What is the difference between a “Will” and a “Living Trust”
Most homeowners do not know the difference between a “Will” and a “Living Trust”. This article will explain the basic differences. In Southern California, if you own a home, you should definitely have some sort of estate planning. Having a will or a living trust is what the legal community refers to as “estate planning”. Both wills and living trusts are documents that facilitate the passing of your assets at your death to whom you want them to go to. If you don’t have a written will or living trust, then the California’s intestacy law controls and dictates who gets your assets. For non-homeowners, having a will might be adequate, but if you are a homeowner having a living trust is a must. The average home value in Southern California is about $500,000 and if you have a will but do not have a living trust then your probate cost is about $26,000 and this probate court process will take about one year. When is a will appropriate and when is a living trust a better alternative?
What is a Will?
A will is a written document that satisfies all the legal requirements in the California Probate Codes and states “who gets what”, “who’s in charge” and “who raises the kids”. A will is only effective after your death. After you have written your will, you can change it at anytime or you can tear it up to terminate it. If your total assets are over $150,000, your will does not prevent your estate from going into the probate court. The probate court will probate your will and distribute assets according to your will. The problem with this is that if you own a home that is worth $500,000 and even if there is a mortgage of $400,000 against the home, you will probate fee will be approximately $26,000. However, in California, if you don’t own a home and all you have is $100,000 of cash in the bank, then a will might be adequate, because if your total assets are less than $150,000 then no probate is required. However, if you own a home, the value of your home is likely to be more than $150,000 and then a probate will be necessary. California Probate Code 6100 states that anybody can make a will as long he or she is at least 18 years old and is of “sound mind”.
What is a living trust?
A living trust is an integrated estate planning document. It allows you to management your property while you are alive and provides for an efficient and convenient means of distributing your asset after your death without court involvement. The living trust document integrates your wishes with the California Probate Codes, thus, upon, your death, there will be no need for court involvement nor a probate proceeding because your instructions and wishes are written in a contractual manner in accordance with the California Probate Codes. The reason why a living trust avoids probate is because you have transferred your assets into the living trust, thus, those transferred assets are not part of your probate estate. A living trust maintains greater confidentiality than a will because a will has to be probated in court and those court documents are public records, If you die without a living trust, anyone can go to the courthouse and pull that will and see exactly what assets were left and who is getting those assets. Another useful advantage of a living trust is the conservatorship avoidance feature. For example, if husband is incapacitated and wife wants to sell the house, if there is no living trust then the wife would need to go to court seeking conservatorship, however, if there is a living trust, no court involvement is needed. If you own a home, a living trust is a better estate planning tool than a will.