Estate Planning, Wills & Trusts

The public generally has some understanding of wills, trusts, and estate planning. Almost everyone has heard of a will. Some people have also heard of a trust. However, people are often unclear about the advantages of a trust over a will and when a will is all that is needed. Hopefully, the following explanation will shed a little light on the world of estate planning, wills, and revocable trusts.

Usually, people feel that a will is sufficient to distribute their estate and take care of their family once they are gone. If a person has a relatively small estate or only a few assets, this may be the path to take. A will states your wishes as to the distribution of your estate, including the person who will be responsible for carrying out these wishes, called the executor. Creating a will ensures your intentions are carried out and that your assets are left to the people you want to have them. Before creating a will, however, one should consider the potential disadvantages of using only a will.

A will may result in the probate of the estate. A probate is a court procedure that can be time-consuming – often taking up to a year or more – and expensive. In California, if a person’s estate exceeds $184,500 or has real property worth more than $61,500, it must go through this probate procedure, and the costs of probate can eat up a good percentage of the estate. Not every asset, such as life insurance, retirement accounts, or mobile home, is considered part of an estate for probate purposes. However, real estate is considered part of an estate; most likely, most homeowners in California will have a gross estate that exceeds $184,500, or at least real property that exceeds $61,500, necessitating probate.

There is an alternative to a will that allows an estate to pass outside of probate and avoids conservatorships. This alternative is known as a revocable trust. Placing your assets in trust minimizes the difficulties and costs that your family will face upon your death, and saves time, and preserves privacy. A trust is similar to a will. It provides for the distribution of your property upon your death. However, it is also revocable, which means you can change your distribution, amend or modify any portion of the trust, or even terminate the trust at any time up until your death or incapacity.

Furthermore, the trust will survive your death. As an entity, it can exist for future generations. As a result, if your children are still minors upon your death, for example, the trust can prevent them from receiving outright distributions from your estate. Instead, a trustee (a person who manages the trust and trust assets) may have the discretion to determine when and how much at a time your beneficiaries will receive in distributions. It can also be structured to provide asset protection to your beneficiaries.

Consequently, people who have estates in excess of $184,500 or have real property in excess of $61,500 should consider a revocable trust instead of a will. A trust will prevent a lengthy and costly court procedure, as well as secure your property in an entity that will survive your death. At the Corman Law Offices, we have over 40 years of experience in estate planning and are happy to sit down with you and discuss what might work for you.