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A Last Will and Testament is a legal document that communicates your final wishes relating how you want your assets distributed. Your Will allows you to make both specific and general gifts. For example, you might make a specific gift of your coin collection to a favorite niece. You can also make general gifts in your Will. For instance, you could gift half of your entire estate to your daughter. Your Will is also where you will appoint someone to be the Executor of your estate and where you can nominate a Guardian for your minor children in the event one is ever needed after you are gone.
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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. All trusts are first divided into testamentary or living trusts. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place. A living trust can be revocable or irrevocable.
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A properly drafted trust can help your estate avoid probate because assets held within the trust bypass probate, instead passing directly to beneficiaries without court intervention. In contrast, a Will must go through probate, which can be time-consuming and costly. If avoiding probate is a priority, a trust may be the better choice.
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A Last Will and Testament becomes a public record once it is filed with the probate court, meaning anyone can access the details indicating how you distributed your estate and to whom. A trust, however, remains private because it does not go through probate. This makes a trust a better option for those who wish to keep their estate details confidential.
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Yes, a trust provides greater control over how and when assets are distributed to beneficiaries. You can include specific instructions, such as staggered distributions at certain ages or conditions that must be met before receiving an inheritance. A Will, on the other hand, distributes assets outright to the beneficiaries after probate is completed.
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A Last Will and Testament is generally easier and less expensive to create than a trust. It involves fewer formalities and does not require the ongoing management that a trust may require; however, the costs associated with probate and the potential legal fees could make a trust a more cost-effective option in the long run, especially for larger or more complex estates.
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If you have minor children, you should consider establishing a trust to manage their inheritance until they reach an appropriate age. While you can name a guardian for your children in a Will, your minor children cannot inherit directly from your estate. As such, an adult must manage the inheritance you leave your children. A trust allows you to set terms for how that inheritance is used for their care and education. Without a trust, the court may oversee the child’s inheritance until they reach the legal age of majority, at which point they receive the full amount without restrictions.
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A trust provides a significant advantage over a Will in planning for the possibility of incapacity. If you create a revocable living trust and become incapacitated, your designated successor Trustee can step in and manage the trust assets without court involvement. A Will, however, does not take effect until after your death, meaning it cannot help determining who will manage your assets if you are incapacitated.
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Both a Last Will and Testament and a revocable living trust can be modified or revoked during your lifetime, as long as you are mentally competent (not incapacitated). A Will can be changed by drafting a new Will or adding a codicil. A revocable trust can be modified by the Settlor through an amendment or restatement. The Settlor can also revoke the trust at any time for any reason. An irrevocable trust, however, cannot be changed or revoked without the consent of beneficiaries and/or a court order.
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The validity of both a Will and a trust can be challenged; however, because a Will goes through probate it is more common for disgruntled heirs to contest the Will by claiming undue influence or lack of testamentary capacity. A trust, particularly if it has been in place and funded for many years, is less likely to be challenged. Working with an experienced estate planning attorney during the creation of your Will or trust is the best way to plan for the possibility of challenges.
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A trust is often the better choice for large or complex estates because it provides flexibility, privacy, and the ability to manage wealth across generations. Trusts can also help minimize estate taxes and provide creditor protection for beneficiaries. While a Will can be used for large estates you will likely need additional estate planning tools to achieve the same level of control and efficiency that a trust offers.
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Contact Us
If you have additional questions about whether to use a Last Will and Testament or a trust to distribute your estate assets, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule your appointment today
