Do I need a Will or a Trust, or both?
A primary reason you should create a Will, or a Trust, is to formally declare who should inherit your assets upon death. If you die without doing so, then not only may your estate be subject to probate, but California succession laws will direct that your assets be distributed to your closest relatives. If you do not have a relationship with some or all of your relatives, then this may not be a desirable result. To ensure you have a say in who inherits your assets, then you must do some initial planning, whether it be a Will, a Trust, or both.
The basic functions of a Will and a Trust can be easily misunderstood. Clients are sometimes under the impression that they only need a Will and not a Trust, or vice versa. One common misconception about a Will is that it removes you from probate court administration. This is not true. Probate administration is the official process where the Will is proved in the court and accepted as the last testament of the deceased person, or if there is no Will, the process by which the court applies succession laws to determine who succeeds to the deceased person’s estate.
Under current California law, a probate administration is only necessary if you have over $150,000 in total assets at death. This total does not include assets that are disposed of by non-probate transfers, such as beneficiary designations (i.e. retirement accounts, pay-on-death bank accounts), by jointly holding title to real property with right of survivorship, or assets held in Trust.
If your estate is subject to a probate administration, then this process will not only be public, but likely expensive and time-consuming. While a person can technically forego creating a Will or a Trust and avoid probate through non-probate transfers, this type of strategy tends to backfire due to flawed planning. And when a non-probate transfer fails, the assets often end up being the subject a probate administration. The best way to control the disposition of your estate and avoid probate is through creating a Revocable Living Trust.
Another common misconception is that if you have a Trust you do not need a Will. This is also not true. Every Revocable Living Trust should be accompanied by a Will. The function of the Will is to avoid probate by naming the Trust as its beneficiary and effectively “pouring-over” any assets to the Trust that end up in the estate by mistake. With proper planning and funding of the Trust, the “pour-over” Will typically does not come into play.
Another reason you need a Will is if you have minor children. In the Will you should nominate who you desire to serve as the child’s guardian if you pass away while the child is a minor and the child’s other parent is unable to act. Every parent with minor children should have a Will for this reason. While the court acts in the best interests of the minor child, the only way the Court will know of your intentions for the child’s guardian is if you make it known in your Will. Therefore, a Will is necessary for at least this purpose.
Estate planning by Will, Trust, or both, requires strategic planning. It is highly recommended that you consult with an estate planning attorney to make sure your plan fulfills your wishes.