A Last Will and Testament (Will) and trusts both transfer estates to heirs and beneficiaries. Both are legally binding documents that can be used to protect assets and dictate how these assets should be distributed when the owner passes away. However, there are more differences than similarities between these two legal documents. When estate planning, it is important to consider the intricacies of both wills and trusts and ask “what is the difference between a will and a trust?” Some estates will also make use of both a will and a trust. If you are in the estate planning process and looking for legal guidance on how to best structure your plan, you can learn more by contacting the dedicated San Francisco estate planning lawyers of Von Rock Law at (866) 720-0195.
Wills are essential estate planning documents that outline how the assets of the estate will be distributed to named heirs and beneficiaries after the death of the owner. A will also often includes directions for important matters that must be settled after the owner of the estate dies, such as appointing guardians for minor children or instructions for the funeral and burial. Wills are settled through the probate process, which can be lengthy. According to California Courts, this process can take between 9 months and 1.5 years, and sometimes longer.
Wills are often used alongside trusts in estate plans. In this situation, the will can name an executor of the will and request that the executor creates a trust and appoint a trustee to control assets for certain individuals. The trustee commonly holds on to assets for minor children until they become adults or reach another age specified in the will.
Wills must be signed and witnessed and are subject to a legal process called probate. The will must be filed with a probate court in the jurisdiction of the estate and the terms of the will must be fulfilled by an executor. This process makes the will a publicly available document in probate court records. The probate court oversees the execution of the will and has the final say if any disputes arise.
Like a will, a trust is a legal document that sets guidelines for the transfer of assets from the owner of the estate to their heirs or beneficiaries. However, this transfer process differs drastically from that of a will. In a trust, the assets are first transferred from the owner (known as the grantor or trustor) to a trustee, who then distributes those assets to the beneficiaries. The trust dictates how the trustee should manage the assets and how and to whom they should be distributed. Trustees are fiduciaries who are obligated to follow the terms of the trust when handling assets and to act in the best interest of the trustees. There are a few different types of trusts and this process varies depending on which one is included in the estate plan.
While a will only goes into effect when the owner of the estate dies, trusts are active as soon as assets are transferred into them. Unlike a will, a trust does not need to go through the probate process. For many estates, a trust allows for the assets to be distributed much more quickly and easily than an estate plan consisting of only a will. If you have questions such as “what is the difference between a will and a trust?” for other estate planning concerns, you can learn more by speaking with one of the experienced estate planning lawyers at Von Rock Law.
Also known as living trusts, revocable trusts give the estate owner the right to change the conditions of the trust or terminate it at any point in their lifetime. The estate owner can also serve as the trustee. Under a revocable trust, the estate owner retains ownership over the assets held within the trust for tax reasons. The trust can also name a successor trustee who is obligated to follow the estate owner’s instructions on the management and transfer of trust assets after the owner passes away. Assets held within a revocable trust can pass on to beneficiaries without probate, but these assets will be included in the taxable estate since the owner retains control of them until their death.
In an irrevocable trust, the estate owner gives up ownership of their assets after transferring them to the trust. Irrevocable trusts are not controlled by the estate owner and may not be altered after their formation. A separate trustee manages the irrevocable trust – the owner of the estate may not serve as the trustee. This can be beneficial for tax purposes, as the assets held in an irrevocable trust are not included in the taxable income or assets of the estate. Irrevocable trusts can also be used to protect the assets from creditors.
Wills and trusts can either be used together as part of a comprehensive estate plan or separately. Most people require a will in their estate plan, but a trust does not apply to everyone. The right estate planning strategy will depend on the financial situation of the estate owner. The Attorney General of California recommends considering hiring a lawyer for guidance on this subject. An experienced estate planning lawyer can help the estate owner determine whether they need a will, a trust, or both as part of their estate plan.
Wills and estate plans differ in the date they go into effect, tax implications, complexity, cost, and other factors. If you are planning to create an estate plan or update one and are unsure whether you should use a will, trust, or both documents, the San Francisco estate planning lawyers at Von Rock Law are prepared to help. We can evaluate your unique situation and help you develop an estate planning strategy that caters to your needs, preferences, and goals. Call us today at (866) 720-0195 to learn more about questions like “what is the difference between a will and a trust?” and any other estate planning queries you may have.