Estate Planning: Do I need a will or a trust?

 In Blog, Estate Planning

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If you’re thinking about estate planning, you’re making a wise decision. You’ll be able to provide for your family, as well as remove much of the stress and headache that would otherwise be involved in taking care of your affairs after you’re gone. But now the question is, “What type of estate plan do I need?” You’ve probably heard the terms “will” and “living trust” as you’ve researched the topic. Whether you need one or the other (or both) depends on your planning needs and the size of your estate.

Revocable living trust

Setting up a trust means transferring ownership of your property to a trustee, who holds and administers it for the benefit of someone else (the beneficiary). The terms of the trust are outlined in the trust instrument. A revocable living trust is one that you set up while you’re still alive and can be amended or revoked at any time prior to your death.

Advantages of a revocable living trust include:

  • Keeping your estate out of probate: This is probably the most important feature of the living trust for many people. Probate is a long, court-supervised process where a personal representative (or executor/administrator) marshals your assets, has them appraised, and ultimately distributes them to your heirs or beneficiaries. Probate also eats up a significant portion of the estate in court and attorney fees. Property that goes into your living trust during your lifetime stays out of probate, sparing your family member’s from this cumbersome ordeal.
  • Avoiding a conservatorship: Living trusts can prepare your estate for incapacity as well. If you can no longer handle your financial affairs, you might ordinarily need a conservator appointed by the court. However, with a living trust set up, your successor trustee can start exercising those duties, making for a much easier transition.
  • Flexibility and control: A living trust is much more flexible than a will for distributing your assets. You can delay gifts to your children until they reach a certain age (often 25), spread them out over time, or make them conditional (i.e., your beneficiary gets paid when he or she graduates college).

The living trust forms the core of an estate plan for many people. While they are more expensive to set up than a will, the long term benefit to your family more than makes up for this. Of course, a living trust is not much help if no property is transferred into it. Once the trust is active, property must be transferred into the trust (called “funding the trust”) and retitled. Typically, you will name yourself as the initial trustee, which allows you to use, sell, or remove trust property as you see fit. If you’re married, you and your spouse can be co-trustees if you choose.

Will

A will (often called a “Last Will and Testament”) is a simple document that provides guidance for the “wrapping up” of your estate after you’re gone. It names an executor to carry out your wishes, indicates where your property will go, and nominates a guardian for your minor children, if necessary. Advantages of a stand-alone will include:

  • Ability to name guardian: A will is where you can name a guardian for your minor children.
  • Cheaper and easier: A will is a much more basic estate planning document, so it is generally cheaper and easier to draft.

While wills tend to be easier and less expensive than a living trust to set up, they are more appropriate for small, simple estates. In California, if your estate is worth more than $150,000, it will have to go through probate, even with a will. One way to avoid this is by setting up a living trust.

What’s the right option for me?

If you have a small estate, you might only need a will. However, if you have assets over $150,000, you should consider setting up a living trust. This will help save your family members from having to go through the probate process, and give you many more options for how you distribute your assets to your loved ones.

If you have a living trust, you will still need a will. It’s called a “pour over will.” Essentially, it dictates that everything that didn’t get transferred into your trust while you were alive is left to your trust. Additionally, if you have minor children, this will can be used to name a guardian for them.

The type of estate plan you set up is largely determined by the size and complexity of your estate. The important thing is to choose what’s right for your goals. You should have a well-drafted plan that provides for your loved ones and gives detailed guidance to the person carrying out your final wishes.

Helix Law Firm can help draft a will or living trust

The estate planning you do now can make a huge difference in the lives of your loved ones after you’re gone. We can help you draft an estate plan that provides for them and avoids the hassle of probate.

If you’re interested in learning more about how Helix can help, please call us at (619) 567-4447 to schedule a free consultation.

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