When it comes to estate plans, it is important to understand the difference between a will and a trust. There are a variety of different names for wills (e.g. living will, pour over will, etc.) and trusts (e.g. living trusts, inter vivos trust, etc.), but these are more or less names for two different documents. Each document has its own unique function and is often used in unison to minimize costs and ensure timely administration of the deceased individual’s (“decedent”) estate.
In the most basic sense, a will is an expression of the decedent’s intentions for his or her property after death. A decedent’s will only concerns property (real or personal) which belonged to the decedent at the time of his or her death. This property is considered the decedent’s “estate.” Unlike a trust, a will only has legal effect after an individual’s death.
When a decedent has $150,000 or more in assets, a probate is necessary to administer the decedent’s estate. Probate is a court supervised process of transferring legal title of property from the decedent’s estate to the beneficiaries of the will. The court supervises the estate’s administration to further ensure that the decedent’s testamentary intent is followed. A probate can often take months, if not years, to complete, and may result in the estate incurring a lot of fees and costs. Further, because the courts are involved, a will becomes part of the public record and does not provide for privacy.
In contrast, a trust takes effect the moment it is established, and controls property transferred to the trust by (you) the trustor. A trust is an entity created to hold ownership rights to property (real and personal) on behalf of a beneficiary. A trust is deemed to be separate from the trustor (person establishing the trust) and is managed by the trustee. Often, the initial trustor is also the trustee and a beneficiary of the trust. Unlike a will, a trust is excluded from the probate process. As a result, a trust provides several benefits to a trustor: (1) the trustor may maintain control over his or her assets during lifetime, (2) direct how the trustor’s assets will be conveyed at death, (3) reduce the value of the decedent/trustor’s personal estate for tax purposes, and (4) avoid the time and expense of probate for the surviving beneficiaries. Finally, a trust does not typically enter the public record and therefore affords a level of privacy for the decedent/trustor and his or her beneficiaries.
Essential to every estate plan is coordinating the will and the trust. A trust cannot govern all aspects of an individual’s estate upon death. For instance, if an individual has young children, a will is important for purposes of naming a guardian to care for the decedent’s children. Further, in the event a decedent does not properly transfer property to his or her trust, whether it is intentional or not, a will is often used to convey the remaining property to the decedent’ trust at his or her death. The property is then conveyed according to the terms of the trust.
A typical estate plan at The Walker Law Firm typically includes a trust, will, durable power of attorney, and advanced healthcare directive. Additionally it is important that a trustor ensures that title is properly held in the name of the trust. Our attorneys will prepare the necessary documents to assist with the trust’s funding and will also prepare of an abstract of trust and certification of trust. These documents are used to highlight the pertinent terms of your Trust while taking out any personal information. These documents are given to financial institutions to complete the transfer of your assets to your Trust, while maintaining your privacy.
Contact The Walker Law Firm to begin estate plan process.