Wills and Trusts

What is the difference between a will and a trust? If I have one do I need the other?

In a nutshell, a will is a document that identifies “who gets what and when” and also names the person responsible for carrying out your wishes. A will sets out:

• Who gets your belongings and real property
• Who will care for your minor children until they become adults
• Who will represent your estate and ensure that your wishes are carried out

To ensure that your will is followed and to legally transfer ownership of your assets to your beneficiaries—the recipients of your gifts—requires court supervision or probate. If you die without a will, probate is required to transfer property to your legal heirs as defined by statute (California Probate Code).

Probate is:

• Expensive
• Complex
• Time-consuming
• Very public as proceedings take place in open court

Similarly, a trust also identifies “who gets what and when” and names the person responsible for carrying out your instructions. However, identifying a guardian for your minor children is typically done by will. A trust does not require court supervision; thus, probate is not needed.

Trust Administration

Managing trust assets is known as trust administration—the “who gets what and when” according to your estate plan.

“Legalese” is rampant in the area of estate planning; words and expressions confuse rather clear up matters. Following is a basic primer for trust terminology:

• The person creating a trust is the “settlor” or “grantor” of the trust
• Once the settlor transfers or funds property to the trust, the “trustee” of the trust takes control of and manages the trust assets
• The trust “beneficiary” is the designated individual(s) who receives the benefit of the trust assets
• Settlors can designate themselves as both the initial trustee and beneficiary—this is commonly done

What happens when you are unable to serve as trustee due to illness or death? You name an individual as “successor trustee” to take over the responsibility to manage the trust property according to your directions stated in the trust. You also name the ultimate trust beneficiaries.

I assist trustees carry out their administrative responsibilities which include:

• Perform multiple tasks as directed by the trust itself
• Comply with a variety of tax laws
• Keep the trust property legally separate from his/her own property
• Distribute trust assets to the beneficiary as directed by the trust
• Not show favoritism if there are multiple trust beneficiaries