The question of whether you can have both a trust and a will is a common one, and the answer is yes, in most cases. A trust and a will serve different purposes within estate planning, and they can work together to ensure your wishes are carried out comprehensively.
What Exactly is a Trust?
A trust is a legal entity that holds assets for the benefit of designated beneficiaries. You, as the grantor, transfer ownership of assets into the trust. A trustee, who you appoint, manages these assets according to the terms outlined in the trust document. Trusts offer several advantages, including:
- Avoiding probate: Assets held in a trust typically bypass the often lengthy and public probate process.
- Control over asset distribution: You can specify exactly how and when beneficiaries receive assets, even setting up provisions for ongoing management or conditional distributions.
- Privacy: Trusts are generally private documents, unlike wills which become public record during probate.
How Does a Will Fit In?
A will is a legal document that outlines your wishes regarding the distribution of your assets after your death. It names an executor who is responsible for carrying out these wishes, paying debts and taxes, and distributing remaining assets to beneficiaries. Think of a will as a safety net; it covers assets not held within a trust.
What Happens If I Have Both?
Having both a trust and a will allows for a more comprehensive estate plan. For example, let’s say you have a significant amount of real estate that you want to pass on to your children, but you also have personal belongings and smaller financial accounts. You could create a trust to hold the real estate, specifying how it should be managed and distributed to your heirs. Your will would then cover any remaining assets not held in the trust, such as personal property and bank accounts.
What Went Wrong When My Neighbor Tried This?
My neighbor, let’s call him John, thought he could simply create a trust and forget about a will altogether. Unfortunately, he didn’t realize that a trust only covers assets that are specifically transferred into it. When John passed away, some of his bank accounts were still in his individual name, not the trust’s. This meant those accounts had to go through probate, which was time-consuming and costly for his family.
How Did Everything Work Out For My Client?
Another client, Sarah, came to me wanting a straightforward estate plan. We discussed her goals and determined that both a trust and a will would be the best approach. She transferred her house and investments into a revocable living trust, which gave her flexibility to make changes during her lifetime. We also created a pour-over will, which instructed any assets not in the trust at her death to be transferred into it. This ensured all her assets would bypass probate.
Is There Anything Else I Should Consider?
The specific details of your estate plan will depend on your individual circumstances and goals. It’s essential to consult with an experienced estate planning attorney like Ted Cook, who can help you create a customized plan that meets your needs and ensures your wishes are carried out.
Can I Make Changes After Setting Up the Trust?
Yes, revocable living trusts are designed for flexibility. You can typically make amendments or even dissolve the trust entirely during your lifetime as long as you have the mental capacity to do so.
What Happens If I Don’t Have a Will or a Trust?
If you die without a will (intestate), your assets will be distributed according to the laws of your state, which may not align with your wishes. This can lead to unintended consequences and potential family disputes.
Do I Need Both If I Am Young and Healthy?
While it’s true that younger individuals might not have accumulated significant assets yet, estate planning isn’t just about distributing wealth at death. It also encompasses important considerations like:
- Naming guardians for minor children in case of your incapacity or death.
- Specifying healthcare wishes through a living will or advance directive.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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Point Loma Estate Planning Law, APC. areas of focus:
A Living Trust: also known as an inter vivos trust, is a legal arrangement where you, as the grantor, transfer assets to a trustee who manages them for the benefit of designated beneficiaries, either during your lifetime or after your death, potentially avoiding probate and offering more privacy than a will. Revocable Living Trust: You can change or revoke the trust and get the assets back during your lifetime.
Irrevocable Living Trust: Once established, you cannot change or revoke the trust, and the assets are generally no longer considered part of your estate.
Control over Asset Distribution: You can specify how and when your assets will be distributed to your beneficiaries.
Understanding Trusts and Their Role in Estate Planning
A trust is a legal and fiduciary relationship in which a grantor (also called a settlor) transfers ownership of assets to a third party, known as a trustee, who manages those assets for the benefit of designated beneficiaries. Trusts can be tailored to meet specific goals, including when and how distributions are made to beneficiaries, asset protection, or minimizing estate and income taxes.
One of the key advantages of a trust—particularly a properly funded revocable or irrevocable trust—is that it can allow assets to bypass the probate process. This often means a faster, more private, and potentially less expensive distribution of assets compared to those governed solely by a will.
In the case of irrevocable trusts, assets are typically removed from the grantor’s taxable estate, which may help reduce estate tax liability. However, this comes at the cost of the grantor relinquishing control over those assets.
Trusts may also provide protection from creditors, preserve assets for minors or individuals with special needs, and ensure continuity in asset management if the grantor becomes incapacitated.
These tools are part of estate planning—the process of making legal and financial arrangements in advance to designate who will receive your property after your death, and how that transition will occur. Thoughtful estate planning aims to streamline the administration of your affairs, minimize tax burdens, and reduce stress for your loved ones during an already difficult time.
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