For most people, the ability to decide how their estate assets are distributed after they are gone is a primary motivation for creating an estate plan. If that is one o your primary estate planning goals, you will need to decide exactly how you want most of your assets to be distributed – via a Last Will and Testament or a trust agreement. A Los Angeles estate planning attorney at Collins Law Firm offers some factors to consider when deciding whether a Will or a trust should be used to distribute your estate.
How a Last Will and Testament Works
A Last Will and Testament is a legal document that communicates your final wishes pertaining to possessions and dependents. Your Will allows you to make both specific and general gifts. Your Will is also where you will appoint someone to be the Executor of your estate and provides you with the only official opportunity you will have to nominate a Guardian for your minor children in the event one is ever needed after you are gone. One of the most important benefits to executing a Will is that is ensures your estate will not be administered using the state’s intestate succession laws which distribute a decedent’s estate to legal heirs according to priority. Even if you do decide to use a trust to distribute most of your estate, you should continue to include a valid Will in your estate plan to prevent overlooked or recently purchased assets from creating an intestate estate.
How Does a Trust Work?
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. A trust is created with a document known as a trust agreement. Assets held in the trust are distributed by the Trustee according to the terms of the trust – terms created by the Settlor. When used to distribute estate assets after the death of a Settlor, the trust terms will tell the Trustee when to distribute assets and which assets to distribute to which beneficiaries.
Factors to Consider When Choosing
Given the complex nature of estate planning, it is in your best interest to consult with an experienced estate planning attorney before making decisions that impact your estate plan. It may help, however, to consider some of the most common factors that typically go into deciding whether to use a Last Will or a living trust as a primary distribution method for your estate assets.
- Incapacity planning. The terms of a Will do not become relevant until the death of the Testator; however, the terms of a trust can apply in the event of incapacity as well as death.
- Probate avoidance. Assets held in a trust are not required to go through the probate process. Therefore, those assets will bypass probate and can pass directly to beneficiaries much faster.
- Minor children. A minor child cannot inherit directly from your estate. Therefore, if you are the parent of a minor child, or you plan to have children in the near future, a trust is a better option to guard your child’s inheritance until he/she reaches the age of majority.
- Privacy. Because a trust agreement is not part of the probate of your estate, the terms of your trust remain private. Therefore, gifts made using a trust agreement can remain private as well.
- Staggering an inheritance. If you are concerned about leaving a lump sum to a young and/or inexperienced beneficiary, a trust agreement allows you to stagger the inheritance you leave that beneficiary.
Contact Collins Law Group
For more information, please download our FREE estate planning worksheet. If you have additional questions about whether to use a Will or a trust as your primary estate planning document, consult with an experienced Los Angeles estate planning attorney near you. Contact the Collins Law Firm by calling (310) 677-9787 to register for one of our FREE estate planning workshops.