A Last Will and Testament is a legal document that is used to express an individual’s wishes with regard to his/her estate assets and what should be done with them upon the Testator’s (creator of the Will) death. Gifts made in a Will may be general or specific and may be made to as many different beneficiaries as the Testator wishes. Along with serving as a vehicle for making gifts of estate assets, a Will is the only opportunity the parent of a minor child has to nominate who the parent would want to serve as Guardian for the minor child if one is ever needed. In California, a Will is best used for persons who do not own any real estate and whose total estate value is less than $150,000. When those assets are present, a Will most likely may have to be administered following death through a costly and burdensome court proceeding known as probate.
One of the most common explanations people offer when questioned about the fact that they do not have an estate plan is the belief that they do not yet need one. They either think they are too young or not wealthy enough to need a plan. Every adult can benefit from having an estate plan in place though, without regard to age, marital status, or net worth. At a bare minimum, executing a Will ensures that the State of California will not determine what happens to your estate assets and prevents the possibility of your loved ones winding up embroiled in costly and divisive litigation after you are gone.
When a decedent dies without a valid Will in place the estate is referred to as an “intestate” estate. If you die intestate, the State of California (or the state where you reside at the time of your death) decides how your estate assets are distributed using the California intestate succession laws. Usually, this means that only close relatives will inherit from the estate. Moreover, dying intestate means you give up the ability to decide who oversees the probate of your estate.
Given the prevalence of the internet in today’s society, people often make the mistake of thinking they can save time and money by using a “DIY” Will form they find on the internet. Unfortunately, you are more likely to cost your loved ones unnecessary time and money when it comes time to probate your estate by using these forms. DIY Will forms are notorious for having mistakes, errors, and omissions that lead to protracted litigation during the probate of an estate. Given the importance of your Will, coupled with the fact that you won’t be here to correct problems that arise when it is probated, it should be clear that working with an experienced attorney is the only way to go when creating your Will.
Except in the case of a very modest estate, as soon as possible after your death, the individual appointed as the Executor of your Will must submit the original Will to the appropriate court for probate. The Executor is also required to formally notify beneficiaries and heirs of the estate as well as creditors that probate is underway. Creditor claims are reviewed and paid if approved. Any federal (and/or state if applicable) gift and estate taxes due must also be paid. Eventually, the terms of your Will are used to determine how the remaining estate assets are distributed. This process often takes a year or longer.
At its most basic, trust is a relationship whereby property is held by one party for the benefit of another. Trusts are broadly divided into living trusts and testamentary trusts with the former activating during the lifetime of the Settlor (the creator of the trust) and the latter typically being activated at the time of the Settlor’s death by a provision in the Settlor’s Will. Living trust can be further sub-divided into revocable and irrevocable living trusts while a testamentary trust is always revocable because a Will is always revocable.
People sometimes choose to execute a Last Will and Testament as their initial estate plan. As assets grow, however, the option to switch to a trust as the primary distribution method is often the wise move. Whether you want to use a Will or a trust to distribute your estate is something that can truly only be decided after consulting with an experienced and qualified estate planning attorney; however, there are some common considerations when deciding whether a Will or a trust should be used. If your estate is small enough to qualify for small estate administration, and you do not have minor children (nor plan to have any in the near future), a simple Will may be sufficient. If, however, your estate is large enough that probate avoidance is a consideration and/or you do have minor children who will inherit from your estate, you should strongly consider establishing a trust.
Trusts can help further a wide range of estate planning goals which is why trusts are so often found in an estate plan. Among the numerous and varied estate planning goals that can be furthered using a trust are:
- Probate avoidance
- Pet planning
- Long term care benefit planning
- Asset protection
- Incapacity planning
- Special needs planning
- Protecting the inheritance of a minor child
- Charitable gifting
- Tax avoidance
- Funeral planning
For people with very modest estates, a Last Will and Testament serves as the foundation of their estate plan. As their estate and family grow, that initial estate plan may need to expand as well. At that point, a trust may be added to that original estate plan given the numerous and varied objectives that can be furthered using a trust. To help ensure that you have at least a basic understanding of these two common estate planning tools, the Northern California Center for Estate Planning & Elder Law has created some frequently asked questions and answers related to Wills and trusts. If you have specific questions about Wills and trusts please contact our office to schedule a consultation.
If you have specific questions regarding Wills and trusts, contact us at Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 to schedule your appointment today.