Will vs Trust in California

Most California estate plans are based on either a will or a trust. Both are legal documents that allow you to leave your assets to your loved ones. But what is the difference between a will and a trust, and which is the better estate planning tool? This blog post will explain the difference between a will versus a trust in California.

What is a Will?

A Last Will and Testament is a legal document that allows you to share your last wishes regarding what will happen after you pass away. A will lets you:

• State how you want your property to be distributed after your death
• Nominate guardians for any minor children you may have
• Select a person called an executor to administer your estate after your death

For those with very small estates that would not trigger a probate proceeding after death, a will-based estate plan may be sufficient and allow you to make key decisions about what happens after your death.

Benefits of a Will in California

Creating a will is essential to avoid dying “intestate”, meaning without any estate plan in place. If you were to die intestate, the California probate court would determine who should administer your estate. They would also decide who would get custody of your minor children and how to distribute your property according to California laws of intestacy. 

If you create a will, you will get to make all of these decisions yourself.

Disadvantages of a Will in California

There are two main disadvantages to a will-based estate plan in California. 

The first disadvantage is that a will does not take effect until after your death. That means your executor would not have any ability to help you manage your finances if you were to become incapacitated. Creating a Durable Power of Attorney in conjunction with a will can help you avoid a conservatorship in situations like these.

The second and main problem with will-based estate plans is that a will must pass through a lengthy, expensive, and public Probate Court proceeding after death. So if you create a will and your estate is larger than the probate threshold of $184,500, then the estate will be tied up in the Probate Court for a minimum of 18 months before it can be distributed to the beneficiaries. The Probate Court process will cost the estate tens of thousands of dollars and become public record.

Because of the high value of California real estate that almost always exceeds the probate threshold, most California homeowners are better served by creating a revocable living trust-based estate plan. 

What is a Revocable Living Trust?

A Revocable Living Trust is a legal document that allows a third-party trustee to hold assets on behalf of a beneficiary. It’s called a “living” trust because it takes effect immediately while you’re still alive. You would continue to access and use the trust assets during your lifetime.

Like a will, a trust allows you to:

• State how you want your property to be distributed after your death
• Nominate guardians for any minor children you may have
• Select a person called a successor trustee to administer your trust after your death

But unlike a will, a trust also lets you:

• Bypass the California probate process
• Reduce capital gains taxes and federal estate taxes

To create a trust, consult an experienced estate planning attorney who can ensure it is drafted and executed in accordance with California law. 

Benefits of a Living Trust in California

The main advantage of a revocable living trust is that it allows your loved ones to skip the Probate Court after your death. Avoiding probate is one of the main reasons Californians create a trust. A trust administration is almost always faster, cheaper, and easier than a probate proceeding. It’s also done privately, unlike a probate matter. 

Another advantage of a revocable living trust is that it takes effect while you’re still alive, unlike a will which only takes effect after you die. If you were to lose mental and/or physical capacity, your successor trustee could take over managing your trust assets, avoiding a complicated conservatorship. 

Disadvantages of a Living Trust in California

We recently blogged about potential disadvantages of a trust. To sum it up, potential drawbacks are that a trust:

• Can be costly to set up
• Requires careful record keeping, especially after death
• May complicate borrowing situations like a home refinance 
• Does not protect against creditors or lawsuits
• May carry potential tax burdens

In spite of the potential disadvantages or limitations, trust-based estate plans have become incredibly popular in California and are a suitable choice for most homeowners. 

Will Vs Trust in California; Which is Better?

If you’re wondering which is better, a will or a trust, here’s a quick summary. For individuals and couples with an estate over the probate threshold, a trust-based estate plan is usually better suited to their long-term goals. 

For individuals with very small estates valued at less than $184,500, a will-based estate plan may be adequate for their needs. 

Consult an experienced estate planning attorney for help deciding what type of estate plan is best suited for your personal needs and circumstances. 

If I Have a Trust, Do I Also Need a Will? 

Californians who select a trust-based estate plan will also create a type of will called a Pour-Over Will. This document “pours” all of their assets into their trust. A Pour-Over will does not contain any specifics about distributing your assets but merely states that the assets will be distributed according to the terms of the trust.

After the trust settlor’s death, the successor trustee would lodge the Pour-Over Will with the Probate Court. Upon reading in this document that the decedent had created a revocable living trust, the court would rule that no probate proceeding was needed.

If you have any questions about a will vs trust in California, feel free to contact our law firm.

Law Offices of Daniel A. Hunt

The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.