We live in a time in human history when everything is changing before our eyes. The global pandemic is forcing people inside their homes. COVID-19 is affecting our way of life, and many of us now find ourselves taking a long look at where things stand with our health, our finances, our careers, our families and just about anything else that we always appreciated.
If you haven’t done so already, now is the time to make sure that your affairs are in order with regard to your estate. If you become seriously ill for this or any other reason, it could be too late, and you could force your family to make difficult decisions without knowing what you want. Instead of putting them in a challenging position, plan your estate now and make your wishes known.
One way to do that is to put together a will. Another idea is to put together a living trust, but what’s the difference? How does one decide on the question of a living trust vs. a will? Below you’ll find an overview of the differences between the two so you can make the right decision for you and your family.
What is a Living Trust?
The first step in clarifying the differences between a living trust and a will is describing the nature of a living trust. A living trust, also known as a revocable living trust, is a contract that provides guidelines for use of the assets during the trustors lifetime, incapacity, and upon their death.
When someone puts together a living trust, that person becomes known as the “trustor.” The trustor’s assets – at least those that he or she decides to include in the trust – are transferred into the trust and become the property of that trust. The trustor controls the trust while he or she is alive and has capacity. Every living trust must include the following information:
- The identity of the trustor
- The identity of the trustee
- The identity of the successor trustee
- The assets included in the trust
- The beneficiaries of the trust
In a revocable living trust scenario, the trustor can make changes to that trust during his or her lifetime, such as removing some assets, adding others or naming new beneficiaries. Those changes need to be properly drafted by an attorney so that they are legally valid.
When the trustor passes away or otherwise becomes incapacitated, the trustee takes over the management of the trust and distributes the assets to the beneficiaries as laid out in the trust document. If the trustee is not able to take on these duties, they pass to the successor trustee. When the assets are distributed and all costs paid out, the trust is closed and ceases to exist.
What is a Will?
The next step in understanding the dichotomy that exists with a living trust vs. a will involves obtaining an understanding of the nature of a will. A last will and testament, like a living trust, is a document that the owner of assets creates or has created on his or her behalf. It details the property in that person’s estate and dictates how that property should be distributed when that person passes away. The person executing the last will is known as the testator.
When the testator passes away, someone must step in and manage the distribution of the assets named in that will. Those assets will ultimately pass to people who are known as beneficiaries, similar to a living trust. The person managing this process is known as the executor. In order to be valid in California, a last will must meet the following requirements:
- The testator must be at least 18 years old when the will is signed.
- If the will is handwritten, which is known as a holographic will, it needs to be signed and dated by the testator.
- If the will is typed, the testator must sign the will with at least two witnesses present.
- These witnesses must also sign the will.
- The witnesses cannot be beneficiaries of the will.
When the testator passes away, the executor presents the will to the Probate Court for administration. This legal process takes some time to complete. With the current pandemic causing court closures, this process is taking even longer than it used to.
In terms of the question regarding a living trust vs. a will, one similarity is that a will can be changed before the testator dies. However, this can only be done by way of what’s known as a codicil, which is a document that clearly states the intended changes. This codicil must also have witnesses.
Differences Between a Living Trust and a Will in California
There are several important differences when it comes to a living trust vs. a will in California. First and perhaps foremost, the property in a living trust does not have to pass through probate when the trustor passes away, while estates with wills must do so. This adds time and expense to the administering of the estate and the timeline for the distribution of the assets to those beneficiaries. Typically, a California probate takes 1-2 years.
In addition, a living trust allows for ongoing management during a trustors incapacity whereas a will only becomes applicable at death. However, while there are benefits to a living trust vs. a will, there are also some things that trusts cannot do that wills can. These include:
- Naming guardians for children
- Naming property managers for property passing to children
- Directions on paying taxes and debts
By law, wills also include all of the property in an estate, while living trusts only include that property that’s specifically included. That’s why many people execute both a living trust and what’s known as a “pour-over” will, whereby any property not detailed in a living trust “pours over” into the trust upon death, thereby protecting that property from the probate process.
The Importance of an Advance Health Care Directive
It’s important for people to understand the nature and role of an advance health care directive. In practice, an advance health care directive functions much like a living will. An advance health care directive is just that – a document that provides family members and medical professionals with guidance on the types of medical treatments you want or do not want should you become unable to communicate with others effectively.
Filling out an Advance Health Care Directive Form allows you to:
- Appoint a healthcare agent, and/or
- Detail instructions for your desired treatment or lack thereof.
You can allow for your agent to do both things, as it may not be easy to predict what types of medical treatment could be options given the different ways in which you can become too ill to communicate. You can provide your agent with broad discretion or narrow discretion, as that is completely up to you.
Why Estate Planning is More Crucial Than Ever
Given our current environment, it should be clear by now that understanding the differences between a living trust vs. a will is extremely important. We have no real idea who the coronavirus is going to infect, who is going to recover or who is going to survive.
In situations like a global pandemic, it’s best to hope for the best but to plan for the worst. That way, if something does go wrong, you can rest assured that your family will not have to be burdened with unnecessary suffering. If you’re ready to take care of this efficiently, contact a San Diego trust attorney at Kam Law Firm today to schedule a complimentary initial consultation.