Tag: trusts

Wills vs. Trusts: What’s the Difference?

Posted on April 17, 2023 by - Estate Planning

wills vs trusts

Estate planning can be confusing, especially when understanding the differences between wills and trusts. While both documents allow you to distribute your assets and property to loved ones after you pass away, they serve different purposes and have unique advantages and disadvantages.  

If you’re unsure which option is right for you, keep reading. We’ll explain the differences between wills vs. trusts so you can make an informed decision and protect your assets. 

Wills: A Brief Overview

A will is a legal document that ensures your assets and property go to the right people after you pass away. But a will can also be used to name individuals who will manage your state, care for your children, or even outline your burial wishes. 

Your will must be signed and witnessed according to each state’s rules to be considered a valid, legal document. And after you die, your executor must take your will to probate court to make it official. After that, your will will be subject to public record. 

Trusts: A Brief Overview

A trust is a legal arrangement where an individual transfers their assets to a trustee who manages them according to their wishes. The trustee must follow the rules that the individual sets up for how those assets should be managed and who should receive them.

To better understand the difference between a will and a trust, think of a will as a set of instructions that tells beneficiaries what to do with their assets once they pass away. On the other hand, a trust is more like a container that holds your assets, which a trustee then manages.

Advantages of a Will 

There are several advantages to having a will instead of a trust. However, keep in mind that these advantages are unique to your circumstances and goals:  

  • Simplicity: Generally, a will is a simpler document that requires less time and money to prepare than a trust, making it a good option if your assets are small and your instructions are straightforward. 
  • Flexibility: Wills can be changed or updated relatively easily, allowing for greater flexibility. 
  • No trustee necessary: When choosing a will, you do not have to appoint a trustee to manage your assets, simplifying the estate planning process. 

Advantages of a Trust 

Trusts also have several unique advantages over wills, including: 

  • No probate: Probate is a court-supervised process that can be time-consuming and expensive. It can also tie up your assets for months or even years. A trust ensures you avoid probate altogether. 
  • Increased privacy: Unlike wills, which become part of the public record, trusts remain confidential. 
  • Increased control: A trust also gives you more control over how your assets are distributed to beneficiaries and under what circumstances. 

Wills vs. Trusts: Which is Right for Me? 

The answer to this question depends on several factors, including the size and complexity of your estate, your goals for distributing your assets, and your preferences for managing your assets during your lifetime.

Generally speaking, a will may be the best option if you have a simple estate with few assets and straightforward distribution goals. But if you have a larger or more complex estate, a trust may give you the control, flexibility, and privacy you need to manage your assets successfully. 

It’s also important to consider other factors, such as the potential tax implications of your estate plan and your desire for privacy and asset protection. 

Talk to an Estate-Planning Specialist

If you need legal assistance with estate planning, including wills, trusts, and probate matters, contact Hoffman & Forde. Our team of estate planning attorneys is perfectly suited to help you plan for the future and protect your loved ones. With our extensive expertise, we can provide the protection your estate needs in San Diego, Los Angeles, or Orange County. Contact us to schedule an initial consultation.

Estate Planning 101: The Different Types Of Trusts

Posted on September 23, 2021 by - Estate Planning

Estate Planning 101: Trusts

Creating a trust or multiple trusts is an indispensable part of the estate planning process for many people. Trusts offer many advantages. They can reduce taxes, simplify the probate process, and give the grantor (the person who creates the trust) some amount of control over how their assets are used and managed even after they pass away. There are many different types of trusts in California. There is no one-size-fits-all approach because each has its advantages and disadvantages. Understanding some of the most common trusts will give you a sense of the tools available to you.

Testamentary Trust

The grantor’s will creates a testamentary trust after their death. A person might want this type of trust if they don’t wish to fully transfer their property to an heir (in the case of minor children, for example).

Because it doesn’t come into existence until the grantor’s death, the grantor may annul or make changes to the terms of a testamentary trust while they are still alive. However, the assets of the trust must go through the probate process.

Living Trust

As the name implies, a living trust is created while the grantor is still alive. The tax implications of a living trust and the degree of control the grantor may keep over the assets depend on whether it is a revocable or irrevocable trust.

With a revocable trust, the grantor may move assets in and out or annul the trust. However, any income is taxable to the grantor.

An irrevocable trust cannot be changed once created, so the trust itself must pay the taxes.

Special Needs Trust

A special needs trust provides for the needs of a person who is chronically disabled. The major advantage of a special needs trust is that the disabled person may still receive government benefits such as SSI or Medi-Cal. That’s even when the value of the assets in the trust would otherwise disqualify them.

A special needs trust can either be first-party (funded by the assets of the disabled person) or third party (funded by someone else).

Life Insurance Trust

With a life insurance trust, the trust owns and pays for an insurance policy on the grantor’s life. When the grantor dies, the proceeds of the policy are paid to the trust and distributed accordingly. Because the assets are not part of the estate, this arrangement can reduce or avoid estate taxes.

Charitable Trust

There are two main types of charitable trust: the charitable remainder trust and the charitable leads trust.

With a charitable remainder trust, the grantor may receive income from the trust assets for a certain period of time or the rest of their life. The assets are distributed to designated charities after the set period.

A charitable lead trust works oppositely. Income is paid to charity for the duration of the trust, and afterward, the assets may be distributed to family or others. The two types offer different income and estate tax benefits.

For Expert Advice on Different Types of Trusts

The list of California trust types could go on: bypass trusts, spendthrift trusts, blind trusts, etc. You have many options available to meet your unique needs, but it’s crucial to speak with an experienced estate planning attorney to find the best fit. Contact our office today to schedule a consultation.