Planning your estate is an important part of home ownership. Here are the differences between Wills and Trusts, and why you should consider having both.
A WILL DOES NOT AVOID PROBATE COURT
A TRUST CAN AVOID PROBATE COURT
A Will is a legal document that declares how your assets are to be distributed among surviving heirs. It is very important to be as detailed as possible as a Will only controls what you specify! A Will only goes into affect at the time of your death, but Wills can be revised many times before you become incapacitated.
A Trust is a legal fiduciary agreement between the creator of the trust and the trustee. This allows the trustee (i.e. “executor”) to manage the trust creator’s assets, as a benefit for your beneficiaries. The major goals of a trust are to reduce estate taxes and to avoid the probate process. The Trust will also have detailed instructions on how your assets will be distributed among your beneficiaries when you become incapacitated. A Trust can go into affect before your death, at death, or x amount of time after death; assets can be distributed at a time you specify. If your beneficiaries decide to sell your home, they may be eligible for a “step-up” tax basis, costing them less money in the selling process.
The Probate Process can be a very lengthy and expensive endeavor for your beneficiaries. If you only leave a Will, the administration of the Will has to be overseen by the court system to make sure everything is valid, and that all beneficiaries are in agreement about distribution of assets. Your home may have to be sold, and this process can take anywhere from 6 months to over a year. The probate process is expensive, stressful and time-consuming.
Having both a Will and Trust alleviates a lot of stress and tension from your beneficiaries. It outlines exactly how you want your assets to be handled and what happens to your property.
It is advised that you contact a legal representative, financial advisor, and title insurance companies to help set-up both a Will and a Trust.
I am a California Certified Trust and Probate Real Estate Specialist. Have more questions? Send me an e-mail by filling out the form below!