you have would like more control over how and when your assets are distributed. Additionally, a trust lets you plan for potential incapacity and in most cases, a trust will be required if you own a home and would like to avoid probate. Keep in mind, many people need both a trust and a will as a trust handles most assets but a will serves as a backup for any property that has not been placed into the trust.
Why Estate Planning Matters
Estate planning is essential to avoid courts deciding what happens with your property after you die. The probate process is a lengthy and costly process that is not ideal for anyone. If you have minor children, estate planning is critical so that your children will be cared for by people of your choosing. Don’t leave these decisions up to chance.
Ready to Create Your Will or Trust?
Whether you need a simple will, a full estate plan with a trust, or help through the probate process, we can help.
Schedule a consultation today to protect your family, your assets, and your peace of mind.