Trust or Will? - Concerns and Misconceptions

Article submitted by Karen Cooley of Valleywide Legal Documents, LLC.
For more information, she can be reached at 623-910-8771 or by e-mail: ValleywideLegalDocuments@cox.net, or visit their website: www.VWLD.biz.

Two common concerns about estate-planning documents is "I don't know whether to get a will or a trust." and "I don't think I need a trust because I don't have a lot of money." There are no cookie-cutter answers to these concerns; but there are a number of things to consider that will help you make an informed decision.

When Is a Trust Beneficial? If any of the following situations apply to you either now or in the future, a living trust could be beneficial:

• You want to protect your children's inheritance from a surviving spouse who might leave the estate to a new partner;
• Inexperienced or irresponsible loved ones will be inheriting from you and you don't want them to receive a large sum of money at one time;
• Minor children or incapacitated adults will be inheriting from you and you don't want a court to appoint a conservator to manage their inheritance;
• You want to avoid a court appointing a conservator for you if you become disabled or incapacitated;
• You have real estate equity of more than $50,000 or other personal property worth more than $50,000 and want to avoid probate; or
• You are a married couple with an estate worth more than $1.5 million and want to reduce or eliminate estate tax.

How Does a Trust Work? A Trust is created when you sign a trust agreement. A Trust lives on after you die, avoids probate if properly funded, and may eliminate or reduce estate taxes. You are the person(s) who creates the trust and are called the Trustor. You have complete authority and power over the trust as long as you are alive and competent. You are usually also the Trustee and make day-to-day decisions about the management of the trust in accordance with the trust agreement. The trust agreement names the people or charities that will get the trust assets when you die (the "beneficiaries") and will also state when the beneficiaries get their inheritance. You may decide, for instance, to hold a certain beneficiary's inheritance in trust until the beneficiary reaches a certain age; or you might decide to pay out an inheritance in increments. The trust agreement will also name the person or company that will become the successor trustee when you are no longer able to handle the affairs of the trust.

Wills and Probate A Will names the recipients of your estate and designates how much of the estate goes to each person or charity named. A will also names the Personal Representative of your estate, who carries out the terms of your Will, including the responsibility of administering a probate. A will has no legal authority until it has been filed with the probate court after your death.

Children as Co-Owners A common tactic is to add a child's name to bank accounts and homes. Many people have lost their homes and their savings because of this.