Post by: Eric Jones | Posted Date: May 22nd, 2017 | Categories: Individuals
Everyone should have a will or trust. Some people may benefit from having both a will and more than one type of trust. Dying without an enforceable contract for how your estate will be divided among family members, creditors, charities, and business partners creates legal hardships for those you cared most about in life and strips you of control over the money, property, and assets you spent a lifetime accumulating.
Knowing exactly which estate planning tools will serve you best requires meeting with financial planners and an Ohio wills and trusts attorney. Since each person, family, and commercial organization has different financial and legal concerns, no type of contract will serve each person best. Still, an important first step toward making plans for what will happened to your “stuff” once you are no longer around to enjoy it is gaining a basic understanding of what wills and trusts are and how they function.
Wills Are Public Documents That Must Be Executed Under Court Approval
A will specifies where the deceased individual’s money, property, and assets go. It must be filed with a probate court, and the execution of a wills provisions are subject to review by a judge. Arbitration and mediation may also factor into executing a will. Last, as a court filing, the will is subject to public records access laws.
A will must name an executor, who is the person tasked with carrying out the deceased individual’s instructions that are spelled out in the document. The will must also present a list of who gets what. Highly detailed wills do a better job of ensuring the deceased person’s wishes are carried out because any amount of money, piece of property, or transferable asset that is not assigned by the will is subject to disposition by a decision made in probate. This does not mean that the probate court takes possession of anything, but it does mean that heirs and creditors can submit claims for ownership of assets and items that do not have named recipients. The provisions of the will can also be contested.
Trusts Are Private Contracts That Do Not Go Through Probate
Trusts used for estate planning are classified as revocable or irrevocable. The person who establishes a revocable trust — known as the trustor — can make changes to the contract at any time. A trustor must receive the signed consent of an affected beneficiary to make a change to a provision of an irrevocable trust.
Unlike a will, a trust document does not get filed with a probate court, and the provisions of a trust are not automatically subject to legal review or implementation by a court. A person or organization named as the principal trustee carries out the instructions in the trust, and the details of the document are not available for public review.
The type of trust most commonly used for estate planning is a revocable living trust. It does not take effect until after the trustor’s death. It is just called “living” because the trustor prepares the contract while he or she is still alive.
A trustee can be given very explicit instructions. Many people forgo that, opting instead to issue general guidance along the lines of ensuring equitable distribution of money from liquidated investments, bank accounts, and the sale of property among surviving children.
More than one type of trust can be established to protect and transfer different parts of a trustor’s estate. For instance, a generation-skipping trust can be used to give significant assets to grandchildren and great-grandchildren without saddling the beneficiaries with tax burdens. Speaking with an experienced estate planning attorney in Ohio will help you understand if this is a good option and also if you could benefit from setting up some other arrangements such as a credit shelter trust, qualified personal residence trust, irrevocable life insurance trust, or qualified terminable interest property trust.