If you live in California, then you have the option to set up a Will, a Living Trust, or both as a part of your Estate Plan. These are both legal documents that allow you to leave assets and property to your loved ones. However, that’s essentially the only function they share in common. Which one should you use? Should you use both? The answer depends on which document(s) can best be leveraged to help you fulfill your estate planning goals. In this guide, we’ll go over the differences between a Living Trust vs. Will in California to help you decide which option to go with.
Living Trusts vs Wills in California
A Will is the commonly known term for a Last Will and Testament. It’s a legal document that is commonly used to protect your property and ultimately your legacy. In your Will, you can provide instructions on how you want your property to pass to those you love and the organizations you support. You can also nominate a Guardian for any dependent children or pets, as well as an Executor whose role is to make sure the terms of your Will are carried out.
To make a Will legal in California, you should follow state requirements for creating your document. Typically, you must have written or typed the document, signed it, and collected the signatures of two witnesses. If anything were to be called into question, your witnesses should be able to attest that you were in the right of mind at the time of writing and signing your Will. The purpose of this is to prevent fraud or coercion.
Benefits of a Will in California
If you were to pass away without having a Will in place, you would die “intestate.” This means that the California probate courts would be forced to decide how to distribute your property, and how your dependents should be cared for, by following state laws. One would only hope that these rulings lead to favorable outcomes, but they often don’t. Probate court can be a lengthy and costly process, and intestacy makes sure of it. Having a Will is advantageous because you get to have a voice for what should happen to your legacy and your family.
Here are some additional benefits of having a Will in California:
Dictate how your property should be distributed to loved ones or organizations
Have a say over who should care for your dependent children
Nominate a trusted person to manage property left to any minor children
Name a person you trust that you’d want to carry out the terms of your Will
Relieve your loved ones of pain, confusion, and possible in-fighting
Disadvantages of a Will in California
Asking whether or not there are any disadvantages of establishing a Will is essentially a trick question. Absolutely anyone can and should create a Will. It’s always a good idea to protect your family and your property, especially when you have the legal right and access to tools to do so. At Trust & Will, we typically recommend that everyone should use a Will as their foundation and starting point of any Estate Plan, and then build upon it from there.
The only possible “disadvantage” of using a Will is if you were to choose an alternative option in place of will that might suit your personal circumstances better. For instance, a Living Trust could be that alternative. We explain how Living Trusts work, next.
Living Trusts in California
A Living Trust is a powerful estate planning tool for a number of reasons. Before we get to the benefits, let us explain how they work.
A California Living Trust is a document that you can set up such as the Trust controls some or all of your assets. It’s called a “living” Trust because you can still access and use the assets in the Trust during your lifetime. The assets are eventually passed to your loved ones after you pass away.
Benefits of a Living Trust in California
One of the key reasons Living Trusts are a popular estate planning tool is because you get to retain control while providing more protection for your family. For instance, with other types of Trusts, you have to choose a Trustee other than yourself to manage and control your assets. With a Living Trust, you have the option of appointing yourself as the Trustee. The other key benefit is that a Living Trust allows you to pass your property directly to your beneficiaries outside of the probate court.
This is an ideal option for individuals who want to be proactive by placing their assets into a Trust today, but want to maintain control and use of their assets during their lifetime.
When you use a Will, assets are distributed as soon as the probate court makes their determination. When using a Trust, the probate court is not involved. Instead, property is distributed per the terms of the Trust. This allows you to control how and when property is distributed.
Here is a summary of the benefits of using a Living Trust in California:
Bypass the California probate process
May protect your family further
Reduce income and estate taxes
Access and control property during your lifetime
Control how and when your assets are distributed
Disadvantages of a Living Trust California
While the advantages of using a Living Trust are appealing, there are certain disadvantages to consider as well.
First, setting up any type of Trust is more costly relative to setting up a Will. However, it’s important to think of the opportunity costs and any cost savings in the long-run. Probate court is a lengthy and expensive process, and things may not go in the way you had envisioned. By investing in the up-front costs of setting up a Living Trust, you may be preserving more wealth for your family over time.
Further, setting up Living Trust doesn’t necessarily eliminate the need for a Will. Most individuals aren’t able to transfer all of their property using a Trust. Any assets left out of the Trust (either on purpose or by accident) should still be covered by a Will.
If you choose to leverage a Living Trust as your primary estate planning tool, it’s still recommended that you set up a Will as your back-up and catch-all document.
The below list summarizes the possible disadvantages of a Living Trust:
Does not eliminate the need for a Will
Can be costly to set up
May be time-consuming and complicated at first
More paperwork involved
May require the assistance of a legal or financial professional
California Wills and Trusts - What’s the Difference?
Wills and Living Trusts serve the purpose of distributing property to your loved ones after death. Apart from that, these two estate planning tools function very differently from one another.
The key difference between California Wills and Trusts is the involvement of the probate court. As a review, any assets not held in a Trust are subject to the California probate process. In other words, if your Estate Plan consists only of a Will, then your estate must pass through probate.
Probate is intended to audit and distribute property and assets in a judicious manner. However, the California probate courts are currently overloaded. This means that your loved ones may have to wait several years before they inherit what is rightfully theirs. In addition, the outcome of your estate is in the hands of the court, when you could have exercised more control by using a Trust. Last but not least, probate court fees will eat into your estate, leaving less for your family.
There are additional differences between Wills and Living Trusts to keep in mind:
A Will is used to document how you want your affairs handled upon your death
Assets held in a Trust, unlike a Will, are not subject to the probate process
A Living Trust allows you to set up protection for your property during your lifetime
A Trust gives a Trustee the right to manage assets on your behalf indefinitely
A Will allows you to name guardians for your minor children
Trusts are private record while Wills are public record
Is a Living Trust Better Than a Will in California?
There is no right answer in regards to whether a Living Trust is better than a Will, or vice versa. Each individual should establish their own preference based on their personal circumstances.
Some may choose a Living Trust over a Will from the standpoint of removing assets from the probate process. They can exert strong control over how their assets will be distributed after their death, and name a Trustee who will oversee the process. (Plus, they have the option to serve as their own Trustee during their lifetime.) A Trust also allows you to control the timing of when assets are distributed as well.
However, a Trust is more complex, and thus more expensive to set up over a Will. Further, a Trust cannot accomplish the important task of naming a Guardian for any dependent children.
This guide provides a detailed look at the various advantages and disadvantages associated with Living Trusts and Wills. The bottom line is both tools offer certain benefits; one set of benefits may be more advantageous to one person, while the other set of benefits is more advantageous to another. It’s best to consider your own circumstances and choose the option that will better help you meet your estate planning goals.
Combining a California Will and Living Trust Together: Should You Use Both?
Another possible option to consider is combining a Will and Living Trust and using them both. Including both types of documents in your Estate Plan is valid and accepted under California law. By doing so, you can take advantage of each tool’s benefits.
For instance, perhaps you use your Will to state your end-of-life wishes and name a guardian for your children. You could then transfer any and all assets you want to be kept private and outside of probate into a Living Trust. You’d also have peace of mind knowing that your Will could serve as a catch-all for any assets that aren’t included in your Trust, whether by accident or intention.
If you do not have any children, then you may be compelled to choose one or the other. However, if you do have minor children, it often makes sense to use both.
Living Trust vs Will in California - Which Should You Choose?
Living Trust vs. Will in California: which should you choose? Both documents serve the important purpose of passing property to your loved ones. A Will allows you to state how you’d like for your affairs to be handled. If you have any dependent children, you should certainly use a Will to name a guardian. Your estate must pass through the California probate process before your property can be distributed. This process can take several months to several years, and can be costly.
A Living Trust, in contrast, bypasses the probate process. It enables you to name a fiduciary to manage your assets on behalf of your loved ones. You can also set up terms that dictate how and when those assets should be distributed. Living Trusts can be set up such that you get to use these same assets during your lifetime. Any assets left out of the Trust still must pass through probate.
Before you begin to feel stressed over making the right decision, knowing that having either a Will or a Living Trust are fantastic ways to protect your property and your loved ones. There are so many individuals who die intestate, which means that they have no say over what happens to their legacy. Either document allows you to use your voice. The rest is about fine-tuning your options to optimize your estate planning goals.
At Trust & Will, we typically advise that any individual start with the foundational building block of a Will, regardless of their marital status, or whether they have any children. However, if you have dependent children, you should certainly have a Will without fail. Once you have a Will in place, it would then be smart to look into a Living Trust and see if it would behoove you to set one up. Remember, you don’t have to place all of your assets into a Trust. Many individuals choose to take the best of both worlds and combine them! Ready to create your Living Trust? Trust & Will makes it easy - you can create your Living Trust online today at affordable rates.
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