So what is a trust and why is it different from a will?

To answer the question – a trust is a fiduciary relationship that allows another person (the Trustee) to hold assets on behalf of a person or people (the Beneficiaries). But what are all these words? Well, let me give you an elaborate analogy. A trust is a vehicle that helps you reach a certain destination. The destinations that you may use a trust to reach are as follows: 1) using it for your own life journey; 2) planning so as to lessen your tax burden; 3) giving possessions from one person to the other. You get to create the rules about where the vehicle goes and how it gets there (as long it complies with the law).

Now because it is a vehicle, it needs a driver (the Trustee). You can be the driver of the vehicle for as long as you are capable. And once you are no longer capable to be the driver, you may choose another person to drive the vehicle (they still have to follow your rules, though). You may need to stop driving this vehicle if you have health or mental reasons or if pass you away. Even during your lifetime, you may need someone else to handle your affairs – pay your bills, manage your property –  and so a trust helps somebody else (the Trustee) be able to do this for you in a more simple manner, since they would not have to spend time, money, and effort going to court to get access to your affairs.

Another very important reason why a trust may be necessary is that proper planning can reduce the tax burden for the people that inherit from you. Lastly, a trust will help get your life time possessions to the people/organizations you choose after you pass away, without having to go through probate! I already wrote why you want to avoid probate here. Creating a trust is a good way to do that!

One important part of this is that the person driving the vehicle can only control what is inside of the vehicle. Meaning, you need to put whatever you want the vehicle to control, inside of the vehicle (seems like a simple enough concept right). This is called trust funding. It is a very, very important step in setting up a trust. If you do not put the possessions you deem important into the trust, then the trustee cannot do anything with them.

What is a will? And can I use that to avoid probate

A will is a document that you can use to distribute assets after your death. You can make specific distributions of specific assets within this document, if this is something that you want to do. This document also provides for minor children at the time of death.

Very important to note that a will does not help you avoid probate. If you pass away with a will,  it is lodged with the court. Whoever is named in the will as an Executor (ie the person that helps settle all your affairs) is required to show that the will is authentic, and with the approval of the court, they help distribute your assets as provided in the document. It is particularly necessary to establish a will if you do not like the default rules from the state California about how your possessions will be distributed (I wrote a little more about them here).

Establishing a trust may be a little bit more expensive at the beginning (the trust package usually includes a will just in case), however, it is also more cost effective than having to go through probate – like you would need if you only had a will.