WILLS & TRUSTS

A will is a written or oral communication, made by an individual, that provides specific instructions for the distribution and disposition of one's property and care of their children upon death. It essentially dictates your wishes about who gets what, although there are exceptions to what is covered.

If you have, for example, a life insurance policy or 401(k) with named beneficiaries, those persons would receive the appropriate distribution. A will must be prepared while you have full legal capacity, so it’s smart to make one even in early adulthood.

If you die without a will - or “intestate” - your estate must be sorted out in probate court, a process that essentially hands your property over to the State for ownership determination and distribution among your legal heirs.

TYPES OF WILLS

There are several different types of wills one can use to dispose of his or her estate:

Self-proving will: A will that has been witnessed and signed with all of the formalities required by State law. This is the most common will.

Holographic will: A will that is handwritten without the presence of witnesses. Very few States recognize these types of wills, and only in limited, specific circumstances.

Oral wills: An unwritten disposition of property, whereby the individual orally communicates his or her wishes. Oral wills are only recognized in a few States and usually only in compelling situations.

REQUIREMENTS FOR A WILL

The law states that you must be of "sound mind" when making your will, which means that you must:

• Be at least 18 years old or an emancipated minor
• Know what a will is
• Know that you are making a will
• Understand your relationship between yourself & the people who care for you
• Expressly State that this document is your will
• Sign and date the will
• Signed ("attested to") by at least two or three witnesses

In addition, most States require that the witnesses be unrelated to you and that the will contains provisions to:

• Appoint a guardian for minor children
• List who inherits specific items
• State what happens to remaining property not mentioned in the will
• Appoint an executor, who is responsible for supervising the distribution of property and makes sure that all your debts and taxes are paid

Anyone who owns real or personal property, regardless of its current value, should have a will. You may choose to leave everything to one person, such as your spouse, or to distribute your property among several people.

TRUSTS

A trust is a legal arrangement in which a person holds the legal title to property for another person.

Unlike property transferred through a will, which becomes public record once submitted to a probate court, the terms of a living trust can be kept private. It can provide modest protection from creditors as well.

While trusts don’t legally hide property from creditors, its ability to quickly and quietly distribute that property to the beneficiaries can often discourage, if not head off, a creditor’s hunt for property to which they may have a claim.

TYPES OF TRUSTS

Living trust: A trust created while you are alive. A living trust allows the trustee and beneficiary to avoid the probate process.

Testamentary trust: A trust established through a will. A testamentary trust generally must go through probate.

Revocable trust: A trust that can be terminated at any time by the grantor for any reason.

Irrevocable trust: A trust that cannot be changed or terminated for any reason.

There are potential tax benefits as well. A simple trust has no effect on taxes, but there are some complex living trusts, which can greatly reduce the federal estate tax bill for people with valuable assets.

ADVANTAGES OF A TRUST

• Property in a living trust does not go through probate
• The trust document is never made public like a will
• You can name alternative beneficiaries to inherit property if a primary beneficiary dies before you do
• Allows others to handle your assets when you are not able to

If you choose to create a will or trust, consulting with an attorney experienced in estate planning is always a wise thing to do. The potential tax implications and legal formalities of will and trust drafting make a lawyer's counsel indispensable. A lawyer can explain all your options and help you understand what types of wills or trusts are right for you and your family.