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Posted on April 25, 2016

Common Questions: Wills v. Trusts

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It can be a confusing process for the uninitiated when it comes to estate planning. Do I need a will or a trust? What is a trust? What is probate? What will happen to my assets when I die? The purpose of this blog is to address these questions and hopefully simplify the process so you can have a meaningful estate planning discussion with your attorney should you need to set up your estate plan.

A will is simply a document by which a person directs his or her estate to be distributed upon death.[1] Generally, a will must be signed by and witnessed by two uninterested parties (individuals who do not have an interest in the disposition of your estate). A will is revocable and may be amended or restated at any time during your life (assuming you are not incapacitated). If you have minor children, a will also allows you to appoint a guardian should you and your spouse (if applicable) die prior to the children reaching the age of majority.

On the other hand, a trust is a property interest held by one person (the trustee) at the request of another (the settlor) for the benefit of a third party (the beneficiary).[2] A trustee is one who, having legal title to property, holds it in trust for the benefit of another and owes a fiduciary duty to that beneficiary.[3] Generally, a trustee’s duties are to convert to cash all debts and securities that are not qualified legal instruments, to reinvest the cash in proper securities, to protect and preserve the trust property, and to ensure that it is employed solely for the beneficiary, in accordance with the directions contained in the trust instrument.

A living trust is a trust created while the property owner is alive and it is revocable for the settlor’s lifetime. A living trust can provide lifetime and after-death management of your estate. Conversely, a testamentary trust is a trust that is created by a will and takes effect at your death.[4]

Whether you should utilize a will or a trust as part of your estate plan depends on several factors:

·       Is avoiding probate (the judicial procedure by which a testamentary document is established to be a valid will[5]) is an important factor to you? Keep in mind that your testamentary document will become public record if it is admitted to probate.

·       Do you have minor children?

·       Do you have children or grandchildren with special needs?

·       How do you plan on passing your estate to your beneficiaries? One-time outright distributions or distributions when the beneficiary reaches a certain age?

·       Will your estate be subject to estate taxes?

·       Are upfront costs the determining factor in creating your estate plan?

Most importantly, I recommend utilizing the services of an attorney who specializes in estate planning to help you answer these questions and assist you in developing your estate plan. After all, you wouldn’t go to your general practitioner if you needed brain surgery!


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