When most people set out to create their first estate plan they begin by executing a Last Will and Testament. A Will can accomplish the most basic estate planning goals; however, as your estate and your family grow, your estate plan may also need to grow. At some point, you may consider switching to a living trust for the distribution of your estate assets. A Geneseo estate planning attorney at Nash Bean Ford & Brown, LLP helps you decide if a living trust is a better choice to distribute your estate.
Last Will and Testament Basics
At its most basic, a Last Will and Testament is a legal document that communicates a person’s final wishes pertaining to possessions and dependents. Your Will allows you to make both specific and general gifts. For example, you might make specific gifts of your home and $100,000 to an adult child. You could also gift a percentage of your estate to a beneficiary. For example, you could gift 50 percent of your entire estate to each of your two adult children. In addition, when you create your Will you appoint someone as your Executor to oversee the administration of your estate. A Will also offers you the opportunity you will have to nominate a Guardian for your minor children in the event one is ever needed.
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place.
Will or Living Trust?
Distributing your estate assets can be accomplished using either a Will or a living trust. When deciding which one to use as your primary estate planning instrument, the following factors should be taken into consideration:
- Minor children – becoming a parent is a major incentive for creating a Will because a minor child cannot inherit directly from your estate. Therefore, a trust is a better option to guard your child’s inheritance until he/she reaches the age of majority. In addition, using a trust to protect that inheritance allows you to decide who will manage the assets held in the trust until your child is old enough to manage them properly.
- Probate avoidance – probate is the legal process that follows the death of an individual. Probate can be time consuming and costly. A Will is generally required to go through the probate process as are most assets distributed through the provisions in a Will. Trust assets, on the other hand, bypass the probate process entirely, allowing them to be distributed immediately after your death if you so choose. If your beneficiaries will need those assets right away, a trust is a better option.
- Spendthrift beneficiaries – gifts made in your Will become the unconditional property of the beneficiary once the transfer of ownership is complete. If you have a spendthrift beneficiary, or a beneficiary who has an addiction problem or mental health issues, to whom gifting a lump sum of money is not a good idea, a trust might be a better choice. A Trustee manages the assets held in a trust and the Settlor creates the terms of the trust, allowing you to retain a certain degree of control over gifts you make using a trust. It also allows you to distribute the beneficiary’s inheritance in small sums over a greater period of time, decreasing the ability to squander that inheritance all at once.
Contact Estate Planning Attorneys
For additional information, please join us for an upcoming FREE seminar. If you have questions or concerns about your estate plan, contact the experienced estate planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.