Understanding a Last Will and Testament
A last will and testament, often simply referred to as a will, is a legal document that outlines how an individual’s assets will be distributed after their death. To create a will, a person must be at least 18 years old and the document must be in writing. The testator, or the person creating the will, must sign it in the presence of at least two witnesses who are also 18 years or older.
Handwritten wills can cause complications and expenses, so a typed will is always recommended. Any changes, or codicils, to the will must follow the same procedure, and significant changes may require creating a new will altogether.
A will identifies the executor responsible for carrying out the testator’s wishes and names any beneficiaries, trustees, and guardians. Additionally, it may include any special instructions or unique desires of the testator.
The Necessity of a Last Will
If a person dies without a will, their assets will be distributed according to the state’s intestacy laws. These laws may not always be straightforward or aligned with the deceased person’s wishes. To ensure that assets are distributed as desired, it is crucial to create a will. A will can expedite the asset transfer process, minimize tax burdens, and designate an executor and guardians for minor children, easing the emotional burden on loved ones during a difficult time.
Selecting an Executor
Choosing an executor is a critical decision when finalizing a will. The executor manages the estate after the testator’s death, addressing any debts, gathering assets, liquidating certain assets, and distributing assets to beneficiaries. The chosen executor should be trustworthy, responsible, and able to dedicate the necessary time and effort to fulfill their duties. Executors can be family members, friends, or professionals like lawyers or accountants. It is essential to discuss this responsibility with the chosen executor to ensure they are willing and able to take on the role.
Reviewing and Updating Your Will
Circumstances can change, and it is important to review and update your will periodically to ensure it reflects your current situation and wishes. Major life events, such as marriage, divorce, the birth of a child, or the acquisition of new assets, may necessitate a review of your will. It is advisable to review your will every three to five years and after any significant life events. To maintain compliance with probate rules and avoid complications, any updates or changes to the will should be made with the assistance of an attorney.
Considering Probate Avoidance
Probate is the legal process that ensures the proper administration and distribution of an estate’s assets. While the process is public, it is rare for wills submitted to the Surrogate’s Office to become the subject of public records requests. To avoid probate, all assets must be placed into a trust, with each account, stock, piece of real estate, and other assets transferred or titled in the trust’s name. However, few people manage to do this successfully. Even with a trust, a pour-over will is necessary to ensure that any assets not titled in the trust’s name are administered as part of the trust upon the testator’s death. Furthermore, a will is necessary if a legal action is filed as a result of the testator’s death.
For clients with substantial assets, creating a trust and appointing a trustee to manage assets during their lifetime can be an effective strategy. Upon the testator’s death, the trustee can continue managing assets and following directives for beneficiary distributions as set forth in the trust.
Another way to make assets available immediately after death is to place them in a joint account with a trusted individual or designate individuals to receive funds from a checking account upon the testator’s death. An attorney can offer guidance on the best probate avoidance options based on an individual’s unique circumstances and financial goals. Some additional methods for transferring assets outside of probate include beneficiary designations on retirement accounts, life insurance policies, and payable-on-death (POD) or transfer-on-death (TOD) designations for bank and investment accounts. Each probate avoidance strategy has its own advantages and potential drawbacks, so it is crucial to consult with an experienced attorney to develop a comprehensive estate plan that meets your objectives and protects your loved ones’ interests.
Understanding Trusts
Trusts are legal arrangements that allow a third party, called a trustee, to hold and manage assets on behalf of beneficiaries. Trusts can be an effective tool for managing and distributing assets during the grantor’s lifetime and after their death. Trusts can offer various benefits, such as tax advantages, probate avoidance, and privacy.
Types of Trusts
There are numerous types of trusts, each serving a specific purpose or addressing different needs. Some common types of trusts include:
- Revocable Living Trust: This type of trust can be changed or revoked by the grantor during their lifetime. It allows for the management of assets and can help avoid probate upon the grantor’s death.
- Irrevocable Trust: Once established, an irrevocable trust cannot be changed or revoked. This type of trust is often used for tax planning, asset protection, or providing for beneficiaries with special needs.
- Testamentary Trust: This trust is created under the terms of a will and takes effect after the grantor’s death. It can be used to manage assets for minor children or beneficiaries who may not be financially responsible.
- Charitable Trust: This type of trust is designed to benefit a specific charity or charitable purpose while potentially providing tax advantages for the grantor.
- Special Needs Trust: A special needs trust is designed to provide financial support to a beneficiary with disabilities without jeopardizing their eligibility for government benefits.
The Benefits of Trusts
Trusts can offer numerous advantages, including:
- Control: Trusts allow the grantor to specify how assets should be managed and distributed, providing control over the use and disposition of the assets.
- Probate Avoidance: Trusts can help avoid the probate process, potentially saving time, money, and maintaining privacy.
- Tax Advantages: Certain types of trusts can provide tax benefits, such as reducing estate or gift taxes.
- Asset Protection: Trusts can be used to protect assets from creditors or legal judgments.
- Special Needs Planning: Trusts can ensure that a loved one with special needs is cared for without jeopardizing their eligibility for government assistance programs.
Consulting an Attorney for Trust Planning
Creating a trust involves complex legal and financial considerations. It is essential to consult with an experienced attorney who can guide you through the process and help you determine the most suitable trust type for your specific needs and goals. Trust planning should be a part of your overall estate planning strategy to ensure a seamless and efficient distribution of assets to your chosen beneficiaries.
