Should I make a Will or a Living Trust, or both?
As with most general legal questions, the answer is – It Depends? A Living Trust and a Will are two separate tools that people use to pass assets along to others after death. There are advantages and disadvantages to each asset transfer strategy and whether someone should use one or the other, or both, to pass assets along is a very individualized decision. Some assets will need to be provided for in a Living Trust or a Will, while other assets will pass outside these documents. If you do not make a Will prior to your death, the State does have a plan in place to determine who gets your property. Guardianship decisions can also be made in your will so that you can give some direction to the Judge as to whom you would like to raise your minor children.
A Will, technically called a Last Will and Testament, is a legal document that will name those to whom you would like to leave your property. A basic Will can be done fairly simply and inexpensively and may be all you need, depending on your situation. It can also name the guardian for your minor children as well as a person to manage any property left to your minor children. Additionally, the Will typically names a person to be responsible for carrying out the terms of the Will. If you are young and without a lot of assets, then a basic Will may be all you need. However, there may be other factors particular to your situation where you may need more than a basic Will. If you expect to owe estate taxes when you die, then you may need a more comprehensive estate plan to minimize the amount you will owe. Additionally, if you have children with a disability or some other type of special need and you need to account for them in your estate plan, then you would likely be better to consider other options. Also, your estate plan may need to account for conflict between children from a prior marriage and your current spouse or his or her children. Additionally, there are ways to control what happens to property after your death which may be more advantageous to your situation. Your Will can include trusts or other instruments to handle your estate.
State law has specific requirements of a valid Will including a requirement of two disinterested witnesses. In order to determine the validity of a Will, the Will must be admitted to the court through a process call probate. Probate is a process where the court authenticates the will and supervises the administration of the Will. The court usually appoints the Executor which is typically named in the Will by the deceased Will Maker. During the probate process, the Executor locates the assets of the decedent and determines the value of said assets. The Executor also pays the final bills and taxes from the estate proceeds. Finally, the executor distributes he remainder of the estate to the beneficiaries named in the Will.
A Living Trust is an arrangement created to hold your property, as the grantor, under one person, a trustee , for the benefit of another person, called the beneficiary. You can serve as the grantor, trustee, and beneficiary of a trust, all at the same time. This allows you to keep full control over the property held in trust. You should name secondary trustees and beneficiaries in the event of your death. After your death, the Trust lives on and, therefore, avoids probate. Because the probate process is avoided, transfer of assets to beneficiaries can be significantly reduced from months and years to a few weeks. Additionally, because, unlike a Will, the Trust is not submitted to the Court for probate, it is not made public and therefore preserves privacy. As with Wills, Trusts must be set up properly to protect the grantor, trustee, and the beneficiaries. Because trusts require a little more work on the front end, they are likely to have an increased cost up front, however, the cost of probate such as attorneys fees and court costs are avoided.
Even when you decide to set up a Living Trust, it is often a good idea to have a back-up to a trust in the form of a will. A will can account for any items that haven’t been deeded or titled into the trust. For example, if you purchased real estate or other property, such a car, shortly before you passed and did not transfer ownership into the trust, then a Will can include a clause naming someone as a beneficiary to any property not left to a specific beneficiary.
There are other assets and other tools that can be used to avoid probate. For example, property titled in joint tenancy with another, will go to the joint title holder. Additionally, proceeds form insurance policies pass directly to the named beneficiary. Consult your attorney to see which estate planning tools best fit your specific needs.