Differences between a Will and a Trust

As estates and trusts attorneys, we are often asked to explain the differences between
a Will and a Trust. A Will and a Trust are tools that can be used to accomplish how you
would like your estate to be administered after you pass away. However, they are not
the same tool.

Take a moment to think about your life. What would happen if you were to pass away
tomorrow? Who are the people that matter most to you? Is there property that you’d like
to leave those individuals? Are there any charities you’d want to support? Do you have
minor children or vulnerable family members with specific needs? Do you have health
issues that should be considered as you make choices regarding finances and long-
term care? Are you single or part of a blended family? A well-thought out estate plan
considers your responses to these and other questions to create a personalized estate
plan that proactively considers your needs as your life circumstances change.

What happens if there is zero estate planning?

The California Probate Code has a default estate plan if a person passes away, known
as the decedent, without any estate planning called an intestate probate. Intestate
means dying without a Will. An intestate probate is a court-supervised process where
the court will appoint a person with the responsibility of administering the decedent’s
estate. The court-appointed individual must gather estate assets, manage or sell estate
property, pay the valid debts of the estate, and distribute the decedent’s assets to their
legal heirs at law. Each meaningful step in the process requires court approval.
Depending on the assets, an intestate probate can take anywhere between six months
to a year. This timeframe doesn’t even consider the delay that can ensue if your loved
ones disagree over who has a right to be a beneficiary of your estate.

You should be aware of the following factors if you choose the intestate probate
approach to estate planning. For individuals who value privacy, it is important to
recognize that probate is a public court proceeding. All documents filed with the probate
court are part of the public court record. Some people believe that the size of their
estate is not large enough to require probate. Most are surprised to learn that the
current threshold amount to trigger a formal probate in California is an estate with gross
value of $150,000. Depending on how title is held, owning a single parcel of real
property in California is likely more than enough to meet this threshold amount. Also, in
an intestate probate, the Probate Code determines the ultimate beneficiaries, which
may not necessarily reflect your wishes as to who should receive your assets.

Many people create a Will largely because they want to control who receives their
assets after they pass away.

What happens if the decedent has a Will?

Contrary to popular belief, a Will does not avoid the time or expense of the probate
court. In fact, the definition of probate is “to prove a Will.” A Will has no effect legally
until its creator passes away.

Creation of a Will

A person who creates a Will, known as the testator, must be at least eighteen years old
and have sufficient mental capacity to make a Will.

Generally speaking, a person has sufficient mental capacity to create a Will when, at the
time of creation, the testator understands three things. One, that the document being
created is a Will. Two, the ability to recall the property owned. Three, an understanding
of relations to immediate family members and whose interests are affected by the Will.
The Will must be in writing and signed by or on behalf of the testator. If the Will is
signed by someone other than the testator, it must be signed in the testator’s presence
and at the testator’s direction. It may also be signed by a conservator authorized by the
court.

The Will must be witnessed by being signed by at least two persons. Each witness must
be present at the same time. The witnesses must be present for the testator’s signing of
the Will, or acknowledgment of the signature of the Will. The witnesses must also
understand that the document they are signing is the testator’s Will. Ideally, the two
witnesses to the Will are disinterested, meaning that neither witness benefits from the
Will. If a witness is a beneficiary under the Will, there is a presumption that that witness
became a beneficiary due to duress, menace, fraud or undue influence.

Another way for a testator to create a valid Will without meeting the witnesses
requirement is if the signature and material provisions are in the handwriting of the
testator.

Purpose of a Will

For most people, the most important aspect of creating a Will is choosing their intended
beneficiaries. Under a Will, you can dispose of all of your separate property to any
person. If you are married, you can dispose of the one-half of community property or
quasi-community property that you own to any person. The person responsible for
carrying out your instructions is the Executor you nominate. If your children are minors,
you can express who you would like to take care of them.

A Will does not avoid Probate

It bears repeating that a Will does not avoid the probate court process. The probate
court determines the validity of the Will and oversees the transfer of the title of your
assets from your individual name into the name of your intended beneficiaries. If a Will

accomplishes the orderly distribution of assets to intended beneficiaries, how is a Trust
different?

What is a Trust?

Unlike a Will, a Trust takes legal effect upon creation, allowing for the care of your
assets during any time of disability prior to your death. Unlike a Will, a Trust is a private
document and unless there is a dispute, a Trust is not generally subject to the court’s
approval.

A Trust is a legal contract between a trustor (person creating the Trust) and a trustee
(person in charge of the Trust) for the good of one or more beneficiaries. The trustee
holds legal title to the property and manages the property in the best interests of the
beneficiaries. The dispositive provisions of the Trust determine who the beneficiaries
are and what they will receive from your estate. The Trust provides the trustee with
powers, rights, and duties that govern the trust relationship. If a specific situation isn’t
covered in the Trust, then general trust law applies.

In your Trust, you can establish multiple sub-trusts that are created if specific
circumstances occur. For example, if one of your children cannot handle money and
you don’t think it’s a good idea to give him or her a lump sum distribution, you can direct
the trustee to create a Special Needs Trust for the benefit of your child rather than
distribute money directly to him or her. Another example is if you and your spouse have
sizeable assets and want to maximize savings on estate taxes, you may wish to give
the surviving spouse the option of creating a Disclaimer Trust upon the death of the first
spouse. Then there’s the Pet Trust where you can provide for a beloved animal’s care.
A Trust can provide greater flexibility in the distribution of your assets than a Will.

One thing to remember when creating a Trust is understanding the difference between
a Revocable Trust and an Irrevocable Trust.

Revocable Trust

If you create a Revocable Trust, you have the power to amend, revoke, or terminate the
Trust during your lifetime. You can transfer assets into and out of the Revocable Trust.
Assets that are in the Trust when you pass away will not be subject to probate court
supervision. A Revocable Trust will become irrevocable upon the death of the
Trustor(s).

Irrevocable Trust

Generally, an Irrevocable Trust cannot be changed, revoked or modified. Once the
Irrevocable Trust is in effect, you are bound by its terms, even if you are the person who
created the Irrevocable Trust. Let’s say you create an Irrevocable Trust and transferred
the title of the family residence into the Irrevocable Trust. Upon transfer, the family
residence becomes an asset of the Irrevocable Trust. The trustee, whether it is you or

someone else, is duty-bound to manage the asset strictly in the best interest of the
beneficiaries. Under most circumstances, the trustee could not sell the family residence
to provide cash for your benefit because it is no longer your asset but an asset of the
Irrevocable Trust.
A Trust allows you greater flexibility in terms of setting the distribution terms to your
beneficiaries. For instance, if you are a blended family and you want to ultimately gift
your children the family residence but leave your spouse with the ability to live there for
the rest of his or her life, your Trust can provide instructions for that to occur.

Is it possible to have both a Will and a Trust?

Yes. Attorneys will prepare a pour-over Will which works in conjunction with your Trust.
A pour-over Will captures any assets that are not included in your Trust estate when
you pass away. The assets will pour over into the Trust and are then distributed to the
Trust beneficiaries.

Is a Trust better than a Will?

Because an estate plan should be tailored to meet your circumstances, there is no hard
and fast rule that dictates that a Trust is better than a Will or vice versa. The reality is
that an estate administration takes place while loved ones are grieving. If there is poor
planning, complications in administration or disagreements between family members
may flare up. A well-drafted estate plan serves as guidance during a time of challenging
transition and should account for your health, finances, and ultimate wishes.
Disclaimer: The information contained in this article is not, nor is it intended to be, legal
advice. You should consult an attorney for advice regarding your individual situation.