Wills Frequently Asked Questions
- What is a Will?
- What does a Will accomplish?
- Do I need a Will?
- What happens if I die without having a Will?
- When should I review my existing Will?
- What is a Trust?
- How does a Trust avoid probate?
A will is a written declaration of your intentions regarding your financial affairs and who will receive your assets when you die. All property in your name at the time of your death is referred to as your "estate." Those named in your will to receive your property are called "legatees." They may or may not also be your "legal heirs."
The person named in your will to be in charge of your estate when you die is called the "Executor." The executor investigates your assets, then inventories, collects, and cares for your property until it is sold or passed on. The property may also be used to pay off debts such as bills, taxes, and funeral expenses.
Once all of your outstanding debts are paid the remaining assets are distributed to those named in your will. Money and property held in joint-tenancy such as a home or bank account goes automatically to the surviving co-owners upon the death of one owner. Similarly, property held in trust, or in a payable-on-death account (such as life insurance), goes automatically to the named beneficiary upon the death of the owner. These types of property are not affected by your will.
What does a will accomplish?
A carefully crafted and properly executed will is the best guarantee that your assets will be distributed according to your wishes. In addition, your will:
- Allows you to specify who will assume responsibility for your minor children,
- Provides the best way to communicate any special intentions (such as arrangements for the continuing care of pets), and
- Provides the best means of indicating who should receive items holding sentimental value.
Many believe that they do not need a will since there are state laws which govern the division and distribution of their assets. Some may feel that the size of their estate doesn't warrant a will.
What happens if I die without having a will?
Without a will the state decides who receives the assets of your estate. You risk having your property divided in undesirable ways and forfeit any opportunity to reduce taxes through trust arrangements.
When should I review my existing will?
A will may be changed as often as you like, but I recommend reviewing your existing will at the beginning of each calendar year. If a desired change is simple, a codicil may be executed to amend your existing will. If more complex changes are desired and you write a new will, then that will should specifically revoke all prior wills.
In addition, you should review your will when any of the following events occur:
- A change in marital status
- The birth of a child
- A change in your state of residence
- A significant change in the value or character of your assets
- A change in intended beneficiaries
- The death of a beneficiary
- The death of a guardian, trustee, or personal representative named in your will
- A change in tax laws affecting federal estate tax deductions and calculations
A trust is a right in real or personal property which is held in a fiduciary relationship by one party for the benefit of another. The "trustee" is the one who holds title to the trust property, and the "beneficiary" is the person who receives the benefits of the trust.
The person who sets up a trust is called the "grantor" or "settlor." The trustee is the legal "owner" of the trust property, and the trustee's name is on any document of title. The beneficiary actually receives the benefits of ownership, such as the right to receive the income from trust investments. A "living" or "inter vivos" trust is one that is set up and funded while the grantor is alive. In a Living Trust the grantor usually acts as both trustee and beneficiary. In contrast, a trust which comes into being after the grantor's death is called a "testamentary" trust. Upon the death of the grantor the trust assets pass immediately to the beneficiaries of the trust, avoiding the costly and lengthy probate process.
How does a trust avoid probate?
When an estate is conveyed through a will, the probate court must validate the will before its provisions can be executed. This probate process can take up to two years. Assets held in a Living Trust, however, are not subject to probate. The advantages of avoiding probate are threefold:
- Expedited distribution: A Living Trust allows assets to be distributed to your heirs as quickly as your trust agreement instructs and the taxing authorities allow, without the additional delays of probate. Your spouse, for instance, could receive immediate income to provide for living expenses.
- Expense reduction: The cost of probate is avoided for all assets held in your Living Trust.
- Privacy and confidentiality: When a Will is entered into probate, all of its provisions become a matter of public record. Since a Living Trust is a private arrangement, its terms are not made public at your death. Your assets and intentions are known only to your trustee and beneficiaries.
