Estate planning is an important tool that allows you to decide what happens to your money and assets rather than the government. By creating an estate plan, you can outline who receives what, when they get it, and under what circumstances and conditions.
Control of your estate may be the most important reason to plan your estate, but other reasons include reducing or eliminating estate taxes and avoiding the costly and time-consuming process of probate, which can take up to 1-2 years to distribute a person’s assets. In California, the probate process is especially complicated and can involve multiple petitions, appraisals, motions, court appearances, inventories and more.
While a will serves as a “recipe,” or directive of one’s wishes for how their property should be distributed and to whom, it does not act as an official transfer of title. Some people still believe that they can avoid probate with wills, but this is not true. Only a living trust in which title to all assets has been placed can ensure, with certainty, that probate will be avoided. In a living trust, titles to assets are transferred to beneficiaries before the decedent dies – this is one of many differences found between living trusts and wills. For anyone with valuable assets, living trusts can offer several advantages over wills.
Cost & Time
While the initial costs and time requirements necessary in writing a will are low, the expense, time and effort greatly increases once a will goes into effect, or after a decedent dies.
Alternatively, while the initial set up and maintenance of a living trust can be time-consuming and costly, it can save your loved ones from a great deal of stress, time and money after your death, provided that the beneficiaries have been named and transfer of title completed.
Wills save the difficult aspect of estate planning until after an individual dies, while living trusts take care of the logistics of directing and transferring titles of property before the death occurs, allowing the grantor rather than an executor or conservator to actually oversee this process as it takes place.
Privacy
Even if a will meets all requirements and is properly executed, all proceedings and documents still become public record. If a living trust is set up properly and all title transfers are completed before the death of the grantor, the transfer of assets at the time of death will remain private.
Control
The main purpose of documenting one’s final wishes is to ensure that those wishes are followed accurately. Wills and trusts are used as tools to communicate a person’s final wishes regarding property and assets, but they do not produce the same effects in regards to control over one’s estate both in the present and future after your death.
A living trust allows grantors to determine where and how their assets are distributed including how those assets may be used. For example, living trusts can be set up for minor children or children with special needs, which cannot be done with a will.
Living trusts can also include arrangements for the grantor in the event that he or she becomes incapacitated (mentally or physically) before death. Wills do not offer this option. Instead, if a person (with a will) becomes incapacitated, the court will appoint a conservator to oversee the assets of the will, which can prove to be an expensive and stressful process.
Creating an estate plan that outlines one’s final wishes is very important. Not only does a will, or preferably a living trust provide the decedent control over the distribution of their assets, but it also minimizes any negative impact that death and/or distribution of property could have on family relationships.