“If I draft a will, do I still need a living trust?” We get this question a lot. While many people think a will is critical for a sound estate plan, that is not the case for every family. Why? Because, wills don’t protect assets from probate when people pass away. If you create a will, please understand that the probate court must authenticate the will before the will can be enforced and assets distributed.
Additionally, wills are not handy while you’re alive; they can only be enforced after you die. In effect, your will cannot protect you if you become physically or mentally incapacitated. In other words, if you get a severe case of Alzheimer’s, or if you are in a car accident and go into a coma, the courts can swoop in and take control of your assets – this worries millions of people.
If you’re ready to create an estate plan, you certainly want to learn more about the revocable living trust. Unlike wills, trusts avoid probate and you can control your assets while you’re alive. By creating detailed directions now, while you’re of sound mind, you can leave instructions about how your assets are to be divided if you become gravely ill, or otherwise incapacitated; you can also control how your assets are divided when you die.
Why Do I Want to Avoid Probate?
Probate is the process where a will is validated, an executor or personal representative is appointed by the court, the decedent’s debts are paid, and the leftover assets are distributed to the decedent’s beneficiaries or heirs. This is all done according to your will; if you don’t have a will, your assets will be divided according to California’s intestate succession laws, which take effect when someone dies intestate or without a will.
Reasons to avoid probate:
- It can take 9 months to 2 years.
- The probate process is public, so there’s no privacy. Anyone can see how much you had, how much you owed, and what you gave to whom.
- It can be an expensive process.
- You family has no control over the probate process, including how long it takes or how much it costs.
Now that we know what can happen in the absence of a trust, let’s look at the benefits of having a revocable living trust. When you create a living trust, the assets that are in your name will be transferred to the trust, which you control while you’re alive and well. Legally, you don’t own the assets, they belong to the trust. So, the courts are not able to control your assets when you become disabled or you pass away.
Even though the assets are transferred to the trust, that does not mean that you lose control of them. As the trustee of your trust, you have full control of the assets: You can buy or sell the assets, make changes to the trust, or even cancel it – hence the name revocable living trust.
What can be transferred into a trust:
- Real estate
- Bank accounts
- Insurance policies
- Other assets that don’t have titles
When you set up a trust, your spouse can be the co-trustee, or you can name a trusted family member, friend, or attorney to be your successor trustee. If you become incapacitated or if you die, the successor trustee you personally selected will step in and take control over the trust. The successor trustee can pay your debts and distribute your assets according to your instructions – all without court intervention.