Wills and Trusts

A will is the foundation of your estate plan. After a lifetime of building up your assets, a properly drafted document will protect your wealth, provide security for your loved ones, and ensure that your wishes are carried out.

Even if the bulk of a person’s assets pass under the terms of a retirement plan, life insurance policy, or joint tenancies, every adult should have a will to provide backup protection. A will controls the disposition of assets that are not effectively disposed of by beneficiary designations, operation of law, or other will substitutes. In addition, a will serves other functions that other instruments cannot accomplish. In particular, a will may be used to:

  • Alter the outcomes determined by state laws of intestate succession;
  • Appoint guardians for minor children;
  • Consolidate and manage nonprobate assets in a testamentary trust;
  • Direct the source from which debts and taxes occasioned by death should be paid;
  • Dispose of the proceeds of life insurance or other assets in the event the designated beneficiary or beneficiaries do not survive the decedent;
  • Accomplish tax savings through the use of testamentary trusts.

Further, proper estate planning, including the preparation of a will, may be most important for those with very modest wealth – the individuals whose family members can least afford the unnecessary costs and delays associated with administering an intestate estate.

Essential questions about wills and trusts

What happens if I die without a will?

If a person dies without a will, then all of her probate property – that is, all property for which there is no legally recognized death beneficiary designation – passes by the laws of intestacy. Unlike a will, in which a person can designate any person or entity to receive his estate, the law of intestacy sets forth an order of distribution based on the relationship between the decedent and her family members. It can get complicated depending on the circumstances. However, first in line are spouses and children. The relative portions allocated to the spouse and children vary depending upon whether the children are from the same marriage or from other relationships.

What is the difference between a revocable and irrevocable trust? Do I need a trust?

A revocable trust is one in which the person creating the trust retains the ability to terminate the trust and take back the property. An irrevocable trust is one in which the person creating the trust has not retained the right to terminate the trust and reclaim the property. Trusts are as varied as the objectives they serve. Whether a trust should be employed as a part of an estate plan depends upon the particular circumstances. A revocable trust may be used to provide lifetime management of assets. On the other hand, a revocable trust cannot be used to remove property from the creator’s taxable estate. As a general rule, in order to achieve the tax planning objective of removing property from the creator’s taxable estate, the property must be transferred to an irrevocable trust.