Importance of Wills and Trusts

Have you created a Will yet? Or a trust? How about a Living Will? Many people today don’t realize the importance of having a plan in place in case of unforeseen circumstances, and many put off creating one for a variety of other reasons. More often than not, individuals are more focused on the here-and-now and don’t think about the end of the road; after all, one’s own death is not a pleasant thought. However, if you care about those who would be left behind if the unthinkable occurs, it’s best to plan ahead. At the very least, doing some research into what your options are can help you determine what, if anything, you need to plan for.

There are many benefits to having an estate plan in place, and it can often protect your family and loved ones from experiencing unnecessary financial burdens and heartache. The documents within an estate plan can satisfy any number of your wishes: outline a distribution of assets, determine who will look after your children (if minors), name your health care agents and health care preferences, protect your minor children from overspending (and third parties), protect distribution of investment and retirement assets, etc.

So how do you know what is right for you?

For those with minor children, you’ll want to think about setting up a Declaration of Guardianship Nomination for your minor children. This will allow you to legally declare who should have legal and physical custody of your minor children if something happens to you. Without declaring your wishes, the court cannot take what you want into consideration. Instead, it will be up to a combination of your relatives and the court system to fight it out and determine the best guardian for your children, without your say.

If you own a home, you may want to consider putting a Living Trust into place. A Living Trust can do wonders for your estate. It can help you avoid probate fees and court costs, maximize your tax exemptions, provide your children with property tax benefits, and much more. It also allows you to determine who will receive distributions in the manner you want, all while keeping it personal and out of the court system.

If you do not have children and do not own a home, a Will may be all you need to outline your wishes. A Last Will and Testament can outline you who want to receive your assets upon your death, and in what manner. Wills go through the probate process in the court system, which can be very expensive (it can cost anywhere form 3-7% of your total estate) and time-consuming, and must follow a number of rules. Because of this, anyone with a large estate, or complicated distribution issues might consider drafting a trust instead. However, those without substantial assets, or a home, may only need a Will to outline their wishes. If your total assets are under a certain amount, even a Will can outline your distribution requests without necessarily needing to go through the probate court. If you’re not sure of your situation, this is a good time to consider consulting with an attorney to outline a plan that best suits your needs.

With investments, bank accounts and retirement assets, there are ways to avoid probate altogether, but be wary of these methods and do your research. Avoid actions such as “Transfer on Death” (TOD) or “Pay on Death” (POD) which may avoid probate, but can have other repercussions relating to gift taxes, loss of assets and more. These methods can be beneficial for specific instances, but can be harmful more often than not.

Finally, don’t forget about a Living Will, which in California is referred to as an Advance Health Care Directive. This is a legal document appointing your health care agents – those you want to make health care decisions for you if you are unable. It also allows you to state your preferences for other health care wishes, such as end-of-life decisions and organ donation.

The best option is usually to find a good lawyer to consult with and go from there – feel free to contact our office for any assistance you may need!