Wills and Trusts - An Overview
Imagine you are thirty or forty or fifty. You own a nice four-bedroom house in a decent
neighborhood. You have two, maybe three kids. You have life insurance, a pretty good health
plan and a retirement plan that you have tried to put something in every year. You have
some money saved, but not enough to retire and play golf for the rest of your life. You work
hard and you are involved with your children's activities. You are a busy responsible parent
who doesn't have a lot of extra time or money. Why would you need a Will, Trust, or broader
estate plan? An experienced estate planner can answer that question, as well as others you
may have about your family's financial future.
Imagine you become ill or are injured. Imagine you are so ill that you are put on a respirator
and fed intravenously for years. During those years the assets held in your name are used to
help pay for extraordinary care you never wanted. What is not used to pay for the
extraordinary means just sits. No one watches over your investments or, perhaps, pays the
taxes that are due. Your minor children are given a court appointed guardian you have never
met.
Now imagine dying before you got around to preparing your Will. You wanted to be an organ
donor, but you never told anyone. You wanted to be cremated and have your ashes
scattered at sea, but you never told anyone that either. You assumed that your children
would be taken care of with the money from your insurance policy but much of that money is
eaten up by estate taxes. You also wanted to be sure to provide something for your sister
who has fallen on hard times and you wanted your wedding ring to go to your daughter.
Instead, your sister inherits nothing and your ring is sold with the profits divided between your
children.
No one likes to contemplate death or the possibility of years of illness or disability that may
lead up to it. Yet the thoughtful creation of estate planning documents like Wills and Trusts
now, established with the assistance of a knowledgeable estate planner is the best way to
control your own future. You gain a measure of control in all end-of-life situations and YOU
get to decide how and to whom your assets will pass.
Wills & Trusts: The Backbone of a Plan for the Future
A Will is a written or oral communication by a person stating how they want their property
disposed of at death. A Trust is a legal arrangement that allows one person to hold some
kind of legal interest or right for the benefit of another person. Wills, Trusts and other estate
planning documents are generally known in the law as Instruments.
Wills and Trusts are not just for the wealthy; they are for anyone who wants to look after
themselves, their children, and their property. There are a wide variety of different kinds of
Wills and Trusts available. An estate planner with experience in Wills and Trusts will help you
chose the specific combination of Instruments that lets you plan best for:
- Decision making should illness or disability incapacitate you;
- The payment of various state and federal taxes; and
- Distribution of your assets to the people you choose.
The actual Instruments used will depend upon the specific circumstances of your unique life
situation.
What Wills Do
- A written Will is the cornerstone of many estate plans. A written Will, prepared by an
experienced attorney, allows you to:
- Select the person responsible for carrying out the wishes you set forth in the Will. This
individual is known as the executor or personal representative;
- Direct the payment of debts and taxes;
- Make specific bequests or gifts of tangible property like family heirlooms or sentimental
items. (It is always useful to add, "If owned by me at the time of my death" in case the
item has been sold or lost);
- Control the distribution of the remainder (residue) of your other property;
- Name a guardian or guardians for your minor children and their property; and/or
Specify your preferred burial arrangements.
A court will consider a document to be a valid Will if, looking only at the document itself, it
finds that it was intended to be the final expression of the person's wishes. Additionally, the
person creating the Will must be of "sound mind". While each state varies in its specific
requirements, sound mind is usually established in court through showing that the person
making the Will:
- Was legally old enough to understand what they were doing (usually 18 years old);
- Knew what assets they owned;
- Directed the disposition of those assets to people or institutions generally expected to
receive them; and
- Understood that, by signing it, the Will makes a final disposition of property. This
requirement generally only requires that the person understand the Will and its
contents at the time of signing. Thus, a person who is failing mentally but still has
"good" days can make a Will during one of these lucid periods as long as the person
understands what they are signing
Usually, a letter stating one's desires or a list of property is not sufficient to pass this test.
There are many types of Wills including holographic wills, video wills, and self-proving wills
and each has it own requirements in order to make it valid. While each state law varies, a Will
must also generally have witnesses in order to be valid.
What Trusts Do
- A Trust is a legal property interest held by one person (called the trustee) for the
benefit of another person (called the beneficiary). The person establishing the Trust is
called the grantor. A Trust can be revocable or irrevocable. Revocable trusts may be
changed or terminated by the grantor at any time and for any reason. An Irrevocable
Trust, once established, cannot be terminated or altered for any reason. A Trust
designed to go into effect upon your death is called Testamentary Trust. However,
experienced estate planning attorneys often use Living Trusts, created while you are
still alive, as way of avoiding probate and its associated costs.
- Trusts allow the trustee to direct or control the property or other legal rights that are in
the Trust. Trustees have a legal duty to make decisions regarding the Trust property in
the best interests of the beneficiary. In addition to true legal Trusts, other Trust-like
Instruments that you may use to involve others in the execution of your wishes include:
Power of Attorney: A Power of Attorney gives someone you trust the ability to make decisions
for you, when you are incapacitated. That person does not have to be an attorney although
he/she will be known as your "attorney in fact". A Power of Attorney can be used to address
broad issues such as medical care (a Health Care Power of Attorney or Health Care Proxy),
and it can also be used to address very narrow issues such as the purchase of a single
parcel of real estate.
Advanced Medical Directive and Living Wills: In an Advanced Medical Directive you make
your choices regarding medical care known for all situations should you become
incapacitated. A Living Will is a more narrow form of Advanced Medical Directive, generally
limited to situations in which death is imminent. Every state recognizes a patient's right to
make fundamental choices as to the care and treatment he/she will receive at or near the end
of life and will thus honor the terms of most Living Wills and Advanced Medical Directives
(Health Care Proxy).
Conclusion
Wills, Trusts and other estate planning Instruments allow you to take control of the future.
Through the careful selection and creation of the various kinds of Wills and Trusts available,
you get to chose how your own potential disability and death is managed and you get to say
how the people you care for most will be treated when you are gone. The advice and
assistance of an experienced Wills and Trusts estate planner is essential to making sure that
the measures you choose comply with your state's law and truly carry out your wishes.