Will vs. Trust
Wills (AND ANCILLARY DOCUMENTS EACH INDIVIDUAL SHOULD CREATE)
A Will is a written document that indicates how an individual desires his/her property to be distributed on his/her death. A Will is usually revocable and subject to being amended at anytime prior to death. A Will may also appoint guardians for minor children along with naming Trustees to hold assets in trust for the benefit of the beneficiaries of the Will. A Will may be non-self proving or self-proving. The two forms of non-self proving Wills are: (1) A holographic Will which is a Will solely in the handwriting of the testator and signed and dated by the testator; or (2) A witnessed Will in which a testator signs the Will in front of two witnesses. With these types of Wills, testimony will need to be provided at the hearing to admit the Will to probate to prove the validity of the Will. If a Will is a self-proving Will, then it is a Will signed by a testator in front of two witnesses and a notary public with the proper attestation clause attached. The validity of this type of Will does not need to be proved at a hearing to admit the Will to probate. Any of the three types of Wills identified above may contain "no contest" clauses. However, even if a Will contains a "no contest clause", such Will may be subject to a contest on the testamentary capacity of the decedent and/or undue influence, fraud, collusion, tortious interference with inheritance rights, etc. Therefore, if you desire to keep your estate private and make it more difficult for someone to implement a contest on the disposition of the same, you should consider creating a revocable living trust which may avoid the probate issues identified above.
Everyone should have a Will prepared during his/her lifetime. Some individuals state they do not need a Will because they have nothing to leave the beneficiaries of their estate. This might be true. However, it might also be true that their death was caused by the negligent action of another which means a wrongful death action and/or a survival action would occur in the probate created on the death of such individual. This means there would be assets in such individual's estate to leave to his/her beneficiaries and if such individual did not have a Will this may cause major problems to occur in the probate of his/her estate. In addition to a Will, each individual should have a durable power of attorney to handle financial matters, along with a combination medical power of attorney/physician's directive to name someone to make the day to day medical care decisions for him/her if he/she cannot do so him/herself. This document will also provide directions to the declarant's physician as to how far such declarant desired the physician to go to keep the declarant alive if the declarant has a terminal or irreversible condition. Other documents an individual should have in addition to the above is a declaration of guardian which names who will serve as guardian of such individual's estate if a guardianship has to be created for his/her benefit, an appointment for disposition of remains to name who will be in charge of how the declarant's body will be disposed of on his/her death, and a HIPAA waiver naming the medical care representatives of the declarant's estate and giving such representatives the authority to obtain copies of the declarant's medical records. If you have any questions regarding these documents, please feel free to contact our office to scheduled a free consultation for an analysis of your estate and asset protection needs.
Living Trust (revocable and irrevocable)
A revocable living trust is beneficial in that it may: (1) avoid probate for all assets transferred into and/or aimed to it, (2) keep the disposition of your estate private, (3) make it difficult for a beneficiary to contest a distribution of your estate, (4) make it difficult for a creditor to file a claim against your estate; and (5) provide for successor trustees to help manage the assets in your revocable living trust upon your incapacity and/or death. Additionally, in the hierarchy of control, a revocable living trust will trump a guardianship which will in turn trump a durable power of attorney. This means if someone files a guardianship action to try and take control of your assets (for your own good), then, upon the issuance of letters of guardianship, any durable power of attorney you have in place becomes null and void. However, the good news is if an asset is owned by the trustee of your revocable living trust and a guardianship is subsequently filed on your behalf, then all assets titled in the name of your revocable living trust will not be subject to the control and/or management of the guardianship estate. Personally, I prefer a revocable living trust as the testamentary document in an estate because this type of document may reduce a lot of issues that may occur in a probate proceeding. When a Will is filed for probate it is very easy for a beneficiary to file a contest on such Will. A beneficiary does not have to hire a lawyer to file a contest as a contest may be in the form of a hand written document filed with the probate court. If such a contest is filed before a Will is admitted to probate, then the proceedings to probate the Will are stalled until that contest is resolved. This means more than likely nothing may be able to be done in the administration of the probate estate which means assets will more than likely lose value due to stagnation. Most of the time a contest to a Will is filed in order to blackmail a settlement from the other beneficiaries of the probate estate. These types of lawsuits are successful if the numbers show it is less costly to pay off the contesting beneficiaries then to pay the lawyers to defend the lawsuit. It is a numbers game unless the true beneficiaries in the estate are willing to stay the course with the lawsuit knowing even if they win in the end, the estate would still be out the expenditures of attorney fees and costs. This is a sad but true fact. This is the main reason why I prefer a revocable living trust as a testamentary document over a Will. It makes it very difficult to file a contest in an estate because there is no probate opened in which a simple contest may be filed. A contesting beneficiary would have to take the longer route to implement a lawsuit and that type of route costs a lot more money. This deters most beneficiaries who would file a contest for blackmail purposes.
A trust may be created during during your lifetime or after your death. If it is created during your lifetime it is called an inter vivos trust and it may be revocable or irrevocable. A revocable living trust is a type of trust created to control the testamentary disposition of your assets on your death. If you wish to remove life insurance proceeds from your estate for calculation of estate tax, you should create an irrevocable investment (or life insurance) trust. This type of trust is more commonly known as an ILIT or an asset protection trust. This type of trust may own any type of asset you may own. Therefore, we normally transfer more than just life insurance policies inside such a trust. We may treat an ILIT as a grantor trust and have it own interests in any limited liability companies (LLCs) and/or limited partnerships (LPs) a client may create. If this type of planning is done it should give an LLC which is wholly owned by an individual a "partner to protect" if a creditor action ever arises against such individual. Finally, a trust created after your death is called a testamentary trust. Normally, this type of trust is created for the benefit of the beneficiaries of a client's estate. It is also an asset protection trust and it normally allows a beneficiary to become sole trustee of his/her own trust at a certain age. If you would like to obtain more information regarding the pros and cons of creating a revocable and/or irrevocable trust compared to creating a Will please feel free to contact our office for a free consultation regarding the same.
Most individuals are not aware that a trust may be created to take care of loved pets. This type of trust is called a Pet Trust. A Pet Trust would name a "Caretaker" who would receive a deceased party's pet(s) along with funds to help take care of the pet(s) for the lifetime of the pet(s). If the named Caretaker is unable to care for the pet(s), then the successor Caretaker would take over the care of such pet(s). Upon the death of the last surviving pet the trust would terminate. Any funds remaining in the trust would then be distributed to whomever was identified as the remainder beneficiary. This type of trust is an exception to the requirement there must be an identifiable "human" life in a trust in order for there to be a valid trust.