Wills vs. Trusts
WHAT IS ESTATE PLANNING?
Estate Planning is arranging for the transfer of your property upon your death or incapacity. Succession planning is handled using either a last will, a Revocable Living Trust, or preferably both. In this article, you will find more information about the differences between a last will and a Revocable Trust.
WHAT IS THE DIFFERENCE BETWEEN A WILL AND A TRUST?
A last will is a written declaration of who you want to receive your property and who you want to raise your minor children when you pass away. A Will should also include the person nominated as Personal Representative, who will be responsible for managing the estate. After a person passes away, the original copy of their Last Will needs to be delivered to the county's probate court where they last resided. Any bequests made under a last will must be carried out under a court-supervised process called probate. The court must ensure that the Will exists, appears valid on its face, and follows the document's language. The court must also allow potential heirs, creditors, and other interested parties to join the case. For that reason, it is said that Last wills and testaments are public records once they are filed for probate.
Like a Will, a Revocable Trust is a written declaration of who you would like to receive your property at your passing. However, unlike a Will, a Revocable Trust is a private document allowing you to pass property without Probate's delays, cost, and publicity. A Revocable Living Trust protects your property from lawsuits against a beneficiary other than yourself. When a bequest is made using a last will, the beneficiary will eventually get the gift outright; any funds received can be saved, spent, or squandered according to the beneficiary’s wishes. A trust can allow for essential limitations on using and protecting any funds inherited so that the beneficiary is protected from lawsuits, creditors, divorce, etc.
Simply stated, a Trust can accomplish a lot more than a Last Will, such as allowing your family to avoid the probate process, protecting your family’s privacy, providing for your children, grandchildren, and pets, helping to plan for your incapacity; and safeguard your property from lawsuits. We recommend that many McKenzie Law Firm clients use a Revocable Trust instead of a Will to pass their property.
The chart below is a comparison of Wills and Trusts.
WHAT HAPPENS IF I DIE WITHOUT A WILL?
If you die without a last will, the default laws of the state you live in at the time of your passing will govern the distribution of your property. For some, these default laws may reflect their wishes; for many, these laws do not, in which case it is essential to create a Will. However, even if you do not have a last will, the court will still need to probate your estate, a process known as intestate probate. During intestate probate, the court will require that a Personal Representative be named from the surviving family members, a process that could become contentious if more than one person wants the responsibility. Instead of ensuring the estate distributions are made according to the last will, the court will expect the estate to be divided following the guidelines found in the law.
WHAT ARE INCAPACITY DOCUMENTS?
Most people are aware of the importance of planning for their death. However, many people overlook planning for incapacity. This is unfortunate because most people are incapacitated at some point. Not having the proper documents in place can result in a costly conservatorship and guardianship proceeding. Incapacity Documents include a Financial Power of Attorney, Medical Power of Attorney, HIPAA Release, and a Living Will.
WHAT DOES AN ESTATE PLAN USUALLY INCLUDE?
We typically recommend that most clients have all seven primary estate planning documents. The seven primary estate planning documents are…
- Will
- Revocable Trust
- Guardianship Designation
- Financial Power of Attorney
- Medical Power of Attorney
- HIPAA Release
- Living Will
WHY DO I NEED TO CREATE AN ESTATE PLAN?
Here are ten reasons to create an Estate Plan…
- Minimize or Eliminate your Estate Taxes.
- Reduce future medical, court, and legal costs.
- Choose who will raise your minor children.
- Choose who will make medical and financial decisions on your behalf.
- Protect your family’s privacy.
- Alleviate your family from having to make difficult end-of-life decisions.
- Allow your family to avoid probate.
- Decide who receives your property and when.
- Protect your children’s inheritance from lawsuits or divorce.
- Protect your children’s inheritance from their spending habits.
WHAT IS PROBATE?
Probate is the court process for distributing your property at death. All interested parties and creditors must be notified and given an opportunity to object to the planned distribution of your estate. In many cases, probate can be a costly, time-consuming, and public process. By working with the team at The McKenzie Law Firm, we can create a plan that will allow your family to receive your property without going through the Probate process.
WHEN SHOULD I CREATE AN ESTATE PLAN?
Many Estate Planning techniques are ineffective if employed too closely to one’s passing. The best thing to do is create an Estate Plan today so you can give your family the maximum benefit of your property, and you can stop worrying about needing to create one!
HOW OFTEN SHOULD I UPDATE MY ESTATE PLAN?
Anytime a significant life event in your family, such as a birth, death, divorce, or marriage, you should review your Estate Plan. Additionally, you should update your plan whenever there is a law change.
What next?
If you think it might be time to think through your estate plan, you can:
- Call us at 720-821-7604 to schedule an "Attorney Evaluation Session" to determine whether our firm would fit your needs well. Or fill out our contact form to have us call you.
- Visit our estate planning page to learn how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
- Learn more by reading our blog or watching our videos.
