Creating A Will and Trust: What You Need to Know Before You Start

It can be somewhat disconcerting to think about passing on from this life and worrying about what happens to your estate and your heirs. So you may not have considered things like a will or trust. But at some point, you probably should.

A will and/or trust will make sure that your estate and sentimental valuables will go to the people you want after your passing.

The first thing to know is the difference between a will and trust. A will is a written legal document that allows you to distribute your property to whomever you want upon your death.

You can choose the beneficiaries of your property, identify someone who will execute your wishes, and be assured that the courts will supervise your executor in following those wishes.

When you write a will, it becomes an official document and it is final and cannot be changed unless you change it. Nothing else needs to be done. It defines what will be done during the management of your estate when you have passed away.

A trust, on the other hand, is a document that governs how to manage your estate while you are still alive. So it is an alternative to a will. It is also a different way to distribute your property when you have passed away.

With a trust, you appoint a trustee to manage your estate. That can be yourself or someone you appoint who will manage it in case you can no longer do it yourself.

A trust has some advantages over a will in that it is not subject to probate proceedings, and no court supervision is necessary. All challenges or disputes are handled by your appointed trustee.

You continue to manage your estate for as long as you want and are able (of “sound mind”). Your trustee will take over when needed.

Trusts cost more than wills because they are ongoing and subject to change at any time according to your wishes. You can transfer your various assets into your trust at any time during your life. You can even stipulate that on your death, all remaining assets be transferred into your trust. This will prevent them from being subject to probate.

Create an estate plan

Start by deciding what your estate planning goals should be. What do you want to happen and who do you want to give your assets to? Who should manage your estate and affairs?

You should create an estate plan by making a comprehensive list of all your assets including bank accounts, property, investments, vehicles, jewelry, furniture and digital items.

A comprehensive estate plan includes everything you own and everything you owe – your debts. Even if you don’t own a house, whatever you do own is your estate.

The estate plan names who will get your properties after you die and who will be your executor. It names guardians for your minor children. It names health care and financial individuals who will have power of attorney for you in those areas.

Create a last will and testament

The last will and testament is the official document that reflects your estate plan. It lists the distribution of properties on your death, the guardians of your children, and the individuals who will have power of attorney for healthcare and financial decisions.

Things to know:

Before creating a will, you may want to check out the rules in your state for what happens if you do not have a will. These are called “rules of intestate succession.” Knowing these rules can help you create a valid will and an attorney can help you understand them better.

All of the properties in your estate may not be covered in your will. The reason is that retirement accounts, life insurance policies, joint tenant situations, and possibly other financial accounts may have their own designated beneficiary forms. Those beneficiaries have rights to those assets regardless of what your will says.

So when you make your last will and testament, you should also make whatever changes you need on specific beneficiary forms to coincide with your wishes.

Although it is not binding on the courts, you should name a guardian for your children in case both parents are deceased. The court is not bound to agree with you, but if your wishes are known, it is unlikely they will not be followed.

Revocable trust

A living trust might be a better alternative than a will. The living trust (also called a revocable trust) will enable your properties to pass on to your heirs without the need for the courts to be involved. It also keeps the information on your assets private.

A living trust offers a high degree of control over your assets and provides tax protection. You serve as the trustee until your death, when someone else will become a trustee.

There is another form of trust, the irrevocable trust. It provides more tax benefits but cannot be changed after it is put in place.

Creating wills and trusts can be daunting if you try to do this yourself. There are many complex situations you may not know how to handle. These include families with non-U.S. children, disabled individuals, non-married relationships, stepchildren, and many more unique situations. Having a lawyer involved would be a good idea in such cases.

The living will

The living will is not really a will but a legal document also called “advance directive” or “advance health care directive” that provides guidance to your loved ones on your medical treatment at the end of life.

The living will does not take the place of a will and testament or trust and has no use after death. It is used in final days before death. It covers such items as whether to be put on or taken off life support, whether to donate organs, when to administer CPR and whether to use a DNR (Do Not Resuscitate) order.

The living will document is easy to create using a Living Will Form.

Power of attorney

There are several types of power of attorney, so it’s important you understand the differences during your estate planning.

A healthcare power of attorney is a legal document that allows someone you select to make health decisions on your behalf. It makes sure you die with dignity and without pain. The document is also called a Healthcare Proxy. It is often used along with a Living Will, and in some states can be combined into one document.

A financial power of attorney is a document that enables someone you choose to make financial decisions for you – for example, when you may become ill or unable to make those decisions yourself. This can avoid problems in possibly losing your home or car or negatively affecting your credit rating.

The power of attorney does not have to be relative and can be anyone you decide. You can also change your mind and rescind the power of attorney any time by signing a new form and having it notarized.

While some of the forms needed for creating documents for wills and trusts are simple to fill out, others require more thought and planning. It’s a good idea to have a lawyer by your side when taking these important steps.