Thursday, March 7, 2013

Why a Will is only Part of an Estate Plan

     Prospective clients will sometimes arrive for our initial consultation convinced all they need is a simple Will to have a complete estate plan. Sometimes a Will may be all the client needs, but more often after a review and discussion of their situation, we recommend the inclusion of a Living Trust. After explaining how Wills and Trusts work and their benefits, clients will occasionally comment that Wills and Trusts seem to serve the same purpose. Today’s blog addresses the ways that Wills and Trusts vary. 
     While both a Will and Trust can set up provisions for the distribution of a decedent’s assets, there are significant differences. The biggest difference between a Will and a Trust is that property passing to beneficiaries through a Will must pass though the potentially long and expensive Probate process, while property passing via a Trust does not. This is because Probate only attaches to property owned individually by the decedent. A Trust is a legal entity separate from the individual (even though the Grantor totally controls the Trust during lifetime), and cannot die, and therefore assets owned by the Trust almost never require the intervention of a court to facilitate transfer. 
     Before any actions are taken with assets passing through a Will, the Probate must be opened and the Court must approve the Personal Representative. This can take time and create problems if any decisions need to be made quickly. While a Will provides directions as to what happens to assets, the Probate Court stays involved and confirms the Personal Representative’s actions are appropriate and the assets are accounted for properly. A Trust, on the other hand creates a contractual relationship between the Grantor, who creates the Trust, and the Successor Trustee. The Grantor specifies in the Trust the beneficiaries who are to receive assets, when they are to receive assets, and the powers given to the Trustee to administer the Trust provisions. That relationship functions without the intervention of the Probate Court.
     Another difference between a Will and a Trust is that a Will only functions following the death of the person who executed the Will. The Trust on the other hand functions from the moment of its execution. This means that should something happen to incapacitate the Grantor, a successor Trustee can immediately step it to care of the Grantor’s assets and use those assets for the Grantor’s benefit. A Will does not provide this benefit, and absent a Durable Power of Attorney or the Probate court appointing a Conservator, assets may be inaccessible. 
     Estate planning is a personal activity and each person’s circumstances are unique. The insight of an knowledgeable attorney can be the difference between an easy transition following a death and a long drawn out probate process.

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