Do You Need a Will or Trust?

The Need for a Will or Trust

What is a Trust?

A trust is a legal document that allows a third party, a trustee, to hold and direct assets in a trust fund on behalf of a beneficiary. A trust greatly expands your options when it comes to managing your assets, whether you’re trying to shield your wealth from taxes or pass it on to your children.

Although trusts are used by people with significant assets and/or estates, a trust can be used by anyone who wants to take advantage of some of the benefits it offers, such as allowing your heirs to avoid probate.

By creating a trust, you can:

Determine where your assets go and when your beneficiaries have access to them.

Save your beneficiaries (your children) from paying estate taxes and court fees.

Protect your assets from creditors that your beneficiaries may have, or from loss through divorce settlements.

Direct where remaining assets should go in the event of a beneficiary’s death. This can be helpful in a family that includes second marriages and step-children.

Avoid a lengthy probate court process.  Probate is a process an estate may go through depending on the amount of your estate or if there is no will.  It can be expensive and take months to years to settle, leaving beneficiaries hanging while the legal process takes place.

There are many different types of trusts, however, the most common is the Marital Trust between spouses which allows for the marital deduction at the death of the first spouse. 

Trusts should be done by a knowledgeable estate planning attorney.  They are expensive, however, if you have a large estate, the expense is worth it.

The Need for a Will

It is extremely important to have a will to list distribution of your assets at death.  A will also names beneficiaries and lists property owned by the deceased.  Depending on the size of your estate, a will may be sufficient for most people without the need of a trust.  One very important reason for making sure your will or trust is up to date is in the case where both parents die prematurely and who would take care of the children.  Also, like it or not, siblings and heirs fight needlessly over money and to have everything spelled out will eliminate most of that nonsense.

Review your will or trust periodically especially if major life-changing events have taken place.

What should be included in a Will

A list of all property.  This includes absolutely everything:  life insurance, bank accounts, retirement accounts, real estate, personal property, etc. 

Distribution wishes to the beneficiaries.

Who will care for children or special needs family members should this be a consideration.

A durable power of attorney for medical and estate, and an advance medical directive. 

Who you would like to be the executor of your will.

Of course, there may be other considerations that are individual.

Different ways to draw up a Will

Seek the services of an attorney.

You can type the will yourself and have two witnesses sign it.

You can do a holographic will, which means you write the will in your own handwriting and sign it.

It’s very important, however, to use proper language if you are doing your own will.  For example:  Title the document “Last Will and Testament,” then state that you declare this is “the last will and testament of (your name).” State that you are of sound mind. List your complete address and date of birth so that there can be no confusion as to your identity. State that you revoke any prior wills created before this document.  Print your name, full address, and date at the bottom of the will. Include a line for your signature and three additional spaces for names, addresses, dates, and signatures of each of the three witnesses.

Also, if you choose to do a will, not a trust, each spouse needs to have their own individual will. 

Velinda Peyton

Financial and Retirement Consultant

Rancho Cucamonga, CA