Estate Planning: What Kind of Will Is Right for You?
By M. Kotch
So you’ve talked about it with your attorney, partner or children and are ready to create a will. Now you’ll need to decide what kind of will is right for you.
There are two main categories of these legal documents: living trusts and last will and testaments. Choosing the document that’s right for you depends on your age, your marital status, the number of beneficiaries and what kind (i.e. the value) of assets you have.
Here’s a brief overview to help you understand the main differences between the two:
1. Last Will and Testament. This is the most basic kind of document and should cover the following points:
• Listing your property and assets
• Choosing who will inherit your property
• Naming an executor to your estate
• Naming a legal guardian for any children under the age of 18
• Signing your will in front of witnesses (typically two, but the number depends on which state you reside in)
• Keeping your will in a safe place that’s easily accessible by your executor and
• Stating your funeral and burial/cremation preferences
The issue with last wills and testaments is that they can leave your assets open to probate court proceedings which involve legal and court fees and deal with paying off debts, creditors and estate taxes. Such proceedings can take months or years depending on the state in which you live.
Creating a last will and testament is a great idea for someone with modest assets that won’t be subject to estate taxes (and probate), is under the age of 40 and wants to leave his or her assets to a spouse, partner or children. Last wills are also easily done without a lawyer and can be created with tools (many of them online) to help you draw up, notarize and sign a document that will hold up in court.
2. Living Trust. This entails placing your property and assets in trust(s) that simply pass ownership from you (the trustee) to the beneficiaries through a successor trustee (an institution or person that manages your property after your passing).
This type of document covers the same points as a last will but provides better protection against probate, which could take a long time before beneficiaries receive their inheritance and can diminish the assets’ value after all legal fees have been paid.
There are two kinds of living trusts: revocable and non revocable.
• A revocable living trust gives you the flexibility to make changes to the trust (you technically own your assets before they are transferred to the beneficiaries after your death). This can leave assets open to estate taxes but not probate court.
• Setting up a non-revocable trust protects your assets differently. After setting up a non-revocable trust, you technically no longer own the assets that have been repositioned into such a trust, and so you cannot be sued for assets. This type of document protects your assets from estate taxes and probate court. Caveat: a non-revocable trust cannot me amended or changed once it is created, so be sure to discuss this option carefully with an attorney.
If you are over the age of 50 or are younger and enjoy wealth and many assets, a living trust is worth exploring. Creating a living trust yourself is complicated, but thanks to many books and online tools it’s not impossible. Nevertheless, many opt to create living trusts with the help of an estate attorney who has experience in drawing such documents.
Finally, you’ve probably heard of a living will, which is often confused with a living trust. A Living Will is in fact a legal document that does not deal with your assets (and who inherits them) but with your prolonged medical care if you were to become incapacitated. By designating power of attorney, you would be leaving your medical treatment options (such as whether to be taken off life-support or donating organs) and legal decisions up to someone you trust.
What does this type of document have in common with wills and trusts? They are worthless if no one can find them. Make sure these important documents are known to your family, doctor, attorney or executor to ensure that your wishes are followed when the time comes.
