What are the primary differences between a Will and a Living Trust (“Trust”)? Some primary differences are whether a Probate will be necessary; the costs and fees involved; the kind of assets and legal affairs to be managed; and when the document takes effect.

A Will is a “legal instrument” used to name an Executor of your estate and to gift assets. A Will controls so-called probate assets – such as real property, personal property, and financial accounts – if they are held in the deceased person’s name. It does not control any assets which pass automatically to designated death beneficiaries under insurance and retirement accounts, to assets that pass to surviving joint tenants, or to assets held in Trust.

In California, a will involves a court supervised probate when the gross value of the decedent’s estate is at or above $150,000. Debts are not subtracted when valuing the estate.

Since January 1, 2017, only estates that are subject to probate are also subject to Medi-Cal estate recovery when a Medi-Cal recipient dies without a surviving spouse.

Probate begins with a Petition for Probate to admit the Will and to appoint the Personal Representative. Typically, the person nominated in the Will as the Executor becomes the Personal Representative. The probate requires the preparation of an inventory and appraisal of assets, the notification of creditors, the payment of all taxes, and the settling of creditor claims. Probate ends with a Petition to distribute assets to the beneficiaries pursuant to the terms of the Will.

Once probate commences, the court appointed Personal Representative safe guards and inventories assets, notifies creditors, files tax returns and pays taxes, handles any unfinished legal matters, and ultimately distributes what remains to the decedent’s named beneficiaries according to the written terms of the will.

Probate takes 5-6 months at a minimum (usually longer) and may take much more if there are complications (e.g., creditor disputes, controversy over the terms of the Will, and valuation issues, etc.). Executors and their Lake County probate attorney receive a percentage of the estate and sometimes more if extraordinary services are involved.

Next, let’s examine the Trust. A Trust is a contract between the “Settlor” (the person who creates – establishes – the Trust) and the “Trustee,” the person who agrees to hold certain property “in trust” for the benefit of “Beneficiaries” according to the terms of the Trust. A Trust controls those assets that are legally transferred (retitled) from the Settlor to the Trustee (such as one’s home and investment accounts). Unlike the Will, the Trust commences once funded. When the Settlor is disabled, resigns, or dies, a new Trustee (nominated in the Trust) takes over, manages the Trust assets, and administers the Trust according to its terms.

Assets in a Trust avoid Probate at death and avoid Conservatorships of the Estate during disability. A Trustee still has to do most of the same tasks as inside a probate. However, it is usually more expensive, time consuming and aggravating to probate a decedent’s estate than to administer a decedent’s trust estate. That is why most people prefer the living trust.

So, when would you want a Will versus a Trust? Very simply put, a Will is better for anyone with under $150,000 in probate assets. With small estates, tangible personal property, financial assets and mobile homes can be transferred by way of the “Affidavit Procedure” (without court). Above $150,000 a Trust is usually preferred, as settling trust estates are usually less expensive and time- consuming than probate.

Nevertheless, everyone should still have a will. There are always assets held outside of a trust to which the will applies. That includes any bank accounts, vehicles and those assets which were not put in the trust. Typically a person who has a trust uses their will to transfer these assets into their trust – hence the term “pour over will”.

Not everything is handled through the trust. Estate planning also requires powers of attorney to control financial, legal, and property affairs outside of what is held in one’s trust and an advance health care directive to handle health issues.

“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”