Knowing the basics of wills and trusts and what people often miss.
While death is certain, navigating estate planning can feel confusing, overwhelming, and nerve-racking. But taking the first steps toward planning for the inevitable or instances of being incapacitated can save you and your family many headaches.
What Is a Will and Trust?
A will is a legal document that “sets forth a person’s intent regarding who will receive assets after death,” says Scott Hamblin, a shareholder in the law office of Brydon, Swearengen & England P.C. in Jefferson City. Scott also explains that, following your death, someone must file the will with the probate court in the county where the person lived at the time of their death for the court to determine that the will is valid, unless the will was previously filed with the probate court while the person was alive.
Like a will, a trust outlines what you want to happen with your assets and who you want to receive them when you die. However, there are two key differences between a trust and a will. First, trusts state how you want your assets handled both when you die and if you become incapacitated during your lifetime. A will only handles disposition of your assets after your death. Second, unlike a will, a trust does not have to go through the probate process. The same type of assets can be disposed of through a will or a trust. It’s just a different way of doing it.
What Can I List?
“People typically list their real estate, bank accounts, vehicles, life insurance, investment accounts, and any other titled property.” says Jill Dobbs, vice president of wealth management advisors at Central Trust Company. “You can also include non-titled items, such as family heirlooms.”
In Jill’s experience, it’s often the tangible personal property that creates the most conflict. These are the items that typically aren’t monetarily valuable to most people but hold sentimental value to the family.
“Personal property are the things people fight about— who gets grandma’s rolling pin that all the grandkids remember making the Christmas cookies with? Those are the things that can create lifelong division among family members when no one else would see any value in that rolling pin,” she says.
After you list your assets, you will designate someone to identify and protect your assets and execute your wishes. This person is called a personal representative or executor. In a trust, a trustee is a person named to hold and manage the assets of the trust.
“You can be very specific and detailed with regards to your wishes. That’s one of the great things about a trust — you are able to direct how things should happen in the future.”Jill Dobb
When Should I Create a Will or Trust?
“Oftentimes, people don’t begin the estate planning process until a significant event occurs,” says Scott, who’s handled several estate planning cases.
This could be the birth of a child or grandchild, the death of a family member, or the development of mental or physical health issues in you or a family member. However, everyone should consider estate planning, especially if you have children or property.
“Death is a certainty, and yet, when we die is often unpredictable,” Scott says.
Jill also suggests a person should consider creating a will if there is an asset that should be distributed to someone after death.
Can I Have One Over the Other?
“In meeting with your lawyer to create your will, you need to explain what you want or hope to accomplish,” Scott says. “The information you provide will help your lawyer better assist you in deciding whether to create a will, a trust, or both.”
While you can have just a will or a trust, Jill doesn’t recommend it. She encourages everyone to create a trust, will, financial power of attorney, and health care directive because they give direction regarding who will handle financial and health care decisions if you are unable to do so yourself.
These legal documents should work together and serve as “catch-alls” for each other. For example, if you die and your car deed is not titled in your trust, Jill says, the probate court must decide what to do with your vehicle. If you don’t have a will instructing the probate court to put the car in your trust, the court will follow Missouri’s laws and decide how to dispose of the vehicle— which may not be how you want your car distributed.
“So even if you have a trust, you should have a will as a catch-all for things you might miss or that you want disposed of in a way other than what is outlined in your trust document,” she says.
“In meeting with your lawyer to create your will, you need to explain what you want or hope to accomplish. The information you provide will help your lawyer better assist you in deciding whether to create a will, a trust, or both.”Scott Hamblin – Brydon, Swearengen & England P.C.
What Are the First Steps?
Jill recommends having a preliminary discussion with your trusted advisor, such as an accountant, financial advisor, or lawyer, about general estate planning. This includes discussing the various estate planning options, how they work, and how they apply to your situation. Having a grasp of general estate planning before you visit a lawyer may save you time and money.
In preparing a will, you will need to consult with your lawyer to determine whether you want specific assets distributed, who the beneficiaries are, and who will serve as your personal representative. In terms of assets, it is also helpful to know where the assets are located, if there is associated debt, and how the assets are held or titled.
If you are married, Jill says to have a conversation with your spouse about your visions of estate planning to identify areas you agree on and items that need to be discussed so you can find a potential compromise before drafting the documents. For example, you may want all your assets to go to your children equally and immediately, whereas your spouse may want one child to get more of a certain asset on a specific date.
“You can be very specific and detailed with regards to your wishes,” Jill says. “That’s one of the great things about a trust — you are able to direct how things should happen in the future. You can state certain ages or events that trigger distribution to your heirs or even provide for care of family pets left behind. They’re your wishes. That’s why every trust document is different, because everyone’s financial and family situations are unique.”
After your preliminary discussions, you’ll want to consult an estate planning lawyer to ensure your will and trust are thorough and valid. A will and trust must comply with certain legal requirements, and these requirements vary by each state. In terms of a will, Scott explains that a court cannot recognize the document if it doesn’t comply with the law.
But you don’t want to just go with any estate planning lawyer. Make sure the lawyer has experience handling estates similar to yours and that you are comfortable asking the lawyer questions.
“Talking with an estate planning attorney can be like talking with a lender for the first time,” Jill says. “When they ask if you have any questions, you’re sure there are questions you should be asking, but you don’t know what to ask. Estate planning is very similar, so find someone who you can share your situation with and who can make suggestions to you that you may not think to ask about.”
“Personal property is the stuff people fight about — who gets grandma’s rolling pin that all the grandkids remember making the Christmas cookies with? Those are the things that can create lifelong division among family members when no else would see any value in that rolling pin.”Jill Dobbs – Central Trust Company
What Are Common Mistakes People Make?
Your will and trust should be clear, specific, and simple, but also broad enough to allow flexibility. Many wills and trusts can be amended, so Scott suggests that a person generally review their will every five years to determine if it needs updates.
However, amending your will or trust may lead to additional charges, Jill says, so, it’s important to be mindful of your wording so you’re not changing your estate planning documents every few months. Another error Jill regularly sees is not retitling assets in the trust name or not listing the trust as the beneficiary. For example, if you create a trust but do not title your checking account in the trust name, it’s unclear where that account goes when you die.
Once you draft the will or trust, you should ensure a trusted individual knows where to find the document after you die or become incapacitated. In the instance of a will, Scott emphasizes that documents must be submitted to the probate court within a certain time period following your death for it to be valid.
“Therefore, creating a will that no one knows exists is not helpful,” he says. “Leaving the will in a locked safe or safety deposit box to which no one has access can be problematic.”
“Oftentimes, people don’t begin the estate planning process until a significant event occurs.”Scott Hamblin