Tag: estate planning

Wills vs. Trusts: What’s the Difference?

Posted on April 17, 2023 by Hoffman & Forde, Attorneys at Law - Estate Planning

Estate planning can be confusing, especially when understanding the differences between wills and trusts. While both documents allow you to distribute your assets and property to loved ones after you pass away, they serve different purposes and have unique advantages and disadvantages.

If you’re unsure which option is right for you, keep reading. We’ll explain the differences between wills vs. trusts so you can make an informed decision and protect your assets.

Wills: A Brief Overview

A will is a legal document that ensures your assets and property go to the right people after you pass away. But a will can also be used to name individuals who will manage your state, care for your children, or even outline your burial wishes.

Your will must be signed and witnessed according to each state’s rules to be considered a valid, legal document. And after you die, your executor must take your will to probate court to make it official. After that, your will will be subject to public record.

Trusts: A Brief Overview

A trust is a legal arrangement where an individual transfers their assets to a trustee who manages them according to their wishes. The trustee must follow the rules that the individual sets up for how those assets should be managed and who should receive them.

To better understand the difference between a will and a trust, think of a will as a set of instructions that tells beneficiaries what to do with their assets once they pass away. On the other hand, a trust is more like a container that holds your assets, which a trustee then manages.

Advantages of a Will

There are several advantages to having a will instead of a trust. However, keep in mind that these advantages are unique to your circumstances and goals:

Simplicity: Generally, a will is a simpler document that requires less time and money to prepare than a trust, making it a good option if your assets are small and your instructions are straightforward.
Flexibility: Wills can be changed or updated relatively easily, allowing for greater flexibility.
No trustee necessary: When choosing a will, you do not have to appoint a trustee to manage your assets, simplifying the estate planning process.

Advantages of a Trust

Trusts also have several unique advantages over wills, including:

No probate: Probate is a court-supervised process that can be time-consuming and expensive. It can also tie up your assets for months or even years. A trust ensures you avoid probate altogether.
Increased privacy: Unlike wills, which become part of the public record, trusts remain confidential.
Increased control: A trust also gives you more control over how your assets are distributed to beneficiaries and under what circumstances.

Wills vs. Trusts: Which is Right for Me?

The answer to this question depends on several factors, including the size and complexity of your estate, your goals for distributing your assets, and your preferences for managing your assets during your lifetime.

Generally speaking, a will may be the best option if you have a simple estate with few assets and straightforward distribution goals. But if you have a larger or more complex estate, a trust may give you the control, flexibility, and privacy you need to manage your assets successfully.

It’s also important to consider other factors, such as the potential tax implications of your estate plan and your desire for privacy and asset protection.

Talk to an Estate-Planning Specialist

If you need legal assistance with estate planning, including wills, trusts, and probate matters, contact Hoffman & Forde. Our team of estate planning attorneys is perfectly suited to help you plan for the future and protect your loved ones. With our extensive expertise, we can provide the protection your estate needs in San Diego, Los Angeles, or Orange County. Contact us to schedule an initial consultation.

6 Questions to Ask an Estate Planning Attorney

Posted on March 24, 2023 by Hoffman & Forde, Attorneys at Law - Estate Planning

Estate planning is an important process for anyone with assets to pass on, but it’s also unfamiliar. For this reason, it’s best to have assistance from a lawyer who knows all of the options available to you and how to prepare the necessary documents to stand up to scrutiny later.

If you plan on consulting with a lawyer, you probably want to get the most out of your meetings. To help with this, here are a few questions to ask your potential estate planning attorney.

1. How Much Experience Do You Have with Estate Planning?

As you may be aware, most lawyers have specialized areas of practice, and many have little or no experience with estate planning. In contrast, any attorney could draft a simple will, anything more complicated that should be handled by an estate planning specialist. Many rules govern the preparation of wills, trusts, and other estate planning documents, so you want to be sure everything is done correctly and efficiently.

2. What Do You Charge for Your Services?

No doubt, this is already on your mind, and it’s perfectly acceptable to ask about the attorney’s fee structure. Some attorneys charge a flat fee for estate planning, others charge by the hour, or they may offer both options.

3. How Long Will It Take to Draft My Estate Plan?

With any legal service, it’s always good for both lawyer and client to be on the same page concerning how long the process will take. Attorneys are used to working on longer time lines and sometimes forget to communicate this to their clients. Estate planning is a fairly straight-forward service, so an attorney should be able to give you an accurate estimate.

4. Can You Create a Comprehensive Estate Plan?

A comprehensive estate plan involves more than just a will. You may want to prepare trusts, powers of attorney, life insurance documents, and more. A good estate planning attorney should be able to assist you with any of this, and provide you with guidance to decide on the best course.

5. Do You Offer Periodic Reviews of My Estate Plan?

Estate planning may seem like a “one and done” process, but it’s important to check periodically that everything is up to date. Life events such as marriage, divorce, and children will likely profoundly affect your estate planning goals. Many attorneys offer a periodic review for a set fee, so it’s good to ask about this service.

6. What Happens If You Retire or Change Firms?

Hopefully, it will be many years before you pass away and your estate plan goes into action; it’s possible that, in the meantime, your attorney retired, moved to a different firm, or even passed away themselves. However, estate planning lawyers should have a plan in place for this eventuality, and it’s important to find out what it is for your peace of mind and to make things easier for your loved ones.

Schedule Your First Meeting

Now that you have some questions prepared, the next step is to schedule an appointment. At Hoffman & Forde, our estate planning team has years of experience helping clients craft plans that meet their unique needs. We are at your disposal to answer any questions and to get the process started right away. Contact our office to set up a consultation.

The Different Types of Power of Attorney

Posted on January 27, 2023 by Hoffman & Forde, Attorneys at Law - Estate Planning

Power of attorney (POA) is a very useful legal instrument that authorizes someone to make decisions on your behalf. Similar to an executor who has the power to handle your affairs after you pass away, the person to whom you grant power of attorney (called an “agent” or “attorney, in fact”) has the power to handle things while you are still alive. Contrary to what the name implies, this other person does not need to be an attorney or even have any special skills. Additionally, there are different types of power of attorneys.

Creating one or more POA documents is a common component of estate planning, as it helps protect you, your family, and your property in certain situations. Here are the different types of power of attorney you should know.

Durable vs. Non-Durable Power of Attorney

You may have heard the term “durable power of attorney” before. It means the agent can act on the principal’s behalf even if they become incapacitated. (“Incapacitated” means you can no longer make decisions on your own.) On the other hand, non-durable power of attorney ends when the principal becomes incapacitated. So, for example, if you were to grant POA to your stock broker so they could make trades on your behalf, it would usually be a non-durable POA.

Springing Power of Attorney

Whereas power of attorney usually goes into effect immediately upon signing, a springing power of attorney only becomes effective once certain conditions are met. Most commonly, it becomes effective in the event the principal becomes incapacitated.

While springing POA makes sense in theory, it can create complications and delays. This is because incapacitation is not always clear. For example, if the principal has dementia or has a brain injury, there may be disagreements as to whether they can make their own decisions. In the meantime, medical bills and other affairs that must be managed could be piling up.

General Power of Attorney

In California, a general power of attorney allows the agent to handle any of the principal’s financial affairs, such as paying bills or selling real estate. However, a general POA does not authorize the agent to make healthcare decisions. Typically, this POA is non-durable, meaning it ends if the principal becomes incapacitated.

Limited Power of Attorney

Limited power of attorney also usually relates to handling financial affairs but is restricted in scope. For example, if you own an apartment building, you might grant a limited POA to a property management company to enter into leases, pay bills, etc.

Medical Power of Attorney

A medical power of attorney allows the agent to make healthcare decisions on the principal’s behalf if incapacitated. This can include anything from regular checkups to end-of-life care. Often, the principal will have previously created some healthcare directives defining what they want to happen in certain situations, such as whether to continue life support if they are in a vegetative state.

Choose the Right Power of Attorney

Regardless of which type of power of attorney you might need, a power of attorney should be an integral part of your larger estate plan. Speaking to a lawyer is usually the best first step in determining what POA documents are right for you and ensuring all contingencies are covered.

Speak with one of our experienced professionals. They will review your current situation, and help you design a strategy to meet your needs. Contact our office to get started.

Estate Planning Mistakes and How to Avoid Them

Posted on January 17, 2023 by Hoffman & Forde, Attorneys at Law - Estate Planning

Estate planning is a unique area of law. It’s not adversarial, so it’s relatively easy to accomplish all your goals, but if you make any mistakes, you won’t be around to fix them. For this reason, it’s essential to put a lot of thought into every aspect of your estate plan and benefit from a professional’s advice.

To help you understand your estate planning needs, we’ll go over some of the most common mistakes people make and how to avoid them.

1. Waiting Too Long

This is easily the most common mistake people make. Even though most people recognize the need for an estate plan, it is easy to keep putting it off. None of us enjoy contemplating the prospect of our death, but it will happen someday, and it’s not always as far in the future as we might hope. An unexpected death is tragic enough; failing to leave a clear plan for your estate only makes things harder for your loved ones.

How to avoid: Stop delaying and start thinking seriously about your estate plan. It’s not as time-consuming or expensive as you might think.

2. Failing to Minimize Tax Burden

Every person wants the maximum portion possible of their estate to their beneficiaries and the minimum amount possible to the government via taxation. However, with a little guidance, it is possible to minimize your estate’s tax burden or avoid taxes altogether.

How to avoid: Not all estates will be taxed, so it’s important to first out if all or portions of yours could be taxed. If so, various means, such as living trusts and charitable donations, could reduce or eliminate those taxes. This is best accomplished with the aid of an attorney.

3. Drafting Complex Documents on Your Own

It is possible to create a straightforward estate plan with a fill-in-the-blank will, you find online, but it’s not always a good idea. It may work for someone with few possessions and very specific wishes about who should receive their property after they die. Still, the larger and the more complicated the estate, the more problematic a DIY approach is likely to be.

Because the decedent is not around to answer any questions, estate law is full of formalities that must be followed to prevent mistakes and fraud. This is especially true when it comes to more complicated procedures such as creating a trust. If done improperly, the probate court may set aside your documents and come to its own conclusions.

How to avoid: If you are working on your own estate plan and you’re not sure if you are doing something correctly, it’s a good indication you should speak to a professional. You should talk to an attorney if you have a large estate.

4. Not Naming an Executor

An executor is tasked with putting your estate plan into action after you pass away. For example, if your estate includes a home or real estate, the executor will have the legal authority to transfer the deed or sell the property as appropriate. If you don’t name an executor in your will, the probate court will assign someone to the role. However, that person may not be the one you want to take on the task, or they simply may not be up to the responsibility.

How to avoid: Choose someone capable and trustworthy to be your executor, discuss the situation with that person, and name them your executor. If you’re unsure who to designate or if your estate is particularly complex, having your attorney act as executor may be a good idea.

5. Communication

Depending on the nature of your estate, there may be potential for conflict between beneficiaries after you pass away, which is the last thing most people want as their legacy. The most common root cause for such conflict is when someone fails to communicate their wishes while still alive, leading to surprise, resentment, and confusion.

How to avoid: Simply speaking to people in advance (including those who might be disappointed by your plans), giving them notice, and allowing them to ask questions can clear up many problems and reduce the likelihood of conflict later.

Consult with a Professional

With your legacy on the line and no ability to correct any mistakes after you’re gone, the best choice you can make is to sit down with an estate-planning attorney. You can ask questions, identify issues that may not have occurred to you otherwise, and create a comprehensive estate plan that accomplishes everything you want.

To start the process, schedule an appointment today.

Estate Planning Checklist: What You Should Know

Posted on November 18, 2022 by Hoffman & Forde, Attorneys at Law - Estate Planning

Everyone should have an estate plan—we are have at least some possessions to pass on—yet most people will put off creating an estate plan as long as possible. It’s easy to understand why, but the fact is that while it’s never too early to make an estate plan, someday, it will be too late. If you’re reading this, the issue is already on your mind. So here’s a must-have estate planning checklist to help you get started.

1. Make an Inventory of Your Assets

The first step in any estate plan is determining what makes up your estate. Once you sit down and start making a list, you may be surprised by how many assets you have: your home, furniture, vehicles, collectibles, insurance policy, etc. So don’t worry if you can’t create a comprehensive list on the first go; think of it as a working document you can add to as new things occur.

Take special care to identify property that other people might not know. For example, cryptocurrency can easily be lost when a USB drive is tossed into the trash. Include information on where these assets are located, passwords, etc.

2. Decide Where Your Property Should Go

Once you know what your estate consists of, think about who you’d like to receive that property after you’re gone. For some people, it is simple; they want their surviving spouse to be their sole beneficiary or have the estate liquidated and divided equally among their children. Others may wish for a specific property to go to certain people or to give money to a charity.

It would also be beneficial to start thinking about how you want to transfer the property or plan for specific scenarios at this stage. For example, if you have minor children, consider what will happen if you die before or after they reach adulthood. Or perhaps your spouse is not the biological parent of your children, and you want them to have continued use of your home during their lifetime and then pass it to your children.

3. Consider What Happens If You’re Incapacitated

If you are incapacitated, someone will likely need to make decisions on your behalf. For example, if you are severely injured in a car accident, someone may have to make financial decisions for you or even decide whether to continue life support. Thinking about these scenarios in advance can relieve the burden on your loved ones and ensure your wishes are respected.

4. Draft the Documents

After having defined your estate and decided what to do with it, it’s time to create the necessary documents. A wide variety of legal instruments are available to accomplish virtually any estate planning goal. For some, this may consist only of a simple will and perhaps a medical directive. Others may require more complicated measures, such as setting up a trust. You may already have some assets, such as insurance policies or retirement plans with named beneficiaries; verify that those beneficiaries match your current wishes.

At this stage you should also consider who you would like to be appointed as executor of your estate. This person will have a lot of responsibility—e.g., selling your property to distribute the proceeds—so choose someone you trust who is up to the task. A judge will decide who to appoint if you don’t name an executor.

5. Review Your Plan Regularly

An estate plan created when you were 30 years old may not be sufficient when you are 50. Periodically revisit your estate plan to see if your inventory of assets is up to date or if you need to change your beneficiaries. This is especially important after significant life changes, such as divorce.

Before You Begin, Speak to an Attorney

Estate planning is about peace of mind. You want to know that your loved ones are taken care of and that your property goes where it should. However, doing it on your own presents risks because if the documents are not prepared correctly, they may be challenged in court. Also, you may miss out on simple ways to minimize your estate’s tax liability.

Talking to one of our experienced estate attorneys will simplify the entire process and ease your mind. We can help you evaluate your estate and create a comprehensive plan that covers your needs. Contact our office to set up an appointment.

What Do Estate Planning Attorneys Do and Do You Need One?

Posted on August 30, 2022 by Hoffman & Forde, Attorneys at Law - Estate Planning

Although estate planning affects virtually everyone during their life and after it, there’s a lot of misunderstanding about it. This misunderstanding extends to estate planning attorneys as well, to the point where many are unsure what it is they do and whether one is necessary.

What Is an Estate Planning Attorney?

Understanding what an estate planning attorney does requires understanding an estate plan. The term “estate” means all of your property. That is, everything in your name that can be passed on to someone else after you die. An estate plan, as you might guess, is the plan for what will happen to that property when you die or become incapacitated to the point where you can’t make decisions for yourself. If someone dies without an estate plan, their property is distributed among surviving relatives (or to the state, if there are none) according to the laws of intestacy.

Because someone dead or incapacitated can’t speak for themselves, many laws and safeguards are in place to prevent abuse. Estate planning attorneys specialize in this area of law and the documentation required to enable their client’s wishes. They primarily draft wills, trusts, and power of attorney forms that clearly express what the person wanted and hopefully reduce conflict among the surviving parties. Estate planning attorneys also work to minimize the tax consequences of passing along one’s estate.

Do You Need an Estate Planning Attorney?

Not everyone needs an estate planning attorney, but many people could benefit significantly from consulting with one. There is no one-size-fits-all test to determine if you should talk to an estate planning attorney. However, there are several factors to consider that may be helpful.

Size and Complexity of the Estate

It should be no surprise that the greater the value of the estate, the greater the need for comprehensive estate planning. Larger estates generate more intense interest from survivors, potentially leading to conflict. Additionally, the tax consequences are often a bigger concern. Generally, the more complex estates and deceased person’s wishes require the expertise of an estate planning attorney.

Creating a Trust

Trusts are an excellent and versatile estate-planning tool that can help you care for your loved ones, establish your legacy, and even avoid estate taxes. However, they require careful planning and should be created with the help of an attorney.

Children

Parents, especially single parents, can gain peace of mind by recording how they want their children cared for in the event they pass away before the children become adults. This can involve establishing a trust and perhaps designating someone to be a caregiver.

Business Owners

If you are an owner or partner in a business, a succession plan sets out who will be in charge and receive your interest in the company.

Health Concerns

If you have a serious health condition (and even if you don’t), you should consider taking a moment to communicate what will happen if you pass away or if you become incapacitated. For example, if you are about to have major surgery, granting power of attorney and detailing your health directives can help your loved ones make decisions if there are complications.

Talk to an Experienced Estate Planning Attorney

Creating a clear estate plan ensures your wishes are met after you’re gone and reduces uncertainty for your loved ones. Our team has years of experience creating estate plans that range from the basic to the extremely complex. Schedule a consultation today to learn how we can help you with your estate plan.

Estate Plan Checklist: Is It Time For A Checkup?

Posted on November 9, 2021 by Hoffman & Forde, Attorneys at Law - Estate Planning

Couple Working On Their Estate Plan Checklist

How is your estate plan looking these days? If you created it years ago and have not kept it up to date, it might not match up with your wishes anymore. Our lives hardly ever remain static for an extended period of time, so it’s only natural that an estate plan would slowly—or sometimes rapidly—fall out of sync with our current reality. Ask anyone to create a high-level estate plan checklist, and you might get a few different versions, but they generally look something like this:

Take stock of your assets
Define your goals
Meet with an attorney to create the right plan
Revisit the plan from time to time to make sure it’s up to date

It’s very easy to lose track of this fourth component because it’s natural to think, “That’s done, now I don’t have to worry about it anymore.” However, sometimes an out-of-date estate plan can be just as bad as having no plan at all.

Why You May Need to Change Your Estate Plan

As circumstances in your life change, it is likely that your approach to estate planning and the legacy you want to leave behind will change as well. Here are some of the most common reasons that may cause someone to need to update their estate plan.

Marriage & Divorce

When people marry, they, of course, want to provide for each other, but they usually also want their new spouse to be involved in the planning process. There are probably new family members to consider, and marriage often brings new assets into the equation. On the opposite side, divorce involves a complicated disentangling of previous estate plans.

Increase in Assets

Our assets profoundly affect our estate plans. As we work, save, and invest, it’s common for our assets to increase as we get older. This may create considerations that did not exist before. For example, a person who once rented an apartment may later have rental properties of their own; that rental income could go into a trust for a family member or charitable organization.

Death or Birth of Family Members

Since most estate plans deal mainly with leaving assets to family members, it is expected that the plan should change as the family changes. In addition, as people pass away or children are born, you may need to make some major updates.

Changes in Attitudes and Opinions

This can cover a wide variety of situations. For example, you may have previously planned to leave a greater share of assets to a particular child because you thought they needed it, but now that’s no longer the case. Or, if you have created a health care directive—which we highly recommend—your thoughts on the subject may have evolved over the years.

Making the Necessary Changes

However your life changes, it is critical that your estate plan changes with you. First, review your current plan and make sure it matches your wishes. If not, that doesn’t necessarily mean you have to start over from scratch, but you should essentially repeat the original process: 1) Take stock of your assets; 2) Define your goals, and 3) Meet with an attorney to help you put the new plan into action.

Our team of experts is ready to meet with you to ensure you have the estate plan you want. Contact us today to schedule a consultation and we’ll help you review your estate plan checklist.

Estate Planning 101: The Different Types Of Trusts

Posted on September 23, 2021 by Hoffman & Forde, Attorneys at Law - Estate Planning

Creating a trust or multiple trusts is an indispensable part of the estate planning process for many people. Trusts offer many advantages. They can reduce taxes, simplify the probate process, and give the grantor (the person who creates the trust) some amount of control over how their assets are used and managed even after they pass away. There are many different types of trusts in California. There is no one-size-fits-all approach because each has its advantages and disadvantages. Understanding some of the most common trusts will give you a sense of the tools available to you.

Testamentary Trust

The grantor’s will creates a testamentary trust after their death. A person might want this type of trust if they don’t wish to fully transfer their property to an heir (in the case of minor children, for example).

Because it doesn’t come into existence until the grantor’s death, the grantor may annul or make changes to the terms of a testamentary trust while they are still alive. However, the assets of the trust must go through the probate process.

Living Trust

As the name implies, a living trust is created while the grantor is still alive. The tax implications of a living trust and the degree of control the grantor may keep over the assets depend on whether it is a revocable or irrevocable trust.

With a revocable trust, the grantor may move assets in and out or annul the trust. However, any income is taxable to the grantor.

An irrevocable trust cannot be changed once created, so the trust itself must pay the taxes.

Special Needs Trust

A special needs trust provides for the needs of a person who is chronically disabled. The major advantage of a special needs trust is that the disabled person may still receive government benefits such as SSI or Medi-Cal. That’s even when the value of the assets in the trust would otherwise disqualify them.

A special needs trust can either be first-party (funded by the assets of the disabled person) or third party (funded by someone else).

Life Insurance Trust

With a life insurance trust, the trust owns and pays for an insurance policy on the grantor’s life. When the grantor dies, the proceeds of the policy are paid to the trust and distributed accordingly. Because the assets are not part of the estate, this arrangement can reduce or avoid estate taxes.

Charitable Trust

There are two main types of charitable trust: the charitable remainder trust and the charitable leads trust.

With a charitable remainder trust, the grantor may receive income from the trust assets for a certain period of time or the rest of their life. The assets are distributed to designated charities after the set period.

A charitable lead trust works oppositely. Income is paid to charity for the duration of the trust, and afterward, the assets may be distributed to family or others. The two types offer different income and estate tax benefits.

For Expert Advice on Different Types of Trusts

The list of California trust types could go on: bypass trusts, spendthrift trusts, blind trusts, etc. You have many options available to meet your unique needs, but it’s crucial to speak with an experienced estate planning attorney to find the best fit. Contact our office today to schedule a consultation.

Is DIY Estate Planning A Good Idea?

Posted on September 9, 2021 by Hoffman & Forde, Attorneys at Law - Estate Planning

Many people don’t have an estate plan in place. They may be young or believe they don’t have enough assets. Others recognize the need for one but try to do it all on their own. While we understand the impulse to avoid hiring an attorney, the benefits generally far outweigh the drawbacks and risks of DIY estate planning.

Risk #1: Invalid Documents

Whether it’s a will or trust or both, you must follow many rules and requirements for them to be considered valid.

If the documents you drafted aren’t clear enough, can’t be authenticated, or try to distribute assets in a way the law does not allow, they may be declared invalid by the probate court. In that case, the court will likely distribute your property according to the laws of intestacy (the state’s default rules of inheritance).

It’ll create two significant problems. First, your estate may not go to those to whom you wanted it to go. Some people may be overlooked, while others may receive more than you wanted. Second, it can make life difficult for those you’ve left behind. When someone contests a will in probate court, the process can be long, expensive, and emotionally exhausting.

A clear and professionally prepared estate plan, on the other hand, is much more likely to be executed smoothly and according to your wishes.

Risk #2: Higher Taxes

One of the most important considerations for an estate plan is the impact it’ll have on taxes. And that’s whether it’s your taxes, the taxes on your estate, or the taxes your heirs must pay.

There are various ways to reduce the overall tax burden and control when you must pay the tax. It can be complicated, and we advise you to leave it to the professionals.

Risk #3: Missed Opportunities

With a DIY estate plan, one big drawback is that you don’t know what you don’t know. Many tools will help you accomplish specific goals and prepare for a wide variety of contingencies. But unless you’re familiar with the ins and outs of estate law, you’re likely to take a few missteps.

Rather than trying to figure everything out on your own, a consultation with an attorney is crucial to make sure nothing gets missed.

Southern California Estate-Planning Experts

You’ll spend your whole life building up your estate. Determining what happens to it after you’re gone is one of the most important decisions you will make.

Trying to go it alone is likely to be frustrating and time-consuming. But more importantly, it may have unintended consequences for those you leave behind.

A quick consultation with our expert attorneys can help you create an estate plan that works and is right for you. Contact our office today.

Do You Need Both a Will and Trust?

Posted on August 16, 2021 by Hoffman & Forde, Attorneys at Law - Estate Planning

When it comes to estate planning, every case is as diverse and unique as the people involved. Luckily, modern estate planning offers a wide array of tools to accommodate virtually anybody’s goals. What is right for you will largely depend on the nature of your estate and those who you want to benefit from it.

Many clients come to us feeling torn between setting up a trust or relying solely on a will, but there is no need to choose between one or the other; a single estate planning can, and often does, include both a will and a trust (or multiple trusts).

Creating a Will

As most people know, a will is a written document that communicates how a person wants their property distributed after they pass away. It can be as simple or complex as the testator (the person who makes the will) wants it to be.

If a person dies without a will—“intestate” is the legal term for this—the state laws of intestacy provide a generic hierarchy for transferring their property. For example, if the person had a spouse, all the property goes to him or her; if not, it will be distributed equally among their children; if there are no children, then to the decedent’s parents, etc.

Of course, many people want a more custom-tailored estate plan than is offered by the laws of intestacy. For example, they may wish to leave specific property to specific people or leave property to a spouse for the rest of their life (called a life estate) before passing it on to their children. A will can accomplish all this and more when drafted by an experienced attorney. It can even be used to create a trust.

Different Types of Trusts

A trust is a legal arrangement whereby property is held on behalf of and for the benefit of another. Here’s an example: a person owns an apartment building; she dies, and by the terms of her will, if she dies before her child reaches the age of 21, the apartment building will be held in a trust until that time. The trust is its own legal entity, and all of the assets are managed by a trustee. The trustee has a legal obligation to maintain the building, pay taxes, etc. (paid for by the trust); depending on the terms of the trust, the monthly rental income may be paid out to the child, invested in a college fund, or whatever else the parent wished.

There are quite a few types of trusts, but they are separated into two main categories: revocable and irrevocable trusts. As the names imply, a revocable trust can be revoked by the trustor after its creation, while an irrevocable trust cannot. A trust established by a will is by definition an irrevocable trust, as the trustor is no longer around to revoke it. As to so-called “living trusts,” there are many reasons a person might create one or choose one type over another. For example, they may be looking to minimize their tax exposure or ensure that a child with diminished capabilities is cared for.

Identifying the right kind of trust and drafting a document that withstands legal scrutiny can be a complicated process. Therefore, you should consult an estate planning attorney.

Finding the Right Balance

With so many options available, estate planning involves choosing the right combination to suit your needs. The best way to do this is to sit down with an attorney who understands this area of law, identify your goals, and craft a plan accordingly. Take the first step today and contact our office to schedule a consultation.