In California, a will and a living trust are two different estate planning tools that serve similar purposes but have distinct characteristics. Here are the main differences between a will and a living trust:
Distribution of Assets
- Will: A will is a legal document that outlines how a person's assets and property will be distributed after their death. Also, many folks don't realize this but wills go into effect only upon the person's death and generally must go through the probate process, which is a court-supervised process of validating the will and distributing assets to beneficiaries.
- Living Trust: A living trust is a legal entity created during a person's lifetime to hold their assets. The person who creates the trust (grantor/settlor/trustor) can transfer assets into the trust and maintain control over the assets during their lifetime. After the grantor's death, the trust can continue to hold and manage assets for the benefit of the designated beneficiaries without the need for probate.
Probate Process
- Will: Probate is usually required for assets passing through a will, and it can be a time-consuming and costly process. It involves court supervision, legal fees, and potential delays in distributing assets to beneficiaries. The probate code fixes the fees charged by attorney and executors and can be about 5% of the gross estate.
- Living Trust: Assets held in a living trust do not go through probate. As a result, the distribution of assets can occur more quickly and privately, and the costs associated with probate can be avoided or minimized.
Privacy
- Will: Wills are generally public documents, which means the details of the deceased's assets, debts, and beneficiaries become part of the public record. Anyone who wants the information can simply pull a copy of the court's file.
- Living Trust: Trusts, on the other hand, are private documents. The distribution of assets and the beneficiaries' details can remain confidential.
Incapacity Planning
- Will: A will only becomes effective after a person's death, so it does not address incapacity during their lifetime.
- Living Trust: A living trust can include provisions for managing the trust assets in case of the grantor's incapacity, allowing a designated trustee to manage the assets on behalf of the grantor.
When a living trust may be more advantageous to use:
Avoiding Probate
If you want to spare your loved ones from the complexities, time, and expenses associated with probate, a living trust can be a suitable option.
Privacy
If you value privacy and wish to keep your estate details confidential, a living trust can help accomplish this goal.
Incapacity Planning
If you want to ensure someone can manage your assets and affairs in case you become incapacitated, a living trust can provide a mechanism for that.
Large or Complex Estates
For individuals with substantial assets or complex estate planning needs, a living trust can offer more flexibility and better control over asset distribution.
However, it's important to note that estate planning is a complex process, and the suitability of a will or a living trust depends on individual circumstances. It's best to consult with an experienced estate planning attorney in California to determine the most appropriate approach for your specific needs and goals.
A will
- Takes effect only at death
- Generally must go through probate
- Court-supervised; public documents
- Probate fees can be about 5% of the gross estate
A living trust
- Created during your lifetime
- You keep control of the assets
- Assets avoid probate
- Distribution is quicker and private