Question 26: Do All Estate Planning Attorneys Offer Wills? How Would I Know if a Will is More Appropriate Than a Living Trust? Are There Specific Questions I Should Be Asking?
On the financial side, a good estate plan coordinates what will happen with your home, your investments, your business, your life insurance, your employee benefits (such as a 401k plan), and other property in the event you become disabled or die. On the personal side, a good estate plan includes directions to carry out your wishes regarding health care matters. So if you ever are unable to give the directions yourself, someone you select would do that for you, and know when you would want them to authorize heroic measures and when you would prefer they pull the plug.
Several of the following documents are typically used as part of the estate planning process:
- A Will, sometimes called a Last Will and Testament, to transfer property you hold in your name to the person(s) and/or organization(s) you want to have it. A Will also typically names someone you select to be your Personal Representative (or Executor) to carry out your instructions and names a Guardian if you have minor children. A Will only takes effect upon your death.
- A Durable Power of Attorney for Health Care appoints a person you designate to make decisions regarding your health care treatment in the event that you are unable to provide informed consent.
- A Living Will or Directive to Physicians is an advance directive that gives doctors and hospitals your instructions regarding the nature and extent of the care you want should you suffer permanent incapacity, such as an irreversible coma.
- A Durable Power of Attorney appoints a person you designate to act for you and handle financial matters should you be unable or perhaps unavailable to do so.
- A Living Trust can be used to hold legal title to and provide a mechanism to manage your property. You can select the person or persons you want as the Trustee(s) to carry out the instructions you want in the Trust and name one or more Successor Trustees to take over if you cannot. Unlike a Will, a Trust usually becomes effective immediately, continues in force during your lifetime even in the event of your incapacity, and continues after your death. Trusts also help you avoid or minimize the expenses, delays, and publicity of Probate.
- A Family Limited Partnership can be used to own and manage your property, in a similar manner to a Trust, but allowing additional tax planning techniques to be employed.
Since a Will is part of a good estate plan, a qualified estate planning attorney will have the ability to write a Will for you.
What Does a Will Do?
A Will is the legal document that allows you to distribute your property to those you choose. A Will allows you to designate beneficiaries to receive specific items from your estate, and other beneficiaries to receive everything else. For example, if you want your house, your car, or your antique thimble collection to go to a certain person or organization, you designate that person or organization as the beneficiary. The executor is the person you designate to carry out your wishes.
A Will also gives parents of minor children the chance to nominate a guardian. The court makes the final decision when appointing a guardian for your children after your death, but the court will usually accept your nomination.
What Does a Living Trust Do?
A Will comes into play only after you die, but a Living Trust can actually start benefiting you while you are still alive. You will transfer substantially all of your property into your Living Trust during your lifetime, and any omitted assets can be transferred into the Trust at the time of death through the use of a simple Pour-over Will. You should always make a Pour-over Will at the time that you establish your Trust just in case assets are left outside the Trust at your death. The Pour-over Will must be Probated to be utilized.
If you should become incapacitated or disabled, the Trust is in place to manage your financial affairs, usually by a Successor Trustee. The assets within a Living Trust are not subject to Probate, and therefore, all provisions of the Trust will remain private.
Will Versus Living Trust: Which Is Best For You?
Both Wills and Trusts are devices that you can use to provide for the distribution of your estate upon your death. Deciding whether a Will or a Trust best fits your needs depends on your circumstances. A Living Trust is a popular alternative to the traditional Will, but you should weigh the advantages and disadvantages of each before deciding on one form or the other.
Let’s take a look at both the Will and the Living Trust. By looking at what each does, you will be able to determine, with the help of an estate planning attorney, which instrument would be best for you. Keep in mind that often a person has both a Will and a Living Trust.
|Probate||Subject to Probate proceedings.
Out-of-state property requires Probate proceedings in that state, as well.
Provides court supervision for handling beneficiary challenges and creditor disputes.
Becomes public record at the time of your death.
|Not subject to Probate proceedings.
Avoids the cost of a second-state Probate proceeding where there is out-of-state property.
No automatic court supervision to deal with disputes.
|Tax Savings||Same tax saving provisions available as are available in a Trust.||Same tax saving provisions available as are available in a Will.|
|Management of Your Assets if Disabled||In addition to the Will, must use a Power of Attorney or Conservatorship to manage assets during your life.||Allows you as the grantor to manage the Trust assets as long as you are willing and able.
Makes provisions for a successor Trustee to take over in your place.
|Costs||Many times it costs less to prepare a Will than a Trust. Cost to Probate a Will can be substantial.||Many times it costs more to prepare, fund, and manage a Trust than to prepare a Will. But avoids Living Probate and Death Probate if all assets were held by the Trust.|
Don’t leave matters to chance and fail to draw a Will or create a Trust. If you do, a greater than necessary amount of your assets may go to state and federal governments in taxes, and your remaining assets may go to individuals other than those loved ones whom you would prefer to benefit. Whatever the reason, one thing is certain: not making out a Will or Living Trust can be a big mistake.