When someone decides to take action and plan their estate, a common question arises: "should I create revocable living trust or draft a will?" This question is often followed by asking, "What are the differences between a trust and a will?" This article is intended to help address these important questions.
What Exactly is a Last Will & Testament?
A will is a relatively simple document in which you state what should happen to your property after you die. You can also use your will to name guardians for any minor children, name an executor, pay off debts, and pass on assets to your beneficiaries. It is important to note that this process is supervised by a court and requires a highly-structured process known as “probate.” Since a court has to be involved in the probate process, your will is subject to disclosure to the general public.
What Exactly is a Revocable Trust?
A revocable trust offers a more streamlined and private process for transferring your hard-earned assets to your loved one. This is because property that passes through a living trust does not have to go through the aforementioned probate process. As a result, creating a trust will often save your loved ones time and money.
A revocable trust, also known as a living trust, is created while you (i.e. the property owner, or trustor) is still alive. This means you retain the right to modify and change the contours of the trust during your lifetime. You maintain ownership of the property held by the trust while you are alive. When you pass away, the trust becomes operational and the trustee you selected will be empowered to manage the trust assets.
Making a Valid Trust
If you want to create a trust, there are specific protocols you need to follow to ensure the trust is established in a legally-valid manner. If you fail to follow these protocols, there is a risk that your trust could be deemed invalid. Here are the steps you need to follow:
- There must be a trustor;
- The trustor must deliver legal title to property;
- The property, also referred to as res, corpus, or trust principal, must be delivered to a trustee;
- The trustee must hold legal title to the property;
- The legal title must be held for the benefit of one or more trust beneficiaries;
- There must be intent to create a trust;
- The intent to create a trust must be for a lawful purpose; and
- The document embodying the trust must be validly executed.
Different Types of Trusts
Another advantage to creating a trust is the ability to tailor a trust that is specifically designed to meet your specific needs and objectives. This is due to the fact that there are an array of different types of trusts. Here is a general overview of some of the most common types of trusts:
- Revocable Trust
- Irrevocable Trust
- Special Needs Trust
- Charitable Trust
- Pet Trust
Important Differences Between a Will and a Revocable Trust
There are many similarities between a will and a revocable trust. For example, both a trust and a will are estate planning documents that can be used to name beneficiaries for the transfer of property when someone passes away. Beyond that, however, the differences are more pronounced. For example, one of the key aspects of a revocable trust is that it circumvents the need for probate. If you decide to draft a will, you need to understand that probate will be required in order to distribute assets to your loved ones.
Another important difference is that when you create a revocable trust, it becomes active during your lifetime and you can maintain control over the trust. In contrast, a will does not become operational during your life since it is considered to be a testamentary document. This means a will only takes effect after your death. Another distinction is that a will is not officially recognized as a valid under California law until a court agrees to admit the will to probate. Trusts, on the other hand, do not require probate to be valid or to be administered.
Have Questions About Creating an Estate Plan and the Differences Between a Will and a Trust? Contact The Geller Firm Today
If you are interested in creating an estate plan and want to learn more about the nuances between a will and a revocable trust, take action by contacting The Geller Firm. Our firm is ready to address your individual needs and tailor a detailed estate plan that fits your goals and objectives.