The answer to this question really depends upon where you are in life. For example, the answer to the question is different if you are asking it at a time when you do not have children or have children under the age of 18 years old versus children over the age of 18 years old. This blog addresses some of these issues and why you would still want to still have a Will even if you already have a revocable living trust in place.
So what does a Will do? A Will operates at your death to pass assets in your Estate (assets that are not in your Trust) to your heirs. If you have a Trust, you may already know that to make the Trust valid, you have to put assets in to the Trust, otherwise known as “funding the Trust.” For most people, not all of their assets go into their Trust. So, upon a person’s death, assets that are not in the Trust are then in that person’s “Estate” and are distributed according to the deceased person’s Will (and not according to their Trust, with an exception, of course). Many times people who have a Trust will put higher value assets, like the family home, the family vacation home, rental properties, interests in a limited liability company or stock held in a family run business/corporation, etc., in their Trust and leave other smaller assets in their Estate (i.e., outside of the Trust), as a matter of convenience. Some examples of assets that are typically not placed in a Trust include small personal savings accounts and checking accounts used to pay regular bills, vehicles, boats, RVs, sometimes certain investments, stocks and bonds, assets which name specific beneficiaries such as retirement accounts and life insurance policies, and other personal property assets like a piano, grandma’s diamond ring, etc.
So this begs the question of, upon your death if you have a Trust and a Will, does your Will have to gift the items in your Estate to specific persons or can the assets just “pour-over” into your Trust? Good question. Upon your death, your Will can gift specific items in your Estate to certain people. However, your Will could also “pour-over” all of the assets in your Estate into the Trust. This is what estate planning attorneys, CPAs, Financial Planners, and others call a “pour-over” Will because that is an appropriate description of what happens with this type of Will. A properly drafted pour-over Will, upon your death, pours the assets in your Estate over into your Trust and then those assets are handled according to the terms of the Trust. So a Will, especially a pour-over Will, is a very powerful estate planning tool and should be considered any time you have a Trust.
If you live in California and have a Trust, one rule (valid as of the date of this blog) that should be always considered regarding which types of assets you should have in your Trust versus have in your Estate is, make sure to keep less than $150,000 gross value (not net value) worth of assets in your Estate and do what you can to put all of your other assets in the Trust. This will help prevent the dreaded probate of your Estate upon your death (for more information about probate, see other blogs written by Chilina Law Firm about the impact of probate).
Another reason to have a Will is if you have minor children at the time you create a Trust, a Will is a great device to designate who will take care of your children should you (and the other parent) die prior to them turning the age of majority, which is the age of 18 in California. The Will names a guardian of the person and of the estate, meaning a person who will take care of your child’s day-to-day needs and a person who will manage their money. (A minor child might receive money in the form of life insurance proceeds, trust distributions, etc.) In many cases the guardian of the person and guardian of the estate is the same person, but not always. Only you know what is right for your children. Perhaps your sister is great with finances but not with children, while your brother is great with children but not finances (or vice versa). Or perhaps Aunt Sally has a great relationship with your children and would be the best person to raise them and manage their money. Each family is unique and these decisions are very personal. If you have definite ideas about guardianship of your children, it is imperative that you put it in your Will. To do otherwise is to hope that your family can come to some agreement and, if they cannot, hope that the courts will make the right decision.
As you can see, a Will can be a very powerful device and can speak for you when you are no longer able to. A properly drafted Will can make sure your Estate assets are put into your trust and distributed according to the terms of your trust and can also establish guardianship for your minor children. The above reasons are just a few of the many reasons to also have a Will even if you have a Trust. When establishing a trust, do not overlook the importance of a Will. No estate plan is complete without some type of will. Anyone interested in further information about Wills and estate planning should contact Chilina Law Firm or another California attorney who practices in the area of Trusts and Estates for further information.
Authored by Karen Chilina and Co-Authored by Greg Chilina
Chilina Law Firm, a Professional Corporation, is a full-service estate planning, probate, trust administration, business law, and real property law firm that provides a wide-range of advising, transactional, and litigation services to its clients from its office located in Atascadero, California. The firm’s attorneys represent individuals and business entities in an assortment of transactional and litigation matters involving estate planning (including trusts, wills, powers of attorney, and medical directives), probate, trust administration, as well as general business law, contracts, corporate governance, land use, and real property. Chilina Law can be contacted by telephone at (805) 538-5038 or by email at firstname.lastname@example.org or visit the Chilina Law Firm at www.chilinalaw.com. Chilina Law Firm is based in Atascadero, California and serves North San Luis Obispo County communities, including Santa Margarita, Atascadero, Templeton, Paso Robles, and San Miguel.
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