Many people believe estate planning is something they only need when they grow older or if they become wealthy. The truth is, estate planning is appropriate for anyone, of any age, who wishes to have control over what happens to their property after they pass. Not only does it ensure your final wishes will be respected; it gives peace of mind to your family. MacKay & Martin, LLP, represents clients in all aspects of estate planning, including wills and trusts.
What Is A Will?
A will is a legal document that, among other things, provides instructions for how to divide and distribute one's property upon death. More specifically, a will serves such purposes as:
- Identifying beneficiaries (individuals and organizations who will receive your assets)
- Nominating executors (individuals to execute the terms of your will)
- Nominating guardians to care for your children
- Giving instructions about your burial, cremation, and/or memorial services
What Happens If I Die Without A Will?
If you die without a will, any property you have that would normally be subject to a will passes through what are called intestate laws. These laws determine which of your relatives will get your assets when you die, and how much each will receive. If you have children under 18, a court will decide who takes care of them. Not having a will means you don't have control over these and other matters, so what happens to your assets and children may not be ideal.
What Are The Requirements For A Valid Will?
California law requires several formalities to be met for a document to be considered a legally binding last will and testament. Among these are the following:
- The testator (the person creating the will) must be at least 18 years old
- The will must be written
- The will must be signed by two witnesses who are not beneficiaries
Many wills are typed, but they don't have to be. A holographic will is one that is handwritten, dated, and signed by the testator. Holographic wills do not require witnesses to be valid.
Can A Will Be Changed After It Is Written?
Life doesn't stand still, and significant changes such as newly acquired property, marriage or divorce, and the birth of children can occur after you've executed a will. You can revoke and execute an entirely new will as long as it follows all required formalities. Or, you can execute amendments – known as codicils – to the will, as long as they meet the same formalities. You cannot update a will simply by adding notes, crossing out sections, or adding handwritten changes.
What Is A Trust?
When a person dies with a will, it must be submitted to a court process known as probate. This can take months to complete and can involve substantial probate fees. A trust operates in a similar manner to a will, but without probate. It is a legal instrument by which its author (the settlor) designates an individual (the trustee) to manage property for the benefit of a third party (the beneficiaries). Besides avoiding probate and the fees and wait times that come with it, a trust:
- Has certain tax advantages
- Allows wealth to be passed on to the next generation
- Provides financial support to loved ones
What Types Of Trusts Are There?
There are two main types of trusts: revocable and irrevocable. Revocable trusts can be amended or revoked. As long as the settlor can change or revoke the trust, it is revocable. A trust is irrevocable if it cannot be changed or revoked. If the settlor dies, a revocable trust becomes irrevocable. The terms of the trust itself may also make it irrevocable. Once assets are transferred into an irrevocable trust, the settlor cannot change the terms.
What Are The Advantages And Disadvantages Of A Revocable Trust?
The main advantage of a revocable trust is that the settlor can alter its terms and take property back out of the trust at any time. But this power comes with significant disadvantages. Revocable trusts do not have the same tax benefits as many irrevocable trusts. Any trust income received by the settlor is taxable, and trust assets are not protected from creditors.
What Are The Advantages And Disadvantages Of An Irrevocable Trust?
Creating an irrevocable trust requires permanently transferring assets into the trust. The lack of flexibility and control over these assets is the primary disadvantage. But there are several tax benefits to irrevocable trusts. For instance, many of them pay their own separate income taxes apart from the settlor. The settlor can also use the trust to move to a lower tax bracket. If structured correctly, the irrevocable trust can shield certain assets from creditors.
Are There Other Legal Documents To Consider Executing With Wills And Trusts?
Wills and trusts are not the only estate planning documents you should think about. Your attorney may recommend a durable power of attorney to handle your financial affairs. The durable power of attorney allows you to designate someone to handle such matters in the event that you become incapacitated.
A related instrument is an advance health care directive. This document specifies your wishes concerning health care and end-of-life decisions and appoints someone to carry out these wishes.
Your attorney may also suggest using a pour-over will. This is a last will and testament that, upon your death, gives any remaining property in your probate estate to your trust.
Contact Our Los Angeles Wills And Trusts Attorney
Your final wishes are too important to leave to chance. Executing a will and trust gives you say in what happens after you die. At MacKay & Martin, LLP, we can meet with you to discuss the best strategies to address your estate planning needs. Contact us today to schedule your consultation.