If you have yet to create an estate plan, it may be because of the often confusing nature of the estate planning process. Many people find the thought of creating an estate plan intimidating if for no other reason than because they know very little about it. The best way to get started, therefore, is to learn more about estate planning, and the best place to start is with wills and trusts. Why wills and trusts? Because they are two of the most commonly used estate planning tools, meaning you will likely include them in your estate plan. To get you started with learning more about estate planning, here are five things you need to know about wills and trusts.
- Wills and trusts are not mutually exclusive. In other words, you can have both a Last Will and Testament and a trust in your estate plan. Wills and trusts can work together within an estate plan in a number of different ways, depending on your unique estate planning needs and objective. Although the Wills and trusts can accomplish some of the same goals, they can also accomplish very different things in your estate plan. A trust is a legal arrangement by which a Trustee agrees to hold assets for the benefit of a third party. Your Last Will and Testament is used to accomplish three important estate planning goals:
- Appoint an Executor of your estate who will oversee the probate of your estate after your death.
- Gift some, or all, of your estate assets to beneficiaries.
- Nominate a Guardian for your minor children in the event one is ever needed.
- You can only have one Will but may have numerous trusts. You may execute an unlimited number of Wills over the course of your lifetime; however, the moment one valid Will is properly executed, any previous Wills are revoked. No so with trusts. In theory, you have an unlimited number of trusts all operating at once. Although property can only be held by one trust, you could have several trusts and have your estate assets divided up within the trusts.
- Sometimes, a Will triggers a trust. Trusts are broadly divided into two categories – testamentary trusts and living trusts. While a living trust will take effect as soon as the formalities of creation are accomplished, a testamentary trust does not take effect until the death of the Settlor (the person who created the trust). The decedent’s Will often triggers a testamentary trust. The parent of a minor child often sets up his/her estate in this manner because the trust is not actually needed unless, and until, the death of the parent.
- A trust should not completely replace a Will. Although a trust can dispose of your estate property, often in a much more efficient manner than a Will, it is still always wise to have at least a “Pour Over” Will in place. A Pour Over Will, as the name implies, is a Will that “pours” assets directly over into a trust. A trust can only distribute assets transferred into the trust. While you may think you have transferred all of your assets into a trust, you could easily have forgotten one or you might have just purchased an asset right before your death that did not make it into the trust. If no Will is in place, those assets then become part of an intestate estate (an estate where no Will was left behind) and subject to disposition using the Missouri intestate succession laws. By also having a Pour Over Will in place, an asset that was overlooked, or acquired just before death, will not be overlooked and forced into an intestate estate. The terms of your trust can then dictate what happens to any assets that are transferred in after your death.
- Do not rely on “Do-It-Yourself” Wills or trusts. It may be tempting, in today’s electronic world, to use a “do-it-yourself document to create either a Last Will and Testament and/or a trust agreement. The mistakes that are often found in those documents are likely to cost your loved ones far more, both in term of time and money, than what you save by not working with an experienced estate planning attorney.
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about Wills and trusts, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.