WILLS&TRUSTS: The Basics By Russell Chin, Esq.
WILL A will is a legal document that does four things. 1. It gives your instructions and wishes as to how your assets and property are to be distributed after you die. It is a statement that must be written, signed and witnessed in compliance with your state’s laws. 2. It names your beneficiaries, the people you want to benefit from your assets, as well as details of your possessions. 3. It allows you to choose an executor. A will allows you to choose a person to manage the distribution of your assets. If you don’t have a will, a court-appointed person called an administrator will distribute your assets. 4. You may choose a guardian to finish raising your children. Even if you are a young adult with few assets, you should have a will if you have children. A will can be used to appoint a guardian to care for your children if you die while they are still minors.
Unlike a will, which goes into effect when you die, your property can be transferred to certain types of trusts while you are still alive and the trusts continue to hold the property after your death. Although you no longer own the assets, because your trust does, you still have access to the assets during your lifetime. You can instruct your trust to pay an income to you, and, upon your death, your trustee (or successor trustee, if you were the original trustee) is instructed to divide whatever is left among your designated beneficiaries. How to avoid probate and other unnecessary expenses 1. Set up payable-on-death accounts. 2. Name your beneficiaries, including children, institutions and multiple beneficiaries. 3. Name your beneficiaries for retirement accounts, vehicles, real estate, stocks and bonds. 4. Hold property in joint ownership and alternatives to joint ownership. 5. Create a Living Trust. 6. Make gifts of property and money.
Why should I have a will? If you die without a will in place, you have died intestate. The court will distribute your property and determine your beneficiaries. The court may not rule according to your wishes, so dying intestate won’t be good for your beneficiaries. Without the guidance of a will, the court will name the guardian for your minor children, perhaps a family member when you would have much preferred your best friend. If a person dies intestate, the probate court appoints someone to receive all claims against the estate, pay creditors and then distribute all remaining property in accordance with the laws of the state. The major difference between dying testate and dying intestate is that an intestate estate is distributed to beneficiaries in accordance with the distribution plan established by state law while a testate estate is distributed in accordance with the instructions provided in the decedent’s will (after payment of debts, taxes and costs of administration). The probate process will take longer without a will.
TRUST A trust is a legal relationship, represented by a legal document, in which one person (or qualified trust company), the trustee, holds property for the benefit of another, the beneficiary. The property can be any kind of real or personal property—money, real estate, stocks, bonds, collections, business interests, personal possessions and automobiles. A trust will keep your property from going through probate when you die.