What is the Difference Between a Will and a Trust?
A Will and a Trust are both common tools used when creating your estate plan. Both documents assist your loved ones in determining your last wishes as it applies to all of your worldly assets, but they operate in very different ways.
What does a Will do?
A Testamentary Will, which people are generally more familiar with, comes into operation only after the creator of the Will dies. Until then, the Will is kept in a safe place waiting for that eventuality. In California, generally a valid Will must be in writing, signed by the testator (the creator of the Will), and witnessed by two people. There is also the exception, called a ‘holographic’ Will, which requires the substantial terms of the Will to written and signed in the testator’s own handwriting. A Will has no power to assist you during your lifetime, but can assist your loved ones after your death by appointing an Executor (the person in charge of your estate) and giving them instructions on how to distribute your estate.
What does a Trust do?
A Trust is much more complex, and is generally referred to as a ‘living’ document instead of a testamentary document. That is because a Trust operates during your lifetime to manage your assets and assist you in certain circumstances when you need help, such as during periods of incapacity. Once a Trust is created, you fund your trust with assets which are then controlled by your Trust immediately. During your lifetime, you control your Trust and the assets in your Trust. You can also appoint a third-party to act for you in managing your Trust during your lifetime if needed, and after you die. The third-party can be given power to manage your Trust for certain periods of time if you become incapacitated. A Trust can continue to operate after you die, with someone you appoint to manage the assets until minor children become an adult, or even longer. A Will does not do any of this.
Should I have a Will, a Trust, or both?
When deciding which documents you need, a great place to start would be a consultation with your favorite estate planning attorney. Every situation is different and seemingly similar situations often call for very different plans. A Will should be included in any estate plan, even though a Trust is created. When you have a Trust, you will have what is called a “pour-over Will”. The pour-over Will is a kind of catch all, fail safe to make sure anything left out of your Trust transfers into the Trust upon your death, but does not avoid Probate, a long and expensive process in California. Primarily, your Trust is established to prevent your estate from going through Probate. If your estate doesn’t warrant Probate, then a simple Will may suffice. Your Will is also the legal document where you can nominate a guardian for your minor children if you die before they are adults.
In the end, everyone has a different situation, different assets, and different preferences when it comes to what should be done with those assets, both during their lifetime and after their death. If you or a loved one need to create or update their estate plan we encourage you to reach out to an estate planning attorney as soon as possible. The legal team at Naimish & Lewis are here to assist with your estate planning needs.
