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Estate Planning: Why do I need a will if I have a trust?

If you’ve spent any time talking about estate planning, you’ve probably wondered why you would need a will if you have a trust. That is a common question. Before exploring the answer, let’s go over some basic differences between the two.

Most people are familiar with a will (or “last will and testament” to be completely formal), but many don’t really know what a “trust” is. Think of a trust as a special box in which you place your assets (bank accounts, stocks, your home, rental properties, etc.). This person is NOT the “Executor.” An executor is appointed in a will, approved by a court, and only has authority after your death. A trustee generally does not need court approval and can handle things during your lifetime. and after your death. That is why it is sometimes called a “living” Trust.

There are many differences between a will and a trust, but the most basic differences are:

  • A will only takes effect when you die, but a trust can be operational both during your life and after your death.
  • Property given to someone under a will must be distributed directly, without conditions. Assets delivered under a trust may be delivered directly or may remain in trust and be supervised by the trustee. It is possible to set up a Trust through a will, but the result is still a trust.
  • There is a better chance of reducing inheritance taxes if you use a trust rather than a will.
  • A trust allows you to better protect your heirs from creditors, divorce, and other relatives (or adoptive relatives).
  • Property delivered under a will must go through probate court. That process is very expensive in California, time consuming, and very public. A Trust does not have to go through Probate Court, it can remain a private matter, probate expenses can be avoided, and the final affairs of the deceased can be handled quickly.

For most people, having a trust is worth the expense of establishing one, a cost that, by the way, is generally much less expensive than probate. It is customary (although not mandatory) to appoint the same person as Trustee and as Executor, so that control of fiduciary and non-fiduciary assets is centralized in a single person.

So why do you need both? Having a will, even if you have a trust, is like having a safety net. It is very common for people to accidentally leave something out of their confidence. The family home is a good example. People buy a new home or refinance an existing one and forget to return the title to their trust when they are done. When the person dies, the house is not part of the Trust, so the will decides “who stays.” Ideally, the will states that all assets go to the trust. In this way, the final distribution of the assets still follows the plan established in the Trust. Without a will, the State will decide who gets the property that is not in the Trust. They may or may not be the people you wanted to have that property.

A good estate plan will always include a will, even if you have a trust. Regardless of whether you decide to have one or both, you should always get help from an attorney. In the long run, do it yourself, estate planning often leads to more expense and unintended consequences.

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