Wills, Trusts, What's the difference? And which do I need?
A Will and a Trust are two very different documents and most people need both. A Will is a legal document that tells a court how your want your assets to be distributed when you die. Wills also usually include your choice of guardian for your children if anything should happen to you.
A Trust is a legal agreement between a Grantor (that the person that owns the property) and a Trustee (the person who will manage the property) for the benefit of the Beneficiary (the person who will get the property). While you are alive, you are all three people. Once you die you will name a new Trustee to handle your property by continuing to manage it for, or transferring it to, your beneficiary.
The important difference between a Will and a Trust is that a Will must go through a court process called Probate where the court will supervise the distribution of your property. When you have a Trust your property doesn't have to go through Probate. This means that having a Trust will save your family money, time, and stress.
But you always need a Will whether you have a Trust or not, because a Trust only covers the property that is owned in the name of the trust and does not provide for guardianship choices for your children.
What is Probate and how does it work?
Probate is the Court process that a person's property must go through when someone dies with any assets titled in his or her own name. Each State has a different amount of assets someone must have before a probate is necessary. Here in California, if someone has more than $100,000 in assets they will have to go through Probate.
When someone dies with property that needs to go through probate the person's family must get an order from the court to sell their property, close their bank accounts, or handle any other property in any way. The court supervises all distribution of property under the Will or by law if there is no Will.
If, however, the assets are owned in the name of a Trust, the family can contact the person's estate planning attorney who can help them complete the necessary paperwork and walk them through the process of wrapping up the person's affairs without ever stepping into a courthouse.
What is a Living Will? And why would I need one?
In California, a Living Will is known as an Advance Health Care Directive. This is the document that lets your doctor or any other healthcare professional know how you would want your healthcare decisions made if you are unable to communicate those wishes for yourself.
Everyone needs one so that your family and health care providers are aware of whether you want to be kept on life support, or given hydration and nutrition if you are permanently incapacitated.
In addition, your Advance Health Care Directive should include provisions to appoint the person of your choice as an agent under the Health Insurance Portability and Accountability Act (HIPAA) to gain access to your medical records if needed to make important medical decisions.
What is a Durable Power of Attorney? Do I need one?
A Durable Power of Attorney is a legal document that gives the person of your choice the power to handle all of your finances to the extent that you would like in case you become incapacitated. This can be especially important if you have children. The person you name as your agent will have access to the funds necessary to take care of your children if you are unable to.
If you don't have this document in place, the only way to access your finances will be by a court order, which again means time, money, and stress.
What do parents need to do to protect their young children?
All parents need an Estate Plan! As soon as a child is born every parent must decide who they want to act as both short-term and long-term guardians for their children and legally document those decisions. They also need to provide instructions to those named guardians as to what to do if anything were to happen. If this is not done your children could end up in foster care until long-term guardians can be reached and in the middle of a custody dispute between family members who each believe that they should be your children's guardian. It could be left up to a judge who doesn't know you, your kids, or your family to decide your children's future.
What can I do now to make sure my family is protected?
You can contact an Estate Planning attorney today to start creating a plan for your family. Having a Will drafted will protect your children from being placed in foster care or in a custody battle and will make your wishes known regarding your property. Creating a Trust can also save your family the money, time, and stress of having to go through Probate.