Wills and Trusts are vastly different types of documents.  They may seem similar in some respects, but they are more different than they are similar.

What is a Will?

For starters, a Will is a “testamentary” document meaning it must meet certain formalities to be a valid document.  All Wills must be in writing, signed by the testator, and witnessed by two witnesses to be valid California Wills.  Or you can create a valid holographic Will if all substantial terms are written in the testator’s own handwriting, and it is signed by the testator (no witnesses required for holographic Wills).  Those are the only two acceptable procedures for Will creation.  And California Wills are never notarized—notarization of a Will is meaningless.

What is a Trust?

Trusts can be oral or written (don’t try to create an oral Trust though, that is foolish).  Written Trusts must be signed by the settlor, but that’s all that is required.  No witnesses or notarization needed.  Of course, most Trusts are notarized to prove the person signing it was the named settlor, but that is not a legal requirement for Trust creation.

Testamentary vs. Living Documents

Furthermore, every revocable Trust created during a settlor’s lifetime is referred to as an inter-vivos Trust—meaning it was created during lifetime as opposed to being created at death the way a Will is created.  This is why Trusts are sometimes referred to a “living Trusts” because they are created during life.  You can fund assets into the Trust, and the Trust can control those assets right away.  You can have a third-party act as a Trustee to manage your assets if you like.  And that third party can follow the Trust terms in management and distributing Trust assets.  It all is happening right now in the present.

Wills, by contrast, never operate during life.  They are testamentary documents, meaning they only take effect after death.  And a Will is not officially recognized as a valid Will under California law until the court admits the Will to probate (meaning the court issues an order finding the Will valid).  That means every California Will must be admitted to probate to be determined valid and to be administered under the Probate Code.  Trusts, however, do not require probate to be valid or to be administered.  That means the Trust creator can die and the entire Trust estate can be administered and distributed to the named beneficiary without the need to open probate.  That saves time and money to the estate.

Trusts also provide flexibility by allowing you to include in the Trust document further subtrusts that can be created to hold assets for a spouse, children, or grandchildren.  For example, if you have minor children, then you can specify in your Trust that the children’s share shall be held in Trust until each child attains a certain age, such as twenty-five or thirty.  You can include provisions that allow the child to use their Trust funds for health or education until they attain the requisite age.  You could even keep a child’s share of the Trust estate in Trust for his entire lifetime if you believe he needs help managing money or making distributions.  A Trust can be created using just about any terms and provisions you want to include.

A Will, however, has less flexibility.  You can specify that assets must be distributed from your probate estate to a Trust for a child’s benefit, but the Will has to go through probate before the child’s Trust can be created.  This is referred to as a “testamentary Trust” because it is not created until after death when the Will is submitted to probate.  As for the probate estate, it must be closed within a few years at most, so you either have to give people their assets outright or create a testamentary Trust to hold the assets after the probate closes.  Either way, the process is more cumbersome to administer after death.

Because Trusts can be created during a lifetime, they can also be used to help manage your assets if you lose capacity.  Most Trusts provide for a successor trustee to step in and manage your financial affairs in the event you lose capacity.  For example, if you are in an accident and are in a coma for a number of months, your successor trustee can manage your assets for you.  You cannot do this with a Will because the Will does not even come into existence until after your death.  So if you become incapacitated a Will does not help you manage your finances.

A Will is a “testamentary” document meaning it takes effect over  assets held in your individual name after death (that is, anything that is not titled in a Trust, joint tenancy, or passing by beneficiary designation).  Trusts don’t work this way, a Trust can only control assets titled in the name of the Trust.  For this reason, Wills can be a catchall device to ensure all assets will be managed either under your Trust or Will after death.  And many estate plans will include both a Trust and a so-called pour-over Will that names the Trust as the sole beneficiary.  This ensures that any assets held in a person’s individual name are transferred to the Trust after death.

The bottom line: Trusts are far more versatile instruments that can help you plan for life and death in ways a Will simply cannot do.

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Our client gave me a copy of the trust agreement between his mom and Stepdad. The trust had become irrevocable when our client’s mom passed away 6 months prior. Yet, unbeknownst to me, our client had talked to Stepdad’s lawyer. Our client understood that Stepdad’s lawyer had told our client that it was perfectly legal to take the property out of an irrevocable trust under California’s community property laws. Wait a minute. It isn’t okay to take property out of an irrevocable trust in California, regardless of community property laws. An irrevocable trust is just like it sounds, irrevocable. Irrevocable means property can’t be taken out of the trust. In fact, Pursuant to PROB § 859 where property was transferred from the Trust and/or the Estate of the decedent, the transferee shall be liable for twice the value of the property recovered by an action under this part.

A Heggstad petition filed under PROB § 850 Petition governs the “conveyance of transfer of property claimed to belong to decedent or other person.” The most common scenario is the scenario that our client and his siblings experienced: where the decedent owned a property, title the property to the trust, but after the trust became irrevocable, the trustee removed the property from the trust, although the settlors clearly intended the property to be a trust asset. The beneficiaries of a trust have standing to file the Heggstad petition in the probate division of a state court. Sometimes, as in our client’s case, the parties to the Heggstad petition come to a settlement.

Although under the trust, our client was only supposed to inherit after Stepdad had passed away. Under the settlement, our client received his full inheritance before the end of the court’s determination of the Heggstad petition. Then our client dismissed the Heggstad petition because the parties had come to a settlement. In my opinion, the settlement was the best outcome for our client!

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