Wills and trusts are both legal tools you can use to plan out your estate (what happens to your property and possessions after you are incapacitated or die) and ensure that all your assets are securely protected and given to the people who you want to receive them when you die.
A will is a document that details all the things you wish to give to others after you die. This includes naming guardians for your minor children and giving assets to friends, relatives, and even charities.
Unlike a will (only active after your death), a trust is active on the day it's created. It's a way to designate ownership and control of your assets and to distribute your assets before your death.
To help you better understand each of these estate planning tools, we're going to explain what they are, why you need them, and which one is more suited to your needs.
When you think of a will, you're probably thinking of a testamentary will, the most common type of will around.
It is a document that clearly outlines how you want your affairs to be dealt with after you die. This includes how your assets are distributed between your relatives and friends. It can also include instructions on how you want your funeral, burial, or memorial organized.
A will is a vital part of planning your estate, and without it, you could be causing some serious issues after you've passed on.
We highly recommend seeking expert legal assistance from an attorney to write your will. He or she will be able to review your particular situation with you, carefully consider your needs, and prepare a custom-tailored document for you. This will serve as guidance for your executor or personal representative to fulfill your wishes after you are gone. By hiring an experienced professional, there will be a lot less room for error.
Generally, a will contains the following:
If you have any children who are minors when you die, you'll have to appoint a guardian for them in your will if there is no surviving parent.
If you don’t designate who you want to be your child’s guardian by the time you die, then your family will seek help in a probate court. This will allow them to nominate a guardian for the child as a collective.
It is essential to appoint a guardian yourself because the person who's appointed in court might not be the person you would have wanted to take care of your children.
Your spouse and children have statutory rights (state laws which dictate how much of your estate they inherit upon your death if there is no will) to inherit your estate, but your will does allow you to disinherit a child if you'd like to. This means they won’t receive any inheritance from you.
You can also choose to disinherit your spouse as well, under certain circumstances.
It is only possible to disinherit your child or spouse through a will, it cannot be done through a trust.
Conversely, a spouse or child may choose to decline to receive their inheritance. This is usually done to avoid taxes and involves trusts.
If you die without a will, this is called “dying intestate”. Your estate is referred to as an “intestate estate”. In this situation, the state (probate court) gets involved with your affairs and distributes your assets between your spouse, children, and other living relatives.
Without a will, a court will also appoint a guardian for any of your children who are minors after you pass away.
There is a specific way a court divides assets up, which could negatively impact your spouse or child. This is why it's vital to be well prepared and ready for when you pass away. Preparing your will in advance allows you to remain in control of what happens to your assets and who takes care of your loved ones after you die.
A trust is a legal entity into which you transfer your assets thereby removing yourself as the legal owner. This is similar to having a corporation or limited liability company. One reason why trusts are established is in order to avoid individual estate tax liability according to specific state and federal estate tax laws.
Another reason trusts are established is to protect your estate from future medical and nursing home expenses.
A named “trustee” (this could be you) is given the authority to manage your assets for you to ensure your “beneficiaries” get exactly what you want them to receive and when. This brings us to the most important reason why a trust is established. The probate court is not involved and your estate documents and matters are kept private.
There are many types of trusts, two of the most common of which are:
A living trust is similar to a will as it involves the transfer of property, after death, to your loved ones. It's called a living trust because it's created while you, the property owner, are alive.
It can be changed at any point during your life, and you maintain ownership and control of the property while you're alive.
After your death, the trust activates, but unlike a will, the living trust is entirely free of any court involvement. After the trust is established, there are no extra legal fees, and the property can be immediately passed to your beneficiaries.
A testamentary trust is a trust that's created to adhere to the instructions left in the will. It's put in place to ensure that your assets are managed correctly on your behalf when you pass away.
This type of trust can also be used to reduce estate tax liabilities.
What's different about a testamentary trust compared to a living trust is it technically doesn't exist until the person has passed away.
These types of trusts are often used to give the assets of the deceased to their beneficiaries after certain conditions are met. For example, assets might not go to a child until they're 21 years of age.
Note: For any trust to be valid, the following must be identified:
Although both are essential tools for estate planning, they each have differences that can benefit or negatively impact you and your loved ones.
|• Activated when you sign it|
• Doesn't go through probate court so details are private
• Helps to streamline the process of transferring your estate
• Avoids long and expensive probate periods
• More expensive than a will
• It doesn't detail what will happen to minor children
• Doesn't take care of your funeral or memorial plans
• More complex to set up
|• Comes into effect when you die|
• Goes through probate court upon your death; thus it is a public • record
• You name a guardian of your minor children
• Details your funeral, memorial, or burial requests
• Isn't an instant transfer of your estate
• Critical in protecting your minor children and ensuring they receive their inheritance
• Not as expensive as a trust
Deciding between a will, a trust, or both is entirely up to you, but it's often recommended that you have both set up to tick all the boxes.
Everybody should have a will written up, but not everybody needs a trust.
If you have a lot of property and assets that you'd like to place in a trust or have minor children, then having both of these estate-planning tools set up is the right way to go.
If you're unsure of what to do, remember you can always get help from a legal professional at Meimaris Law to guide you through this complex process.
If you're thinking of setting up a will or trust, it's essential to do it now rather than later in life. As the COVID-19 pandemic has shown us, it is important not to wait due to the unpredictability of life.
A will and a trust can ensure that all your assets, valuable possessions, and family heirlooms end up with the people you want to get them. It ensures that your minor children are cared for after your death, and it'll help reduce stress on you while you are alive and on your family after you pass on.
Planning your estate now will help you save time and money in the future. It will also help ensure that your wishes (not someone else’s) are carried out and your loved ones avoid any expensive fees or complications after you're gone.
If you're unsure of the first steps to preparing a will or creating a trust, we highly recommend that you speak to an attorney who specializes in estate planning.
The team at Meimaris Law would be happy to discuss your particular situation and needs with you so that you may choose what is in your best interests.
With over 25 years of experience in estate planning, we can help make it a stress-free and seamless process for you.
Get in touch today for a free consultation with our team and talk about how we can help you with your estate planning needs.