Do I Need a Will or a Trust in California?

This is a common question from clients. While each situation varies, there are some generalities that help determine the right fit for your individual needs. To start, it’s important to understand the difference between a will and a trust. A will is basically a set of instructions that only come into play at the time of death. The function of a will is more limited than a trust.

In contrast, a trust creates an entity, like a person or corporation. A trust can own or hold title to assets. I always tell people a trust creates a bucket that you can place your assets into. A will is typically drafted alongside a trust, but the trust allows for more flexibility and management for your estate.

Probate is often part of the conversation in determining whether a will or trust makes more sense. In California, the threshold for the court to get involved in someone’s estate after death is if the assets have a gross value of $150k or more. If your assets fall at or above this threshold, a trust is recommended to avoid probate. Probate typically takes 12-18 months, during which your assets are all but frozen.

So, what are your assets? These include homes, jewelry, art, any property, any cash accounts, and more. If you own a home, you can likely benefit from a trust. Basically, any type of account or asset without a designated beneficiary should be placed in a trust if your assets exceed $150k. In fact, I oftentimes recommend that a trust is named as a contingent beneficiary on accounts such as retirement accounts. I also recommend that my clients complete a declaration of trust when executing their trust. This is a statement of intention to include all of your assets into your trust. As you can see, a trust can “own” a variety of assets, whereas a will provides more basic instructions and does not avoid probate.

As mentioned earlier, each situation has its unique details. I’d love to discuss your individual situation and help you plan for your future, and find the right estate planning tool to fit your needs.

 

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