Wills, Trusts and Estates, what you need to know:

 

Many people wonder if they really need a will. They may think that they don't have enough assets to bother with a will. Some people erroneously believe that a will causes your heirs to have to go through probate, leading to unnecessary expenses. However, a will is a good idea for just about everyone. Read on for some of the reasons to have a will.

A will is a document in which a person declares what he wants done with his property at the time of his death. A will has no effect until the person who wrote it, known as the testator, dies. The testator can also revoke a will at any time prior to his death.

If you die without a will, the state will distribute your property to your heirs according to the state's intestacy statutes. The statutes might call for a distribution that is similar to what you want. Then again, maybe they won't.

State intestacy laws will provide how the sum total of your property is to be divided among your heirs. It can't provide for who will get certain specific items of your property. This can lead to many problems. Your heirs may not agree on who will get certain items of your personal property. For example, say you have inherited your grandmother's wedding ring and intend to pass it on to your daughter. If you die without a will saying that is what you want, your son may feel very strongly that his wife should have it. So even if you don't have a lot of assets, you may be concerned about making sure that certain items of your property go to the people that you want it to. You can do this with a will.

Another misconception about having a will is the idea that having a will causes your heirs to have to go through probate, and that it will be difficult and expensive. If you die without a will, the court is still going to have to oversee the distribution of your assets to your heirs. There is absolutely no reason to think that this process is made easier or less expensive by your not having a will. In fact, it will probably be more expensive. For one thing, whoever administers your estate will probably have to post a surety bond if you don't have a will. If you do have a will, not only can you choose the person who will administer your estate, you can provide that he or she will not have to post a surety bond.

Do you have minor children? If so, you really need a will. If you don't have one, the probate court will have to set up a conservatorship to manage your children's share of your property. A judge will decide who manages the money. When each child turns 18, he or she will get his share, whether they can handle it or not. If you have a will, you can decide who will manage your children's inheritance on their behalf and you can choose the age at which you want it to be distributed to them.

Even if your estate is small, there are good reasons to have a will. You should see an attorney who practices in the area of estate planning or wills and trusts. This attorney can also help you decide if you need more advanced estate planning techniques and help you implement an estate plan that is best suited to your needs.

 

Trusts:

 

It is, admittedly, difficult to pin down what exactly a trust is. We could tell you that it is a legal entity that is capable of owning property. You can't see it. You can't touch it. You can't speak to it. So what does a living trust really do?

A trust allows you to gather together in one document all your significant property. This is important if you want to make sure that your property is distributed easily and quickly after your death. The trust, not you, owns that property. This doesn't mean that you no longer have control of your assets. Since you, the grantor, will usually appoint yourself as the trust's initial trustee, you still have complete control of your property. You can do what you want with that property - you can even transfer some property out of the trust or add property to it. A living trust is an easy way to keep track of all your assets and manage them as a single unit. Most importantly, a trust allows you to provide for the quick and efficient distribution of your property to loved ones when you die.

A living trust is created with a document known as a Declaration of Trust. This is the legal document which names your beneficiaries, describes your trust property, and provides for the terms of its transfer. The living trust is managed by the trustee; in most cases, the initial trustee is the person who forms the living trust. You may later designate someone else or an institution, like a bank, to act as a trustee. The trustee is also responsible for managing the property covered by the trust.

Estates:

 

It's a good idea to update your estate plan every few years or after the occurrence of significant life events such as marriage, divorce, the birth of a child, or adoption. Even if you haven't experienced any of these events since you last updated your estate plan, there may have been changes in tax laws or changes in your financial situation that necessitate a reevaluation of your estate plan.

Your desires as far as how your property will be distributed are likely to change over the years, especially as certain events occur in your life. For example, if you get a divorce, you probably don't want to make the same bequest to your former spouse as you did when you were married. In some states, provisions regarding an ex spouse in your will can be disregarded, and the remaining portions of your will followed. In other states a will that is created prior to a divorce will be deemed invalid after the divorce.

The birth or adoption of a child is another life event that will require you to update your estate plan. Even if your will already provides for children, it is a good idea to update it each and every time you have a child.

Other significant events that will require you to update your estate plan are marriage, re-marriage, the death of a beneficiary, and the death of an administrator or executor. Most states provide for a statutory share of the estate that will go to a surviving spouse. If this statutory requirement is not in keeping with your estate planning desires, you will need a to have a valid pre-nuptial or post-nuptial agreement to avoid it.

This becomes particularly important for individuals in a second marriage who have grown children from a first marriage. In this situation, you may want to provide for the comfort of your current spouse during his or her lifetime, but you will want to make sure that your children ultimately inherit your assets. Without proper planning, your current spouse's children could end up inheriting your assets, instead of your own children.

Another thing that tends to change over the years is your financial situation. If your current estate plan was made even a few years ago, your net worth may have changed enough that you will need to incorporate more estate tax planning into your estate plan. Also, tax laws are constantly changing, and some changes may necessitate updating your estate plan.

Finally, you should reevaluate your desires from time to time. You may find that you've changed your mind about a variety of issues addressed by your estate plan. Do you want a different person to be the administrator of your estate, rather than the one who is currently named in your will? Did you grant a health care power of attorney to one of your children and now that child has moved to a different state? Is there something about the way one of your beneficiaries is leading his or her life that would make you want to put their bequest into a trust rather than granting it outright. You may have become aware that one of your children has trouble managing money and you fear their creditors might end up with the inheritance.

If you already have an estate plan in place, you deserve congratulations for planning ahead and being prepared. But you also need to remember to update it from time to time as your situation or needs change.