What Is the Difference Between a Will and a Trust?

November 21, 2022Filed Under: Estate Planning

There are specific and quite different benefits to wills and trusts in relation to estate planning. Each state has specific laws and regulations governing these legal documents. You can have both a will and a trust; however, the information in each should complement the other. As a standalone, it is not accurate to say one is better than the other. The better choice for you, or a blend of both documents, depends on your assets and life circumstances. Begin by assessing your situation, goals, and needs, and understanding what wills and trusts do to guide your decision-making. Then, along with an attorney, you will be able to identify the solution that best suits and protects your family.

At its most basic level, a will allows you to appoint an executor for your estate, name guardians for your children and pets, designate where your assets go, and specify final wishes and arrangements. A will is only enacted upon your death. It has some limitations regarding the distribution of assets, and wills are also subject to a probate process (which occurs in court and is overseen by a judge) and, as such, are part of public records.

Types of Wills for Your Estate Plan

The last will and testament designate a person’s final wishes about bank accounts, real estate, personal property, and who should inherit these items. A personal will outlines how to distribute possessions, whether to another person, a group, or donate them to charity. It also deems responsibility to others for custody of dependents and management of accounts and other interests. Accounts can include digital assets with a tangible or monetary value associated with them, such as funds in a PayPal account.

A pour-over will ensure an individual’s remaining assets will automatically transfer to a previously established trust upon their death. This type of will always accompanies a trust.

A living will or advance directive specifies the type of medical care that an individual prefers if they cannot communicate their wishes.

A joint will and mutual will is meant for a married couple to ensure that their property is disposed of in an identical manner. A mirror will is two separate but identical wills, which may or may not also be mutual wills.

A holographic or handwritten will is valid in about half of the states and must meet the specific state’s requirements. Authentication of this will type for acceptance to the probate process also varies by state. There is always the possibility that a court will not accept a holographic will. Even if you have limited assets, your best strategy is to have your will professionally documented by an attorney. A video of your final wishes does not create a valid will.

Trusts are somewhat more complicated than wills, and the many different trust types can greatly benefit your estate and beneficiaries. Generally, a trust provides for the distribution and management of your assets during your lifetime and after death. Trusts can apply to any asset you hold inside the trust and offer more control over when and how your assets are distributed. There are many different trust forms and types, far more than wills.

However, the creation of a trust is only the beginning of the process. You must fund your trust by legally transferring assets into it, making the trust the owner of those assets. This process makes creating a trust a bit more complicated to set up; however, a trust is often enacted to minimize or completely avoid probate, thus keeping personal records private. Avoiding probate is a huge advantage for some people and often justifies the additional complex legal work of setting up a trust. There are nearly as many types of trusts as issues to address in your estate planning, and each offers different protections. However, trusts generally fall into three basic categories.

Basic Trust Types For an Estate Plan

A revocable living trust is, by far, the most commonly implemented trust type. The person who creates and funds the trust is known as the grantor and will typically act as the directing trustee during their lifetime. The grantor may undo the trust, change its terms, and move property and assets in and out of the trust’s ownership as they deem desirable. Revocable living trusts are designed to switch to an irrevocable trust upon the death of the grantor.

An irrevocable living trust is legally binding on its date of designation and allows very few provisions for change. The trust grantor funds the irrevocable living trust with property and assets, and the trust property is then under the care and control of the individual the grantor names as trustee. The grantor cannot change their mind and “undo” the trust. There are unique tax implications and other benefits to an irrevocable trust, including protecting a person’s home and savings from the high costs of long-term care. These benefits can make relinquishing control worthwhile.

A testamentary trust is a provision within a will, appointing a trustee to manage the deceased’s assets. This trust is often used when the beneficiaries are minor children or someone who is receiving public benefits. This trust type is also used to reduce estate tax liabilities and ensure professional asset management. A testamentary trust is not a living trust. It only exists upon the death of the testator (the writer of the will). The executor of the deceased’s estate would follow the terms of the trust (called administering the trust) as part of the probate process.

Things to put into a trust include but are not limited to:

· Stocks, bonds, mutual funds

· Money market accounts

· Brokerage accounts

· Patents, copyrights, and royalty contracts

· House and other real estate

· Business interests and notes payable to you

· Jewelry and precious metals

· Works of art or other valuable collections

Assets that are not affected by trusts include but are not limited to:

· Life insurance proceeds

· Payable on death bank accounts

· Retirement accounts

· Jointly owned assets

· Real estate subject to transfer-on-death deed

The many benefits that proper estate planning with wills and trusts can provide to your family are worth some thoughtful contemplation, legal counsel, and properly drafted documents. We would be happy to meet with you and discuss which options are best for your particular situation. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact us at 513-771-2444.

A Child’s Inheritance in a Will

November 14, 2022Filed Under: Estate Planning

There is a situation few of us care to think about when we are considering transferring our property to our children. What should happen to our property if our children die before us?

I read that when making a will, I could leave my property to my children “per stripes.” Why is the law talking about us like we’re some kind of zebra?

The phrase is Latin and it is “per stirpes,” not “per stripes.” Some bits of property law are extremely ancient in origin and this is one of them.

If a child has died before the parent who leaves property through a will or trust, and that deceased child has passed without leaving any children, many would say that the property should be divided among the remaining children. That situation is pretty straightforward. Suppose that you had three children, and your will said to distribute the property to your children in equal shares “per stirpes.” Then one of your children died without children of their own. The “per stirpes” designation in your will would mean that your surviving children would split your property into two equal shares.

The complication comes, though, when one child has died leaving his or her own children. Let’s call those children “grandchildren.” Would you, as the parent leaving the property, want those “grandchildren” to split the share you had intended for your now-deceased child?

That would be the simplest solution and that is what “per stirpes” would do. If you had three children, and one died leaving two “grandchildren,” your will would direct that your two surviving children would get one-third each, and the surviving “grandchildren” would get one-sixth each. That is distribution “per stirpes.” The phrase means “by the branch.”

The problem there, though, is that from the grandchildren’s point of view, they get less than the other grandchildren. There are a couple of other options we can discuss with you. Or, you can do as most people do, opt for “per stirpes,” and leave it at that.

Zebras have nothing to do with it.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact us at 513-771-2444.

Partnering With Your Spouse or Partner to Plan Your Estate

November 2, 2022Filed Under: Estate Planning

An estate plan that is comprehensive requires careful thought and discussion with your spouse. Before meeting with an estate planning attorney, it is best to discuss your ideas to present a united goal. This conversation can be challenging if you and your loved one have different points of view about your future and the legacy you will leave behind. Suppose you have a blended family; how do you choose to provide for them? There is a lot to process with many emotional topics regarding your mortality, being fair to children, and more.

First, you must decide what elements in an estate plan are most important to you. Once you have a clear idea, you can readily communicate your needs and identify avenues of compromise. At the start of your discussion, state some clear objectives to promote a positive and productive conversation.

Children in Blended Families

Some couples will agree on family beneficiaries, although a blended family with stepchildren may find it challenging. Looking at the big picture first and then fleshing out details can help minimize any tension. There will be back and forth as you craft your ideas and negotiate priorities. Even if you don’t agree on everything, you can discuss why certain elements are crucial to you and openly discuss your point of view until you reach a compromise.

A Partners Rights of Survivorship

Rights of survivorship will not automatically go to an unmarried partner. Because of this, it is critical to create an estate plan specifically addressing how to provide for your loved one. Holding your home as joint tenants gives the surviving partner full ownership of the property. Some payable on death accounts and other designated beneficiary accounts like IRAs or 401(k)s will pass outside probate and be paid to them directly. However, in the absence of a will and other estate plans, the surviving partner often has no legal rights to automatic inheritance. It can be contested.

Setting the Stage for Your Talk

Choosing the right time and place for a serious conversation can lead to a positive discussion. The best circumstances for a talk are different for each couple. Be sure the environment isn’t full of unfinished chores or lots of activities that can sidetrack your estate planning intentions. If you meet resistance to future planning, talk about why you believe estate planning is important to protect yourselves and your family.

Take some general notes and stay open to your partner’s or spouse’s perspective. Avoid being judgemental. If the meeting begins to focus on how you disagree, take a break and give yourself some time to reflect on those issues and revisit the topics when frustration levels are lower. Your estate planning attorney, who understands the best way to structure your estate and is a neutral third party, may be able to help resolve some sticking points later. Continue to focus on the areas where you can agree.

Responsible Estate Planning Takes Time

You will need to craft a will, power of attorney, living will, and healthcare proxy. Some couples will require trusts and insurance policies as part of their estate plan. Your estate plan will cover asset preservation, management, and distribution after you die. It will identify those individuals who will act on your behalf to close your estate properly. If you become incapacitated, your properties, financial obligations, and medical wishes will be clear.

If you already have an estate plan in place, don’t forget the importance of reviewing your documents every couple of years or when family circumstances change surrounding births, deaths, marriage, and divorce. If there are substantial financial changes, it is also wise to review how you plan to address these ups and downs.

While it can be uncomfortable for some couples to broach estate planning, it is a crucial step toward securing your future together and your family’s legacy after you are gone. Approach conversations with a positive attitude and problem-solving spirit. Let your estate planning attorney review and guide your process to create an estate plan well-suited to your life and wishes.

We hope you found this article helpful. If you’d like to discuss your particular situation, please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

Estate Planning: What You Need to Know

October 31, 2022Filed Under: Estate Planning

Despite its reputation as a rite of passage for the very wealthy, estate planning is simply the accumulation of real estate an individual owns, and most people own some or all of their own property. Property ownership includes individual as well as jointly owned bank accounts, stocks and bonds, retirement accounts, real estate, jewelry, vehicles, your online digital footprint, and even pets. Short of being utterly destitute, you have an estate, and planning for it helps to protect yourself, your family, and your loved ones.

According to Caring.com, fewer Americans than ever are engaging in estate planning. The number of adults who have a will or other types of estate planning documents has fallen nearly 25 percent since 2017. Astonishingly, the demographic of older and middle-aged adults are less likely to have wills and estate plan documents at roughly the same 25 percent rate. Additionally, a growing number of Americans lack the resources and knowledge as to how to get a will. Overall, the prevalence of estate planning documents since 2017 has shown a decrease of almost 25 percent.

In their annual survey, Caring.com posed the question to its participants as to why they have put off having estate planning documents, and increasingly people cite a lack of education or the perceived cost of estate planning as the most significant reason. Yet 60 percent of the same respondents think planning their estate is either somewhat or very important. Data shows that as a person’s income increases, their likelihood of having estate planning documents like a will, living trust, or advanced health care directives also increases. Still, the number of people with said documents continues to decrease, even in higher-income groups.

In 2020, study participants in the highest income group show a decrease of 26 percent regarding estate planning documents. Even those Americans with the resources to create a will feel it is something they can put off until later in life, which has disastrous consequences for their loved ones in the case of unexpected death.

caring.com

Estate planning is the process of outlining specific instructions as to how you want your money, and other property dispersed upon your death. It includes decisions about your medical care and final arrangements as well. Wills, trusts, and advanced medical directives are the three primary estate planning documents you need to understand and put into place as soon as possible.

A will instructs how to divide up assets, debt, personal property, and more. A will can cover all of your estate planning needs however, it does come with a few limitations. First, a court process called probate must be started upon death. During this sometimes lengthy process, a judge oversees the transfer of ownership of your property according to your will. Once a probate is opened, the will becomes public knowledge, as well as the property that the deceased owns. For those who wish to avoid court or who wish to keep their affairs private, a living trust may be the best option.

A living trust takes effect at the moment it is enacted while your will only becomes effective upon your death. Planning with a living trust can be more expensive, but it provides the advantage of avoiding probate court and keeps all of your information (and your beneficiaries’ information) private. Further, a living trust can provide for the management of your assets should you become disabled.

An advanced health care directive, like a living trust, is designed to take effect during your lifetime. This directive stipulates your end-of-life wishes as well as what should happen if you become incapacitated and unable to make decisions about your medical care.

A durable power of attorney covers who will make financial decisions for you if you are unable to. You can specify more than one agent, and you can be very specific about what that agent can do on your behalf, including the management of online accounts.

If you are ready to discuss your planning needs, we would be honored to help. If you have an existing plan, we would be happy to review that plan to make sure it still works for you given your current health and financial circumstances. Please don’t hesitate to contact us at 513-771-2444 If you have questions or would like to discuss your personal situation.