Accounting for Profits: Wills and Trusts

Wills, trusts: Why so important?

By Ralph Lizardo

What is a will? What is a trust? Do I really need either? If so, should I set up a will, a trust or both? Do these questions sound familiar? If so, this article will give you a basic description of the purpose of each document and how they can help you and your family in the future.

Wills and trusts are the essential tools when it comes to estate planning.  An estate plan is the accumulation, conservation and distribution of wealth. You have worked hard to accumulate your wealth and you should make sure that that hard work is preserved after you die and distributed according to your intentions.


Most experts agree!

What is a will? A will is a legal document that dictates your wishes on how your assets will be distributed and with a guardianship, expresses who will take care of your minor children at your death. Most experts agree that everyone needs a will regardless of the value of your estate. You want to ensure that your wishes are acted upon.  

Another form of a will is a living will. A living will is a legal document that expresses your final health care wishes and appoints someone administer those wishes. Depending on which state you live in, a living will is sometimes called, Health Care Directive Declaration, Advance Directive, or Durable Power of Attorney for Health Care. A living will takes effect when you become incapacitated and you can no longer make your own medical decisions.


Dying intestate?

What happens when I die without a will?  The legal term for dying without a will is dying intestate. Without a valid will, your property will be distributed, by the courts, according to the laws of the state you live in.  If you have minor children, you leave it up to the courts and social services to determine who will care your minor children, and who will manage their inheritance. If you do not have an advanced directive, the doctors would have to follow your state laws and consider family members’ input in order to determine what would be the best treatment for you.


Appoint trustee

What is a trust? There are various types of trusts but for this article, we will look at a living trust, which is a revocable grantor trust.  A living trust is a legal document that appoints a trustee, to manage your property and gives detailed instructions on how the property will be managed and distributed. A living trust is created by you, or you and spouse jointly. A living trust may be amended or revoked at any time by the person or persons who created it.

With a living trust, your assets are put into the trust, administered for your benefit during your lifetime then transferred to your desired beneficiaries.  In a living trust, most people name themselves as the trustee in charge of managing the trust’s assets.


Avoid probate

The main purpose of a trust is to avoid probate.  In short, probate is the legal process in making sure that all of the decedent’s debts are paid and the remaining assets are distributed to the appropriate heirs.  In addition, having a properly executed trust will help avoid or reduce estate taxes.      

What happens when I die without a trust? Without a valid trust, your estate will be subject to probate. The management of your estate will be under the court’s supervision and their decision might not be in alignment with your wishes.



What are the main differences between a will and a trust? The main difference is that a will is subject to probate while living trusts are not. Documents under probate are also public records and can be viewed by anyone.  Another difference is the cost. The cost to prepare a will is typically lower than a trust. Although the cost to prepare a trust will be higher, the avoidance of probate costs will be worth it.


Which one is right for me?

Which one should I set-up? Generally, both because they serve different purposes but both govern the distribution of your assets the way you intended. The applicable estate laws differ from state to state and each individual’s circumstances vary therefore inquire of your legal and tax advisors on the additional advantages of having a will and a trust.



  Ralph Lizardo, Senior Manager, with Moore Stephens Wurth Frazer and Torbet, LLP,  in Walnut, Calif. Contact him by e-mail at: or call, 909-594-2713., ext. 178.