Estate Planning - Wills & Trusts
By Christopher B. Fagan and Jared Laskin
..........One advantage of marriage over non-marital cohabitation
is that a spouse is a legal heir -- with or without a will. On the other
hand, if you are in a non-marital relationship your partner will not inherit
from you unless you make provisions for your partner, which in most cases
will involve the execution of a Will and/or Living Trust.
..........What is a Living Trust?
..........A Living Trust is a written agreement in which
a "Trustee" agrees to hold assets contributed by the "Trustor"
in trust for the benefit of the "Beneficiaries" of the trust.
Often, the Trustee, Trustor and initial Beneficiary are all the same person
..........Whereas a Will becomes effective only upon the
death of the person who makes the Will, a revocable Living Trust is effective
immediately. Because you can amend or revoke a revocable Living Trust at
any time during your lifetime, you retain absolute control over the assets
transferred to the Trust.
..........At the trustor's death, the Living Trust becomes
irrevocable. It either terminates, with the trust assets going to designated
beneficiaries, or it continues to stay in existence, with the Trustee continuing
to hold the trust assets for the benefit of the Beneficiaries.
..........Advantages and Disadvantages of Wills versus Living
..........Some of the relative advantages and disadvantages
of Wills and Living Trusts are described below:
..........Probate: Normally, Wills must undergo formal probate
administration which can last two years or more, depending on the size and
complexity of the estate. Court permission is needed to buy and sell assets,
and beneficiaries usually must wait until the probate is concluded to receive
the bulk of their inheritance. With a Living Trust, probate can be avoided.
Decisions regarding Trust assets can be made immediately, as can payments
to beneficiaries. (Note that a Living Trust is not the only way to avoid
probate: other techniques, such as owning property in joint tenancy with
right of survivorship, can also be used.)
..........Privacy: When a will is probated, the terms of
the Will become a matter of public record, as does a list of the assets
of the estate. With a Living Trust, under normal circumstances, neither
the Trust assets nor the terms of the Trust become public knowledge.
..........Expense: When an estate is probated, the estate
must pay the so-called "statutory" fees which are calculated based
on the size of the estate, unless the attorney or Executor waives his or
her right to some or all of the statutory fees. In addition to the statutory
fee, the attorney and Executor are entitled to seek compensation for "extraordinary"
services rendered to the estate. Generally speaking, fees payable to the
Trustee of a Living Trust and his or her attorney tend to be lower than
the fees paid in connection with a probated estate, because there is no
statutory minimum fee.
..........Convenience: Once a Will is properly executed,
you can forget about it (unless circumstances change so as to require a
new Will). With a Living Trust, your assets must be transferred to the
Trustee of the Living Trust during your lifetime, either by you or by someone
you pay to do the transfers. This will require signing of deeds to real
property, trips to the bank to switch over accounts, etc. Even after the
Living Trust is funded, administration of the Trust during your lifetime
can make life a little more complicated.
..........Supervision: When an estate is probated, the probate
court supervises your Executor. It is somewhat easier for the Trustee of
a Trust to steal assets or commit other improper acts than it is for the
Executor of an estate.
..........Lifetime Asset Management: A Will, since it becomes
effective only upon death, does not confer any benefits during your lifetime.
With a Living Trust, if you become ill or incapacitated it may not be necessary
to petition for the appointment of a conservator; instead, the successor
Trustee can step in and continue to manage the trust assets, pay your bills
and provide for your care during the period of your illness or incapacity.
..........Up Front Costs: A Living Trust costs more to prepare
than a simple Will. Moreover, you may incur additional attorney fees or
other costs in transferring your assets to the Living Trust.
..........Ease of Making Changes: To change a Will, you
must execute a codicil, which must be witnessed in accordance with the strict
formalities required for making a will. A Living Trust can be more easily
changed through a written document which need not be witnessed.
..........Can I Prepare My Own Will or Living Trust?
..........It is very dangerous to try to prepare your own
Will or Living Trust. If you do not observe all of the formalities necessary
for preparing the document -- and the rituals involved in signing it before
the requisite number of witnesses -- you could end up with an unenforceable
document. Even if the document is enforceable, it may contain ambiguities
that defeat your intentions for the disposition of your property.
..........Since a Will or Living Trust is crucially important,
it makes sense to have them prepared by an attorney experienced in such
..........Other Estate Planning Techniques
..........Depending on your circumstances, you may wish to
use other estate planning techniques, in addition to a Will or Living Trust,
in order to reduce taxes or accomplish other goals unrelated to taxes.
These techniques include insurance trusts, personal residence trusts, special
needs trusts, family limited partnerships, and the making of lifetime gifts.
An experienced estate planning attorney can help you to create a comprehensive
plan using the techniques most appropriate for your situation. For assistance in finding an attorney, see Attorney Listings and "Finding and Working with Lawyers" in the Resources section.
..........The information on this Web page is based on California law. It is
not legal advice and cannot replace the advice of competent legal counsel
licensed in your State based on the specific facts and circumstances of
your case. See Disclaimer.