What is the difference between a will and a trust?
The main difference is which system controls if you become incapacitated or die – the government’s court system or your own, private system. A will is like a letter to the judge: “Dear Judge, When I die, this is who I want in charge and where I want my stuff to go.” Wills are “probated” in the court system. A trust is a private rulebook written by you. If done properly, the court is not involved in the trust process at all, and your named people simply follow what you have written in your rulebook.
Trusts are often created by people who are concerned about taxes or the costs of long-term care and wish to protect their assets. Trusts are also the choice for people who 1) have blended families and would like to minimize problems between spouses, children, and step-children; 2) wish to ensure certain children or relatives are not involved in their affairs; 3) wish to set up trusts for children (even adults who need protection from themselves or others!); 4) want privacy 5) have a child with special needs; 6) have real estate in more than one state; 7) simply want to save their loved ones time, expense, and stress upon death or incapacity.
Who should be my trustee? Or my executor? Or my power of attorney? (And what are the differences?)
A trustee manages your trust property. Your executor (also called a personal representative) handles your estate in court (probate) when you die. Your agent named in your power of attorney manages your financial affairs or makes medical decisions on your behalf if you are incapacitated. Choosing who will fill these roles is often the most important, and the hardest decision you will make during the estate planning process.
Here are a few things to consider:
- Is the person 100% trustworthy to carry out your wishes?
- Does the person have the time and ability to manage your finances and healthcare?
- If you have a blended family, do you and your spouse agree on a single person, or do you wish to name someone from each “side” of the family to act together?
- Have you considered a professional, such as a bank?
When do I need a power of attorney?
As soon as you turn 18. If you do not have a power of attorney, then you risk becoming a victim of the court system if you are incapacitated for any reason and need someone to make medical or financial decisions for you (known as a guardian or conservator).
Can property or real estate go into a living trust?
Absolutely. Not only will titling property in a trust simplify the process if you are incapacitated or die, if you create an asset protection trust, then the property you transfer to your trust can also be protected from the costs of long-term care.
How do you choose an estate attorney?
The lawyer should not only be able to tell you how many estate plans they have prepared, but how often they have been involved in cases after someone dies or becomes incapacitated. Lawyers who have experience with the family feuds they are trying to avoid for their clients are better estate planners, because they know how to create plans that will protect their clients and avoid problems.
Your lawyer should have experience with your particular concerns – young kids, adult children who cannot manage money or who have drug or alcohol addictions, blended families, charitable distributions, farms and ranches, special needs trusts, long-term care, Medicaid, or taxes. Stay away from the lawyer who says they have little or no experience with your important issues, but can “look it up.”
If you meet with a lawyer who charges more than another lawyer, don’t shy away. Ask them why. I can list for my clients what provisions are in my trust documents that other lawyers frequently leave out. I even provide my prospective clients with a chart that shows the differences between my plans, online forms, and other, common, lawyer-drafted plans.
Do not be afraid to ask and make sure the lawyer you are hiring has the credentials, experience, expertise and ethics to help you.
For questions about this article connect with us at Staff@SmartWomenSmartMoney.com.