Orange County Estate Planning Attorneys
Wills and Trusts are valuable and necessary planning tools created to protect your family, your legacy, and your assets and to ensure your wishes are carried out after your death. Unfortunately, many people procrastinate creating their Will or Trust, forcing their estates into expensive Probate, costly estate taxes, and other calamities. Because of poor planning, all too often an estate can shrink to half of its original value.
Without a Will or Trust, your estate and assets may be left to your closest living family members, usually your spouse or children, but if you are single it can go to siblings or parents. However, that may go against your wishes. Having a clear plan in place for how your estate is managed after your passing can ensure that your assets are fairly distributed based on your final desires.
Wills and Trusts have specific purposes and limitations in estate planning. Most people default to Wills to decide how their estate and assets are managed after their passing because they have a generalized view of how they operate. Simply put, a Will is an “instructions to the probate court” that will allow you to voice your opinion in court after your passing.
Within a Will you can include:
- Who will be the executor of your Will and ensure it is carried out, often a lawyer or trusted friend or family member
- Who will act as the guardians for your children
- Who will manage your children’s property until they are of age
- Instructions on how to manage your debts and taxes
- Who will provide for your pets
- Instructions regarding a Living Trust, such as beneficiaries
Today, having only a Will can have many limitations, yet many people still believe this tool is all that is required to dispose of their estate. Unfortunately, a Will does not offer an alternative to court and is subject to lengthy legal battles. This is why Wills should not include conditions regarding gifts – such as a family home – or property that you share with another individual, such as a spouse or business partner. Wills are also not the best way to outline funeral arrangements, as Wills are often not found or discussed until weeks after your passing. In addition to these limitations, having only a Will can result in attorneys’ fees that consume much of one’s estate as the Court goes through the process of evaluating the validity of the Will, the intent of the party writing the Will, and the change of ownership requests.
Within the state of California, there are two scenarios where a probate court may fast-track the procedures and avoid extensive debates about your Will for the following estates:
- Estates that hold less than $166,250, not including assets being left to a spouse, per California Probate Code 13100 and 13050
- Estates that include real estate that is valued at less than $55,425, per California Probate Code 13200 - 13211
In contrast to Wills, Trusts allow you to legally transfer assets to another individual, a trustee, who will manage those assets on your behalf to provide for your loved ones, business, or charitable endeavors, which are referred to as beneficiaries. Unlike Wills, Trusts provide clearer instructions on who is given ownership of your property while bypassing a probate court. Sadly, California’s probate court can be extremely complicated and costly, but having a Trust can allow you to bypass many of those obstacles.
In the last 15 years, the IRS has simplified rules for owning and managing Trusts and can be seamlessly established and managed. They allow you to remain the owner and retain control of all your assets and can provide for surviving spouses and your children, and they defer all taxes that may be owed until after the death of the survivor. Proper trust planning can save substantial estate taxes and ensure that your assets are not tied up in legal battles. A Trust is not just instructions to the Court; instead, it is instructions to the person you appoint as trustee to carry out your wishes after death and it prevents Probate from occurring.
Unlike Wills, Trusts come in a variety of forms that allow the deceased to have more stringent rules regarding how their estate is managed. The most common types of Trusts in California are:
- Testamentary Trusts: These Trusts are included in your Will and go into effect upon your death.
- Revocable Living Trusts: Living Trusts are written and go into effect when you are alive. They can be re-written and modified while you are alive, allowing you to make changes as new tax codes go into effect or situations change with your estate or beneficiaries.
- Irrevocable Living Trusts: This type of Living Trust cannot be modified once it is signed, ensuring that any assets that are included in the Trust are no longer your property. You effectively lose all right to the Trust.
- Charitable Trusts: If you would like to set aside assets for a charity, this trust will allow you to outline how funds should be prepared and distributed. These trusts are subject to lower estate and gift taxes.
- Special Needs Trusts: Ensuring that disabled family members are fully taken care of after your passing can be stressful, but Special Needs Trusts allow you to provide financial support even when you have died. These Trusts can be designed to ensure the trustee can still receive social and government benefits.
Trusts come in many varieties and are more malleable than a Will, but they are not all-encompassing. Wills can act as a backup plan for any assets that are left out of your Trust, such as assets and property that you obtained after planning your Trust but did not have time to include. Having both a Will and Trust can provide significant savings for your estate while providing a clear blueprint for how your assets and loved ones are looked after following your passing.
If you've been putting off the important work of creating a Will or Trust, we urge you to contact us immediately. The highly experienced Estate Planning Attorneys at Allen, Flatt, Ballidis & Leslie know how to effectively structure these legal documents to ensure your family, your legacy and your assets are protected and your wishes are carried out upon your passing.
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