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Avoiding Probate: The Key Difference between Wills & Trusts

A will is a legal document in which you nominate an executor who, after you die, submits the will to probate and is appointed as executor by the probate court before he/she can act as executor. Once appointed, the executor administers your estate. This typically includes settling debts and distributing your assets per your wishes expressed in the will. As such, a will almost always goes through formal probate. The only benefit of a will is that you designate who will be appointed an executor and how your assets will be divided when you die.

Because probate fees are so high, you may wish to help your family members avoid the probate process. A living trust is the essential probate avoidance tool. A revocable living trust essentially does precisely what a will does, except it does it outside of probate court. A trust provides for the administration of your assets during your life and the distribution of your assets at death. Instead of an executor, you name a trustee to take charge of your assets and make distributions after you die. Trusts can be structured in different ways to play different roles and are utilized to benefit not only the trust creator (known as the settlor) but also the trust beneficiaries. There are different types of trusts, and trusts should be customized to fit your specific family’s needs.

If you die with no will or trust, the California probate code prescribes who can be appointed to administer your estate, as well as who is heir to your assets. That occurs via formal probate. Probate fees are set by the state and are a percentage of the gross value of the estate.

Do I still need a Will if I set up a Trust?

If you set up a trust, you still need a Will – which is known as a “Pour-Over” Will, because at your death it “pours” into the trust any assets which are inadvertently not titled in the trust, and would otherwise default to your probate estate. The pour-over will do so by naming the trust as the sole beneficiary of the Will. It, therefore, serves as a safety net to catch any assets not titled in the trust at death.

To learn more, contact our Los Angeles wills and trusts lawyer. Call the Law Offices of Maria N. Jonsson, PC at (310) 935-0706 or contact us online.

Types of Trusts

A trust is a legal relationship in which property is titled in a legal entity and held by a trustee for the benefit of the trust beneficiaries. The creator of the trust, known as the settlor or the grantor, creates the trust document and names a successor trustee. Generally, during the settlor’s life, he/she acts as the trustee and manages the trust assets for his/her own benefit. At the settlor’s death, the named successor trustee steps in the shoes of the deceased settlor and collects, values, and marshals the trust assets as provided in the trust document. The successor trustee fulfills a number of fiduciary duties to the trust beneficiaries, generally without the need of any court involvement.

A trust can be structured in a number of ways; some of the more popular trust structures are:

  • Single person probate-avoidance trust, which replaces what is generally known as your will because it completely avoids probate.
  • Married couple probate-avoidance trust (“A” trust), which can also be utilized by domestic partners and which leaves the surviving spouse or domestic partner in full control of the entire trust at the first death.
  • Irrevocable life insurance trust, which creates an irrevocable trust to own policies of life insurance, thus removing them from the taxable estate of the insured.
  • Qualified domestic trust, which should generally be utilized where one of the spouses is not a U.S. citizen.
  • Qualified personal residence trust, which is a lifetime transfer of a personal residence in trust for a term of years, which can accomplish beneficial tax treatment.
  • Second marriage (“A-B trust”), which ensures that the wishes and goals of each spouse are protected at the first death and leaves (with proper drafting) no opportunity to the surviving spouse to disinherit the children of the deceased spouse or take adverse position to their inheritance interests while providing the surviving spouse with adequate support during his or her life.

The type of trust which best fits each set of circumstances will depend on the specific family dynamic, the extent of your assets, and the inheritance goals sought to be accomplished.

Will the Trust Affect my Property Taxes or How I File my Tax Return?

A living trust does not cause any ongoing management or administration costs. Unless you need to amend the Trust, which should be done through a formally drawn up, signed and notarized Trust Amendment, there are no additional fees or costs once the trust is set up. Popular reasons to execute a Trust Amendment are if you wish to change your Successor Trustee or change the distributive provisions of the trust. You don’t need to change the trust if you just buy or sell trust assets, such as your home. You only need to remember to title assets you acquire in the name of your trust. Transferring assets to your trust are exempt from property tax reassessment, and having a trust does not change the way you file or sign your income tax returns. After setting up the trust, all you have to do is ensure that the title to any newly acquired assets is conveyed into your trust.

To learn more about your options and which type of trust is best suited for you, contact the Los Angeles wills and trusts lawyer at the Law Offices of Maria N. Jonsson, PC today.

Call our office at (310) 935-0706 or submit an online contact form. We serve clients in Marina del Rey, Venice, and the surrounding areas.

  • We Work as Part of
    a Larger Team

    We work with our clients' financial planner, CPA, realtor, and insurance broker to implement a well-rounded and thorough legal plan for wealth preservation and inheritance transfer.

  • Strategic Planning &
    Attention to Detail

    We carefully look at each factor that affects the execution of an estate plan – from the perspective of minimizing and eliminating reassessment of property taxes to avoiding post-death conflicts.

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    We believe that an estate plan should leave behind not only property, but most importantly – harmony, rather than tear families apart with poorly drafted or ambiguous and confusing term