Estate Planning, Wills & Trusts
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Wills, Living Wills, and Trusts
A will can help make the transition after a loss as painless as possible for your loved ones. Your property will be transferred quickly and many tax burdens can be avoided. Wills typically describe the estate, name individuals who will receive specific property, and dictate any special instructions you may have. Depending on your wishes and the size of your estate, your will could be anywhere from a single page to a lengthy document.
While a will allows you to express your financial wishes once you're gone, a living will expresses your health care preferences while you're still alive. With a living will, you'll be able to designate the medical treatment you wish to receive, should you become unable to communicate your wishes due to illness or incapacitation. A health care power of attorney, on the other hand, allows you to designate a person who can make medical or end-of-life decisions on your behalf.
Trusts are another estate planning tool you can use to manage your property and avoid tax burdens. A trust can either be created during a person's lifetime, or after death, by a will. There are a number of different types of trusts serving a wide range of functions. An asset protection trust, for example, is designed to protect a person's assets from future creditors. A charitable trust, on the other hand, is used to benefit a particular charity or cause.
Wills are perhaps the most common and well-known form of estate plan. A valid will allows a person to designate how his or her estate is distributed and otherwise managed upon his or her death. In most circumstances, a person who creates a will can feel secure in knowing that the will's instructions will be honored. On the other hand, a person who passes away without a will runs the risk of a court or other estate administrator making decisions that do not reflect the person's wishes and intentions. Unfortunately, the failure to create a will can lead to disputes between family members, and even to expensive lawsuits and the ruining of relationships.
One of the most important decisions that comes with creating a will is deciding on a competent and trusted executor. This is the person that will carry out the instructions contained in your will. Of course, you'll also need to create a list of beneficiaries, and it's important that you begin to learn about estate tax laws, to minimize the taxes that you and/or your heirs pay.
What Makes a Will Legally Valid?
Estate planning laws vary by state, so it's best to consult with an attorney if you have specific questions about your state's laws. Generally speaking, a person must have been of "sound mind" when he or she created the will. This means that he or she understood the effects and consequences of the will, and that he or she was not coerced or otherwise manipulated into signing it. Typically, at least one witness is required to verify the will, and it's best that this person be someone who doesn't stand to benefit from the will. Although wills are usually made in writing, oral wills can be valid, and recently, electronic wills have been upheld in some courts.
A will cannot violate state or other laws. As an example, a person cannot circumvent a state's community-property marriage laws by asserting in a will that his or her spouse is entitled to no property. Also, note that some states have passed heirship laws that require, for example, children to be listed as heirs in a decedent's will. A will that breaches heirship laws will likely not stand up in court, and the decedent may be considered intestate.
A living will is a type of estate plan that allows a person to express his or her medical and end-of-life treatment decisions, in order to provide family members and health care personnel with clear medical care instructions. In general, if a living will meets legal requirements, then the instructions it provides are legally valid and binding. This section gives an overview of living wills and other health care directives, provides state-specific resources related to these types of estate plans, and contains a link for consulting with an estate planning lawyer in your area.« Show Less
The Purpose of Having a Living Will
The purpose of a living will is to ensure that a person's medical care and treatment wishes are honored should he or she become mentally incapacitated. For example, if a person decides against receiving life support, he or she can express that decision in a living will. By creating a living will or a similar health care directive, you can accomplish two important goals: you inform family members of the types of treatment that you want and don't want, and you provide them with advanced notice of your intentions, so that there's no uncertainty later on. If you create a living will, you reduce the likelihood of emotional and ugly disputes over your medical and end-of-life care. Unfortunately, the desire to avoid dealing with an awkward and uncomfortable subject leads many people to forego creating living wills.
What You Can Express in a Living Will
Depending on the state, a person can provide treatment instructions concerning blood transfusions, dialysis, use of a respirator, and the administration of life-sustaining drugs and intravenous fluids. It goes without saying that these decisions should be carefully considered, with family members and friends consulted. If you begin thinking about your living will early on, you'll give yourself time to plan carefully and to consult with your loved ones.
Trusts are estate-planning tools that can help you manage property during life while ensuring a smooth transition of affairs after death. The Trusts section of FindLaw's Estate Planning Center includes practical information on different types of trusts including living trusts and charitable trusts. You'll also find useful guidance on how to set up a living trust, choosing a trustee, tax implications of trusts, when it makes sense to hire an attorney and related issues.« Show Less
Types of Trusts
There are many different kinds of trusts possible, though all trusts can be separated into two groups; revocable and irrevocable trusts. The key difference, that one can be revoked and the other cannot, is apparent in their names, though the reasons for selecting one or another has more to do with other details about ownership and control.
A revocable trust, often called a "living trust," are trusts in which the person making the trust transfers their title of property into the Trust, serves as the initial Trustee, and has the ability to remove, change, modify, alter, or entirely revoke the trust during their lifetime. Trusts of this sort are useful because the trust owns the property, rather than the person making the trust. As such, when the person dies the property held in trust is not subject to probate. An irrevocable trust, by contrast, is one that cannot be altered, changed, modified, or revoked once it has been created.
Revocable trusts may be vulnerable to claims by the creator's creditors. To access these assets the creditor will need to petition the court for an order enabling them to access the assets of the trust, but the control the trust maker maintains in trusts of this kind is precisely what makes the assets vulnerable to creditors. Upon death a revocable trust becomes irrevocable.
There are many kinds of revocable and irrevocable trusts. We detail many of the trust types and their characteristics elsewhere in this section.
Setting up a Trust
Trusts, regardless of their type, have some common features. A trust is a transfer of legal ownership of property or assets from the property owner, called the trustor, to a person or institution responsible for handling the property, called a trustee. This property is held for the benefit of a third party, called the beneficiary.
A trustee is often compensated for their management of the trust. Regardless of whether they are paid the trust creates a "fiduciary" relationship between the trustee and the beneficiary, meaning that they can only act in the interests of the beneficiary. The grantor may act as trustee, but they still have the fiduciary duty. The grantor may also be the beneficiary of a trust, or among several beneficiaries. The obligations created by these different roles are important to consider when establishing a trust.
Many factors can influence the procedure for setting up a trust, including the age, size of the estate, and the marital status of the trustor. We provide information on choosing a trustee, amending an existing trust, as well as why a trust might be useful and how a trust ends.