Keith Doniphan Elston
Attorney at Law
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A will provides for the distribution of property owned by you at the time of your death in any manner you choose (subject to the forced heirship laws that prevent disinheriting a spouse and, in some cases, children). Your will cannot, however, govern the disposition of properties that pass outside your probate estate (such as certain jointly-owned property, life insurance, retirement plans, and employee death benefits) unless they are payable to your estate.
Wills can be of various degrees of complexity and can be utilized to achieve a wide range of family and tax objectives. If a will provides for the outright distribution of assets, it is sometime characterized as a simple will. If the will establishes one or more trusts, it is othen called a testamentary trust will. Alternatively, the will may leave probate assets to a pre-existing inter vivos trust (created in your lifetime), in which case it is called a pour over will. In either case, the purpose of the trust arrangement (as opposed to outright distribution) is to ensure continued property management andcreditorproteection for the surviving family members, to provide for charities, and to minimize taxes.
Aside from providing for the intended disposition of your property to spouse, children, etc., there are a number of other important objectives that may be accomplished in your will.
You may designate a guardian for your minor child or children if you have survived the other parent, and, by judicious use of a trust and appointment of a trustee, eliminate the need for bonds and supervision by the court regarding the care of each minor child's estate.
You may designate an executor of your estate in your will and eliminate the need for a bond.
You may choose to acknowledge or otherwise provide for a child (e.g., a step-child, god-child, etc.) in whom you have an interest, an elderly parent, a same-sex partner, or other individuals.
If you are acting as custodian for the assets of a child or grandchild under the Uniform Transfers to Minors Act, you may designate your successor custodian and avoid the expense of a court appointment.
Good planning can also enhance your support for religious, educational, and other charitable causes.
A will does not govern the transfer of certain types of assets, called non-probate property, which by operation of law or contract pass to someone else on your death.
Types of non-probate property include jointly-owned property, trusts, Annuities and Retirement Benefits, and life insurance.
Jointly-owned property is property owned with another person as joint tenants with right of survivorship, as distinguished from tenants in common. Jointly owned property passes directly to the remaining joint tenant(s) upon your death and will not be a part of your probate estate. It will, however, be part of your taxable estate.
It is important to realize that the ownership of property in this fashion often leads to unexpected or unwanted results. Disputes, including litigation, are common between the estate of the original owner and the surviving joint tenant as to whether the survivor's name was added as a matter of convenience and/or management or whether a gift was intended. The planning of a well-drawn will may be partially or completely thwarted by an inadvertently created joint tenancy that passes property to a beneficiary by operation of law, rather than under the terms of the will.
Effective planning requires knowledge of the consequences of each property interest and technique.
The term trust describes the holding of property by a trustee (which may be one or more persons or a corporate trust company or bank) in accordance with the provisions of a written trust instrument for the benefit of one or more persons called beneficiaries. A person may be both a trustee and a beneficiary of the same trust. A trust created by your will is called a testamentary trust, and the trust provisions are contained in your willl.
If you create a trust during your lifetime, you are described as the trust's grantor or settlor, the trust is called a living trust or an inter vivos trust, and the trust provisions are contained in the trust agreement or declaration. The provisions of that trust document (rather than your will or state law defaults0 will usuallly determine what happens to the property ni the trust upon your death.
A living trust may be revocable (subject to change and terminated by the settlor or irrevocable. Either type of trust may be designed to accomplish the purposes of property management, assistance to the settlor in the event of physical or mental incapacity, and disposition of property after the death of the settlor of the trust.
Trusts are not only for the wealthy. Young parents with limited assets sometime choose to create trusts either during life or in their wills for the benefit of their children in case both parents die before all their children have reached adulthood. This permits the trust estate to be held as a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust among the children when the youngest has reached a specified age. This type of arrangement has an obvious advantage over an inflexible division of property among children of different ages without regard to their level of maturity or individual needs at the time of such distribution.
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