What Wills and Trusts Mean for You
Understanding Wills And Trusts
Wills and trusts are two commonly utilized tools to ensure the proper transfer of assets after death. While both wills and trusts describe in detail how assets are to be distributed, they differ greatly on how the specific distribution is carried out. After reading this article, you should have a better understanding of how wills are trusts work, as well as their many differences.
Creating A Will
A will is a written document that a person uses to define how their possessions and property will be distributed upon his or her death. Their accumulated property is known as an estate. The creator of the will is referred to as the testator. The testator designates, or names, beneficiaries in the will document. A beneficiary is someone or something that will receive a share of the testator’s estate upon the testator’s death. The testator can name one or multiple beneficiaries. The testator also designates an executor. An executor is the person in charge of carrying out the directions of the will.
In order for a will to be valid, the circumstances surrounding the creation of the document, as well as the document itself, must adhere to certain requirements. Since wills are governed by state law and these laws vary from state to state, it’s important to verify the specific requirements of the state in which the will is to be created. Here are some general requirements that are common for valid will creation:
- The testator must be of majority age, which generally means he or she must be at least 18 years of age;
- He or she must have the intent to create a will;
- He or she must have the physical and mental capacity to create a will;
- The will is typically required to be signed by the testator and a certain number of witnesses.
Executing A Will
It is believed that, once signed by a testator and validated, a will cannot be revoked. This is, however, incorrect as a testator can still revoke their will up until their death. A will can typically be revoked in three different ways:
- A subsequent written instrument such as a new will or a letter of revocation is created;
- A physical act such as tearing up the will;
- An operation of law, such as a subsequent marriage or a court determining the will to be invalid.
After the testator’s death, their will is put through the probate process. Probate is the legal process in which a will’s validity or invalidity is determined. If the will is held to be valid, the testator’s estate will be distributed according to the directions in the will. While this may sound simple, probate proceedings tend to be complicated, time-consuming, expensive, and confusing. To get an idea of the process and complications, check out our guide to understanding the probate timeline.
The majority of courts have local rules that can further delay the process. It is a good idea to research probate law and various probate attorneys ahead of time. Read more.
Establishing A Trust
A trust is a separate entity whereby a person’s real and personal property is held and remains for the benefit of another persons. In general, a trust must have a settlor, an identifiable beneficiary, and a trustee. The settlor is the person creating the trust. The beneficiary of the trust are the designated individuals who hold inheritance rights of the trust property. The settlor can name one or multiple beneficiaries. The trustee is the person or organization that manages the trust.
The trustee holds legal title to the trust property and must hold and manage the property for the benefit of the beneficiaries. The settlor can designate one or more trustees. If there is more than one trustee, each is referred to as a co-trustee. The settlor can, and should, also designate an alternative trustee. This person will serve as trustee if the original trustee cannot or will not perform their obligations.
In order for a trust to be correctly managed, the settlor usually creates a trust document. The trust document is commonly referred to as a Trust Deed. The trustee is obligated to manage and administer the trust in accordance with the terms of the trust document and law. Trusts are governed by state law and each state’s trust laws vary, so you should check your respective state’s requirements.
Remember, when deciding on what type of will or trust you should implement, it is always best to consult a qualified probate attorney in your area.