Adults in California benefit from estate planning. Estate planning is a multi-faceted approach to planning for the distribution of your assets after you pass away. A comprehensive estate plan always includes a will, also known as a last will and testament. Estate plans may also include a trust. Here’s what you need to know about wills and trusts in California.
What is a Will?
Your last will and testament is a legal document that you should create that will specify how your property, money, and other assets should be distributed when you die. All wills should contain the following information:
1. Who You Wish to Be the Executor of Your Will
2. Who You Wish to Care for Any Minor Children if You Die
3. Who You Wish to Receive Your Assets and What Each Person Should Receive
It is important to note that your will is considered a “testamentary” document. This means that it must meet certain requirements in California to be considered valid. The will must be in writing. It also must be signed by you and witnessed by two others. Your will does not take effect until you pass away.
Benefits of a Will
Creating a will is important to ensure that your loved ones receive the assets you want them to receive when you die. It is also important because if you die without a will, the court will handle the administration of your state, and decide who should become the guardian to any minor children. The will is not verified as valid until the will is submitted to probate for administration. If you die with only a will, the will must go through the probate process.
However, you should note that accounts such as 401ks and IRAs which include named beneficiaries will not be subjected to the probate process. Likewise, checking and savings accounts that have named an individual or individuals as “Payable on Death” beneficiaries are not subject to probate.
Downsides of a Will
Wills may be best thought of as the bare minimum in California. This is because although they do allow you to name an executor and express your wishes for the distribution of your assets, they do require your loved ones to go through the probate process. Your estate may also be subjected to various taxes that can potentially be avoided with other estate planning tools.
What is the Probate Process in California?
The probate process requires the named executor of a will to probate an estate. This involves contacting the local court, filing the papers, and beginning the process of documenting all assets, debts, and real property owned by the deceased. The executor is responsible for paying all outstanding debts, paying for the funeral, notifying any creditors, valuing and appraising the assets in the estate, working with other beneficiaries, filing all required forms, opening an estate account, and more. The probate process typically takes many months if not years to complete. The cost of probating an estate may run into the thousands when accounting for appraisal fees, court fees, and filing fees. However, estates valued at less than $166,250 may qualify for an expedited probate process.
What is a Living Trust?
A living trust, also known as a revocable trust, is a legal entity that allows you to place your assets in a trust and maintain complete control over them until you pass away. At that time, your trust will become irrevocable. Living trusts are a terrific option for individuals who do not wish for their beneficiaries to have to go through the probate process. A living trust can also help your beneficiaries to receive their inheritance faster, and without any court involvement.
Benefits of a Living Trust
A living trust can keep your assets out of probate. Much like you name an executor in your will, you can name a trustee to manage the distribution of the assets in your trust after you die. Trusts also allow for privacy. A will becomes public record, but a trust remains private. Your loved ones will not have to pay for court costs associated with probate. Living trusts offer great flexibility as they can be modified or revoked at any time. This allows you to remain in complete control of your assets until you pass away.
Trusts also allow you to make extremely specific rules for how your assets should be distributed. For example, you may decide that you do not want heirs receiving a large inheritance before they reach a certain age. Or you may stipulate that an heir must graduate from school to receive their inheritance. There are unlimited possibilities with a trust. Trusts may also prevent your beneficiaries from a variety of tax burdens.
Downsides of a Living Trust
A trust only covers the items that are put in the trust. Whereas a will takes effect over all your assets, a trust only covers those assets placed in the trust. Trusts are often more expensive to create and maintain than a will.
Which is Right for Me: A Will or a Living Trust?
Estate planning is highly personalized. So there is no way to say whether a trust, will, or both is in your best interest. However, an experienced trust and wills attorney will be able to help you determine which of these estate planning tools is right for you.
A will or a trust can be a valuable component in your overall estate plan. A comprehensive estate plan in California should include a will and/or trust, along with an Advance Health Care Directive, and Power of Attorneys.
Schedule a Trust and Will Consultation in Pasadena
The Law Offices of Paul Yee is a top-reviewed estate planning law firm serving Pasadena, South Pasadena, Monrovia, and surrounding communities. Attorney Paul Yee provides will and trust services along with all other estate planning services. Paul Yee has more than 25 years of experience helping families, individuals, and businesses to create comprehensive estate plans no matter how large or small your estate may be. To schedule a consultation with trust and wills attorney Paul Yee, call 626-799-4900 or send us a message online.