Wills, Trusts, and Estates
Estate planning is the process of preparing and arranging all personal and financial matters at the time of your death. This process involves the counsel of a lawyer and other professional advisors, who are familiar with your goals and concerns, your assets and how they are owned, and your family structure, The device by which this is typically done, a will, is the legal document that coordinates the distribution of your assets after death and can also appoint guardians for minor children. Drafting a will is important to have, as it is the means by which you may communicate your desires clearly and precisely. When the will takes effect, the administration of the estate occurs and the estate is raised which allows the appointed executor/ administrator to manage and distribute the assets of the estate. An estate is all the property and property rights, even assets tied to liabilities, that you own. These assets continue after your death and ownership must be transferred as a decedent may not own property.
A decedent’s estate that has a properly executed will dictating the allocation of the assets will go through the probate process and the assets will be managed and distributed according to the wishes of the decedent in his/her will. On the other hand, an estate that does not have a properly executed will must go through the intestate process and the allocation of the estate is determined by state law.
The Benefits of Having a Will
A will provides for the distribution of certain property owned by you at the time of your death, and generally, you may dispose of such property in any manner you choose. Dying without a will can cause extra stress for your relatives and increases the chances that the distribution of your estate is mismanaged. Drafting and executing a will can help to ensure that your final requests are realized and your estate is distributed in the way you want. Perhaps more importantly, having a will can make the administration of the estate simpler and easier for the executor (the person appointed by the decedent to manage and distribute the assets owned at death) of the estate.
The Role of Trusts in Estate Planning
A trust is an entity or an agreement through which the grantor/donor transfers property to a trustee to hold in accordance with the provisions of a written trust instrument, for the benefit of a third party, called the beneficiary. The trustee may be one or more persons or a corporate trust company or bank. These legal arrangements allow for more flexibility with the ownership of and management assets and therefore enable the grantor to achieve personal goals that would not be achieved otherwise. When a trust is executed, the trustee becomes the legal owner of the trust property, and the beneficiaries are the equitable owners of the trust property. A person may be both a trustee and a beneficiary of the same trust.
A testamentary trust is a trust that is created by a will. In such circumstances, the trust arrangements and provisions are contained in the will. If the trust is created during your lifetime it is called a living trust or an inter vivos trust, and the trust provisions are contained in a trust agreement or declaration. The living trust or inter vivos trust, rather than a will, will then dictate what will happen to the trust property after death. A living trust can alleviate the need to appoint a guardian or conservatorship and can be an instrument by which you may retain control over your assets in the event of physical or mental incapacity.
Trusts are often used in estate planning to take advantage of favorable tax treatment, to place conditions on the use or distribution of assets, or to allow the heirs to take possession of assets without a probate proceeding. Trusts are also often used for the benefit of children in case both parents die before all their children have reached an age deemed by the parents to indicate sufficient maturity to handle property. In these situations, typically a trust is created to hold assets in a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust among the children when the youngest has reached a specified age.