Wills, Trusts & Dying Intestate: How They Differ

Most people understand that having some sort of an estate plan is a good thing. However, many of us don’t take the steps to get that estate plan in place because we don’t understand the nuances between wills and trusts — and dying without either.

Here is what will generally happen if you die intestate (without a will or trust), with a will, and with a trust. For this example, we’re assuming you have children, but no spouse:

1. Intestate. If you should die intestate, your estate will go through probate and all the world will know what you owned, what you owed, and who got what. Your mortgage company, car loan company, and credit card companies will all seek payment on balances you owed at the time of your death. 

After that, state law will decide who gets what and when. 

  • For example, if your only heirs are your children and you have not provided any instructions, state law will mandate dividing up proceeds equally. 
  • Your older children will get their shares immediately if they’ve attained adulthood.
  • But, the court will appoint a guardian to manage the money for your minor children until they become adults. 
  • Shockingly, that guardian can charge a lot of money and be a total stranger - as can the guardian who raises your child. 
  • Yes, if you die without a valid will, the court, not you, will decide who raises your minor children.

Keep in mind that since your death has been published to alert valid creditors, it is not uncommon for predators (fake creditors) to come forth and make demands for payment — even if they are not owed anything. 

The bottom line? Dying intestate allows state law and the court to make all the decisions on your behalf — regardless of what your intent might have been. Publicity is guaranteed.

2. Will. If you should die with a valid will, your assets will still go through the probate process. However, after creditors have been satisfied, the remaining assets go to whom you have identified in your will. 

  • If you want to leave money to your children and name a guardian for the minor ones, the court will usually abide by your wishes. 
  • The same holds true if you specified that you wanted to give assets to a charity, your Aunt Betty, or your neighbor. 
  • Keep in mind that predatory creditors are still an issue as your death has been publicized. Even with a will, probate is a public process.

The bottom line? While a court oversees the process, having a will allows you to tell the court exactly how you want your estate to be handled. But, a public probate is still guaranteed.

3. Trust. If you have created a trust, you have taken control of your estate plan and your assets.  Trust assets are not subject to the probate process and one of the most important benefits of trusts is that they are private. Notices are not published, so you avoid predators coming after your estate. 

You’ll have named a trustee to manage your estate with specific instructions on how your assets should be dispersed and when. 

  • One word of caution — trusts must be funded in order to bypass probate. 
  • Funding means that your assets have been retitled in the name of your trust.
  • Think of your trust as a bushel basket. You must put the apples into the basket as you must put your assets into the trust for either to have value.

You do still need a will to pour any assets inadvertently or intentionally left out of your trust and to name guardians for minor children.

The bottom line? Trusts allow you to maintain control of your assets through your chosen trustee, avoid probate, and leave specific instructions so that your children are taken care of – without receiving a lump sum of money at an age where they are more likely to squander it or have it seized from them.

Don’t let the will versus trust controversy slow you down. Call the office today; we’ll put together an estate plan that works for you and your family whether it be a will, trust, or both. 

An Estate Planning Checklist to Facilitate Wealth Transfer

Studies have shown that 70% of family wealth is lost by the end of the second generation and 90% by the end of the third. 

Help your loved ones avoid becoming one of these statistics. You need to educate and update your heirs about your wealth transfer goals and the plan you have put in place to achieve these goals.

What Must You Communicate to Future Generations to Facilitate Transfer of Your Wealth?

You must communicate the following information to your family to ensure that they will have the information they need during a difficult time:

  • Net worth statement, or at the very minimum a broad overview of your wealth
  • Final wishes — burial or cremation, memorial services
  • Estate planning documents that have been created and what purpose they serve:
    • Durable Power of Attorney, Health Care Directive, Living Will — property management; avoiding guardianship; clarifying wishes regarding life-sustaining procedures
    • Revocable Living Trust — avoiding guardianship; keeping final wishes private; avoiding probate; minimizing delays, costs and bureaucracy
    • Last Will and Testament — a catch-all for assets not transferred into your Revocable Living Trust prior to death, or the primary means to transfer your wealth if you are not using a Revocable Living Trust
    • Irrevocable Life Insurance Trust — removing life insurance from your taxable estate; providing immediate access to cash
    • Advanced Estate Planning — protecting assets from creditors, predators, outside influences, and ex-spouses; charitable giving; minimizing taxes; creating dynasty trusts
  • Who will be in charge if you become incapacitated or die — agent named in your Durable Power of Attorney and Health Care Directive; successor trustee of your Revocable Living Trust and other trusts you’ve created; personal representative named in your will
  • Benefits of lifetime discretionary trusts created for your heirs:
    • Fosters educational opportunities
    • Provides asset, divorce, and remarriage protection
    • Protects special needs beneficiaries (if properly drafted)
    • Allows for professional asset management
    • Minimizes estate taxes at each generation
    • Creates a lasting legacy for future generations 
  • Overall goals and intentions for inheritance — what the money is, and is not, to be used for (in other words, education vs. charitable work vs. vacations vs. Ferraris vs. business opportunities vs. retirement), and who will be trustee of lifetime discretionary trusts created for your heirs and why you’ve selected them
  • Where important documents are located — this should include how to access your “digital” assets
  • Who your key advisors are and how to contact them

How Can Your Professional Advisors Help You Communicate Your Wealth Transfer Goals?            

Your professional advisors are well-positioned to help you discover your wealth priorities, goals, and objectives and then communicate this information to your heirs. This, in turn, will prepare your heirs to receive your wealth instead of being left to figure it out on their own and, as statistics have shown, lose it all. 

We are available to assist you with figuring out your wealth transfer goals, putting a plan in place to achieve these goals, and effectively communicating this information to your loved ones.


Who Needs an Estate Plan?

If you’re reading this, you need an estate plan.  Why?  The short answer is “Everyone, age 18 and older needs an estate plan.” It doesn’t matter if you are old or young, if you have built up considerable wealth or if you are just entering adulthood — you need a written plan to keep you in control and to protect yourself and those you love. 

The Key Takeaways

  • Every adult, regardless of age or wealth, needs both a lifetime plan and an after-death estate plan.
  • Planning for incapacity will keep you in control and let your trusted loved ones care for you without court interference — and without the loss of control and expense of a guardianship or conservatorship proceeding.
  • Every adult needs up-to-date health care directives.
  • You need to leave written instructions to make sure you are the one who selects who’s in charge of when and how your assets will be distributed.
  • We all need the counseling and assistance of an experienced estate planning attorney.

What is an Estate Plan?

Your estate is comprised of the assets you own — your car, home, bank accounts, investments, life insurance, furniture and personal belongings. No matter how large or how small your estate, you can’t take it with you when you die, and you probably want certain people to have certain things you own.

To make sure that happens, you need to provide written instructions stating who you want to receive your assets and belongings, what you want them to receive, and when they are to receive it — that is the essence of an estate plan. If you have young children, you will need to name someone to raise them in your place and to manage their inheritance.

A properly prepared estate plan also will have instructions for your care (and the management of your assets) if you become incapacitated, even for a short time, due to illness or injury. Without the proper documents in place, your family will have to ask the court for permission to use your assets to take care of you and to oversee your care. That process is out of your control and it takes time and costs money, making an already difficult situation even more difficult for your family.

It might surprise you, but having a plan in place often means more to families with modest means because 1) they can least afford to pay unnecessary court costs and legal fees and 2) state laws, which take over in the absence of planning, often distribute assets in an undesirable way. Here’s an example:

Sam and Meg had two young children. Sam died in a car accident on his way to work. Because he had no estate plan, the laws in his state divided his estate into thirds: one third went to Meg and one third to each of his children. Meg, a stay-at-home mom, was forced to go back to work. The court set up guardianships for each child, which required ongoing court costs, including accounting, guardianship and attorney fees. By the time the children reached 18 and received their inheritances, there was not enough left for them to go to college.

What You Need to Know

Don’t try to do this yourself. You need the counseling and assistance of an experienced estate planning attorney who knows the laws in your state and has the expertise to guide you in making difficult decisions such as who will raise your children and who will look after your care at incapacity. That attorney will also know how to carefully craft the appropriate estate planning documents, so that what you think will happen when you become incapacitated or die actually happens.

Actions to Consider

  • Call or email our office now to set up an estate planning consultation appointment. We make tough topics manageable to discuss and talk about. 
  • Don’t worry about how life will unfold; the best practice is to have your plan prepared now based on your current situation. 

Wills vs. Trusts: A Quick & Simple Reference Guide

Confused about the differences between wills and trusts?  If so, you’re not alone. While it’s always wise to contact experts, it’s also important to understand the basics. Here’s a quick and simple reference guide:

What Revocable Living Trusts Can Do – That Wills Can’t

  • Avoid a conservatorship and guardianship. A revocable living trust allows you to authorize your spouse, partner, child, or other trusted person to manage your assets should you become incapacitated and unable to manage your own affairs. Wills only become effective when you die, so they are useless in avoiding conservatorship and guardianship proceedings during your life.
  • Bypass probate. Property in a revocable living trust does not pass through probate. Property that passes using a will guarantees probate. The probate process, designed to wrap up a person’s affairs after satisfying outstanding debts, is public and can be costly and time-consuming – sometimes taking years to resolve.
  • Maintain privacy after death. Wills are public documents; trusts are not. Anyone, including nosey neighbors, predators, and unscrupulous “charities” can discover the details of your estate if you have a will. Trusts allow you to maintain your family’s privacy after death. 
  • Protect you from court challenges. Although court challenges to wills and trusts occur, attacking a trust is generally much harder than attacking a will because trust provisions are not made public.

What Wills Can Do – That Revocable Living Trusts Can’t                    

  • Name guardians for children. Only a will – not a living trust or any other type of document – can be used to name guardians to care for minor children.          
  • Specify an executor or personal representative. Wills allow you to name an executor or personal representative – someone who will take responsibility to wrap up your estate after you die. This typically involves working with the probate court, protecting assets, paying your debts, and distributing what remains to beneficiaries. But, if there are no assets in your probate estate (because you have a fully funded revocable trust), this feature is not necessarily useful.

What Both Wills & Trusts Can Do:

  • Allow revisions to your document. Both wills and trusts can be revised whenever your intentions or circumstances change so long as you have the legal capacity to execute them. 
    WARNING: There is such as a thing as irrevocable trusts, which cannot be changed without legal action.
  • Name beneficiaries. Both wills and trusts are vehicles which allow you to name beneficiaries for your assets. 
    • Wills simply describe assets and proclaim who gets what. Only assets in your individual name will be controlled by a will.
    • While trusts act similarly, you must go one step further and “transfer” the property into the trust – commonly referred to as “funding.” Only assets in the name of your trust will be controlled by your trust.
  • Provide asset protection. Trusts, and less commonly, wills, are crafted to include protective sub-trusts which allow your beneficiaries access but keep the assets from being seized by their creditors such as divorcing spouses, car accident litigants, bankruptcy trustee, and business failure.

While some of the differences between wills and trusts are subtle; others are not. Together, we’ll take a look at your goals as well as your financial and family situation and design an estate plan tailored to your needs. Call us today and let’s get started.

Aging.gov: A New Resource for Older Americans and Their Families

More than 10,000 people turn 65 in the U.S. every day according to Aging.gov (http://www.hhs.gov/aging/), a new website recently launched by the Obama administration. The goal of this website is to act as gateway for older Americans and their families, friends and caregivers to locate information about leading a healthy lifestyle, options for health care, preventing elder abuse, and retirement planning. 

Healthy Aging

According to the website, healthy eating habits, physical activity, and involvement in your community help contribute to living a long, productive, and meaningful life. This section of the website offers links to dietary guidelines for older Americans, the American Dietetic Association, the National Institutes of Health Senior Health website, and resources for volunteering and senior employment.

Health Issues

According to the website, focusing on preventive care, managing health conditions, and understanding medications help contribute to an increased quality of life. This section of the website offers links to various Medicare resources (hospital compare, home health compare, dialysis facility compare); information about mental health, Alzheimer’s disease and dementia; other specific diseases, conditions and injuries (arthritis, cancer, diabetes, fall prevention, hearing, heart and lung, HIV/AIDs, vision); and resources for medications (Medicare prescription drug coverage) and treatments.

Long-Term Care

According to the website, long-term care – either through in-home assistance, community programs, or residential facilities – allows you to stay active and accomplish everyday tasks. This section of the website offers links for finding home care and assisted living facilities; resources for caregivers; securing benefits (Benefits.gov, Medicare.gov); planning for long-term care (LongTermCare.gov, Medicaid.gov); veteran’s services; and preparing for end of life (Advance Directives, funeral planning, organ donation).

Elder Justice

According to the website, millions of older Americans encounter abuse, neglect, exploitation, or discrimination each year. This section of the website offers links to help you identify scams, prevent fraud, address senior housing issues, stop elder abuse, and find legal assistance.

Retirement Planning & Security

According to the website, planning for retirement will allow you to enjoy financial security as you age without the risk of outliving your assets. This section of the website offers links to resources for retirement planning, understanding your employer’s retirement plan, and investing (IRAs, investing wisely for seniors, preventing financial fraud).

State Resources

The final section of the website points out that resources to support older Americans and their families, friends and caregivers can vary from state to state and offers links to the departments of aging for all 50 states and the District of Columbia.

Final Thoughts on Aging.gov

Aging.gov offers a diverse amount of information to help you or a loved one navigate the challenges of growing older. Instead of randomly searching for guidance and advice, this website is a good starting point for locating more specific information related to aging healthy, wealthy, and wise.