Do I need a trust if I have a will?
Wills and trusts are two of the most important estate planning tools. It is a common misconception that if you make a will, your estate plan is complete. In reality, wills and trusts are two unique estate planning tools, with one not able to replace the other. Trusts are critically important estate planning tools which can benefit everyone, regardless of their wealth level or age. Our Orange County, California trusts and estate planning attorney discusses why you should consider making a trust to protect your family today.
Avoiding Probate with a Trust
A will allows you to leave instructions as to whom you wish to receive which assets, as well as nominating a guardian for your minor child. Assets left to your heirs through a will must go through the probate process. Probate is the court process by which assets are distributed to the named heirs or through the laws of intestacy, if no will exists. Not all assets will go through probate. For instance, retirement accounts and bank accounts will generally pass separately.
Probate is a time-consuming process, which could mean your heirs will be waiting for your assets for some time. Furthermore, probate is costly. Your assets will be lessened as your estate is forced to pay for court costs, taxes, attorney’s fees, and more.
Creating a trust allows you to solve these problems. With a revocable living trust, your assets held within the trust can transfer immediately to your beneficiaries upon your death. They will not need to go through the lengthy probate process. Trusts come with the additional advantage of allowing you some control over your assets even after your death. You can set terms for distribution and conditions. For example, you can dictate that funds be only used towards education or distributions be staggered as your child grows up.
Trusts Have Tax Advantages
In addition to avoiding probate with a trust, you can further avoid some taxation. Trusts can reduce your estate tax obligations, most notably on the state level since the federal exemption has been raised so significantly. Trusts can further shield assets from your heir’s creditors. Given the many advantages of a trust, it is advised that you consult with an estate planning lawyer as soon as possible to get started.