Demystifying wills and trusts

Demystifying wills and trusts

Though last year’s pandemic spurred renewed interest in estate planning, a recent survey shows that two out of three adults in America do not have a will or trust in place.

“It is understandable that people are sometimes very resistant to facing their own mortality,” says Jason Perisho, an estate planning expert with the San Joaquin County-based Kroloff, Belcher, Smart, Perry, & Christopherson law firm. “But death is an inevitable part of life and it is far better to be prepared than not. Plus, once a client’s estate plan is in place, it should provide some comfort that his or her wishes will be carried out.”

People often put off the process because it can seem confusing and intimidating. Luckily, understanding the basics can help demystify the process.

What is the difference between a will and a trust?
A will is what most people think of when it comes to estate planning, but it is only a first step in many cases and there are important limitations to be aware of. 

Wills can outline a person’s wishes for how their property is distributed after their death, who can and cannot become a beneficiary, and can nominate guardians for any under-aged children.

“While someone can include their wishes for the distribution of real property in his/her will, if the value of the entire estate is in excess of $162,500, a probate would likely be necessary in order to distribute the estate,” Jason explains. A probate is an oftentimes lengthy and expensive legal process imposed by California laws that requires a will to be proved in court before the beneficiaries can take possession of the assets left to them. 

A trust, on the other hand, is further reaching and facilitates the distribution of large value assets like homes, stock and brokerage accounts, and high-value checking or savings accounts. The trustee manages the sale or distribution of assets after the settlor’s (the person who sets up the trust) death without the need to get the court involved, alleviating the cost and stress for the family.  

“Ideally, a will should state how one’s personal property is to be distributed and a trust should state how real property and high-balance accounts are distributed,” Jason says. “In my practice, unless a person has very minimal assets, I always recommend executing both.”

Who should have a will or trust? And when should you get one?
“Anyone who owns a home, a business, other real property or other high-value assets should have a will and a trust, no matter the age,” Jason advises. “It is never too early to get these documents into effect, though many people wait until it is too late.”

He adds that typically, each spouse will have their own will and shared property (like real estate) would be included in a shared trust.

What should seniors keep in mind?
“My biggest piece of advice would be to meet with an estate planning attorney to see what you need for your specific situation,” Jason says.

All too often people push off the decision longer than they should. For example, if someone is diagnosed with dementia, they will no longer be able to execute or amend an estate plan. This can have consequences even before they pass as the estate planning process can also outline end of life decisions, organ donation, and management of financial assets. 

“People do not like thinking about these decisions, but it sure beats the alternative of not having your wishes documented or followed, or subjecting your family to a costly, lengthy, and usually unnecessary, probate proceeding, which could give rise to conflicts between the beneficiaries,” Jason says.

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