By: David L. Crockett, Attorney, CPA
UCLA Law School , J.D. ’69, UC Berkeley ’66
901 Dove St., Ste 120, Newport Beach, CA 92660
Both wills and trusts are involved in almost every estate plan. They each have their own uses and characteristics. The topics below outline the basic similarities, differences and uses.
What does each one accomplish?
WILL: A basic plan for distribution on death. TRUST: A comprehensive plan for management and distribution during life and after death
When does each take effect?
WILL: Upon death of the will maker. TRUST: When it is signed by the trustor and trustee
Who manages it?
WILL: The executor after being appointed by probate court. TRUST: The trustee starting up-on formation and then the successor trustee after the trust maker’s death.
What do you call the people who benefit?
WILL: Heirs TRUST: Trust beneficiaries
The legal term for the creator?
WILL: Testator (will maker) TRUST: Trustor or Settlor
How to create it?
WILL: The testator signs the will document & 2 witnesses sign at same time. PC§6110. If no witnesses, a holographic will may be created under PC§6111.
TRUST: The Trustor & the Trustee sign the trust document & a notary public acknowledges it. This is called an “express trust”.
Also a court decree or judgment can create a trust.
Can it be changed or amended?
WILL: Yes, as long as the Testator is alive and competent
TRUST: Yes, as long as the Trustor is alive and competent-but if one of the Trustors is deceased the trust document may control what can be done.
Exception-if a trust is set up as “irrevocable” or “permanent” then it can-not be amended.
When does it become permanent?
WILL: Upon the Testator’s death TRUST: Usually on the death of one or both of the Trustors-need to see what the document says.
Are there different types?
WILL: Yes. Witnessed type under PC§6110 and holographic type under PC§6111
TRUSTS: Yes-express trusts and trusts created under a court decree or judgment. PC§82.
What money & property does it control?
WILL: All assets, money and property owned in the name of the Testator at the time of death.
TRUST: Only the assets, money and property actually owned by the trust-BEWARE be sure to transfer assets & accounts into your trust after formation.
What is a “pourover” will?
TRUST: A will that says to pay all money, property & assets over to a trust. TRUST: When a revocable trust is prepared, a pourover will is usually done also.
Can you have lawsuits about it? A lawsuit is called a “petition” in probate court.
WILL: Yes, after a probate is started, there could be a will contest to try to set the will aside on grounds of fraud, undue influence or incapacity.-But beware of “no contest” clauses and strict time deadlines to file.
TRUST: Yes, after a Trustor dies, when his share becomes irrevocable, the trust could be challenged on same grounds- same issues of “no contest” clauses and strict time deadlines.
What has to be done upon death?
WILL: File will with county clerk and start a probate case. Then administer the probate case, make the various required court filings, pay bills & taxes, do an accounting & then get court permission to pay out the estate to the heirs.
TRUST: No court proceedings but successor Trustee has to do trust administration, pay bills & taxes, do an accounting & pay out the remaining trust estate to the trust beneficiaries.
What tax returns need to be filed?
WILL: Final returns for the de-ceased and fiduciary re-turns until the probate ends and estate tax return if the estate is large enough.
TRUST: Same as Will.
Final returns for the deceased and fiduciary returns until the trust ends and estate tax return if the estate is large enough.
Do the property taxes increase?
WILL: Makes no difference if a will or trust owns the property. Property taxes go up upon death unless an exclusion is available and timely applied for. The parent-child child exclusion may apply if children or grandchildren inherit.
TRUST: Makes no difference if a will or trust owns the property. Property taxes go up upon death unless an exclusion is available and timely applied for. The parent-child child exclusion may apply if children or grandchildren inherit.
Is one cheaper to administer on death?
WILL: Probate has mandatory attorneys fees and is generally more expensive.
TRUST: Administering a trust does not involve court and usually costs less in attorney & accountant fees to finish it out.