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What’s the Difference Between a Will and a Trust in California?

Wills and trusts are both essential parts of estate planning, and ensuring you have them in place will make life easier for your family if you pass away. However, there are significant differences between their nature and purpose, so what’s the difference between a will and a trust?

Understanding the Basics of Estate Planning

An estate plan is a set of legal documents that protects your children and assets, and determines how they are transferred after you pass away.

What Is a Will?

Wills are legal documents enacted after you die. They provide several basic functions, and outline:

How your assets are distributed
Who looks after your children
Who acts as your executor (responsible for managing your estate)
Who are your beneficiaries (the individuals who receive your assets)

What Is a Living Trust?

With a living trust, you transfer assets to a trust that you can continue to manage. These assets are then transferred to your beneficiaries when you pass.

The main goal of a living trust is to avoid California’s probate process, which is both lengthy and costly.

Key Differences Between a Will and a Trust

A will outlines how your assets are distributed after you die; a trust holds them for a predetermined period.

For example, you can stipulate that you want some of your assets to go to your children when they reach 21, even if you’re still alive.

Furthermore, a living trust holds your assets while a will merely outlines how they will be distributed after your death. Wills also let you designate guardians for your children.

How Probate Works in California

Probate is the process of settling an individual’s assets after death.

The first step is to ensure the deceased’s debts are settled, after which their assets are transferred according to their will. If they didn’t leave a will, assets are distributed according to state law.

However, only those estates that exceed the financial threshold are required to go through probate.

The first step of the probate process is to file a petition. An interested party requests that the court open the estate and appoints a representative—an executor if there is a will and an administrator if there isn’t.

Heirs, beneficiaries, and creditors are notified, the representative compiles a list of the estate’s assets, and debts and taxes are then paid. The assets are then distributed to heirs/beneficiaries, and the estate is closed.

The entire process can take anywhere from 9 to 18 months on average, but it can drag on for years if there are complex assets to disperse or large estates to manage.

How Assets Are Distributed Under Each Option

How the assets are distributed will depend on the level of estate planning:

A will directs how the assets are distributed.
A living trust gives control over to the trustee who repays debts and distributes assets to the beneficiaries.

With no will or trust, the assets are subject to intestate succession under the California Probate Code. They are distributed according to whether the individual had a spouse or children.

In the recent past, the siblings and parents of the decedent could claim half of the separate property (acquired before marriage), with a surviving spouse taking the other half and all of the community property (acquired during marriage).

The rules have since changed, and the spouse now inherits all community and separate property ahead of siblings and parents. The spouse is first in line, followed by children and their descendants (grandchildren/great-grandchildren).

When You Should Write a Will vs Create a Trust

A will is usually sufficient if your assets fall below the financial threshold, as it means the estate won’t go through the lengthy probate process.

A trust is a better option if you exceed those thresholds.

You should also opt for a will if you have children and need to appoint guardians.

Of course, you can have both a will and a trust, and in most cases, this is the best option. Not only does it cover you and your loved ones for all eventualities, but it also encompasses a broader range of assets and ensures your children have appointed guardians.

Common Misconceptions About Wills and Trusts

One of the most common misconceptions is that a will avoids probate. This is not technically true. If the estate exceeds the financial threshold, it will go through probate. However, the will makes it clear how the assets should be distributed.

Other misconceptions include:

I lose my assets with a trust: With a revocable living trust, you become both the beneficiary and the trustee while you’re alive. You own them. You control them. And you can do with them as you please.
I only need a will/trust, not both: A comprehensive estate plan is best to fully protect your assets, especially if you have property, valuables, and children.
The state will take everything if I don’t have a will: As noted above, the state will try to distribute your assets to your spouse, heirs, and family members if you don’t have a will.

Next Steps: Creating an Estate Plan That Protects Your Family

An estate planning attorney can guide you through the next steps and ensure you have the necessary legal documents in place.

They will answer your questions, prepare the documents, and cover everything related to your property, businesses, and children, while also drafting a power of attorney and healthcare directives.

At County Law Center, we can help with all this and more. We’ll assist in creating a roadmap based on your wishes, helping to protect your family and make their life easier in the event of your passing.