To put it simply, a will is a legal document which states what is contained within a person’s estate, and who should receive what portions of that estate when the estate owner dies. This person is referred to as the testator, and the people who are to receive from the estate when the testator dies are referred to as beneficiaries. A will is used in estate planning to designate how real or personal property is to be disposed of.
Generally speaking, for a will to be considered valid and legally binding in most states, the will document must meet each of the following elements:
- The will must be in writing, as oral wills are generally considered to be insufficient.
- The will must be signed by the testator. Additionally, although not necessarily a requirement, a will should also be dated. Doing so helps to reduce confusion associated with which is the correct will if there are multiple wills.
- If the testator is not able to sign their name, such as if they are unable to use their hands, then making a mark such as an X will be considered sufficient when the witness’s signing can attest that the testator did in fact sign it.
- The will must be witnessed by two or more competent witnesses. Additionally, the witnesses cannot be interested. What this means is that they cannot be named in the will as a beneficiary, or otherwise have a stake in the will.
- The testator must possess testamentary capacity. Generally speaking, this element of testamentary capacity is met if the testator is above the age of eighteen, is in the military, or is legally married; and:
- Knows that they are creating a will;
- Knows that the effect of the will is to distribute their property upon their death;
- Understand the property that they are distributing; and
- Understand who is receiving the property that they are distributing.
It is important to note that the above mentioned requirements can vary depending on the state in which the testator resides, as well as what specific type of will is being created. An example of this would be how if the will is a holographic will, it generally does not need to be witnessed so long as the will is both written and signed by the testator.
What Is a Trust?
A trust is another type of legal device which allows the owner of property to make transfers of said property. A trust also allows the testator to have the property, which is generally referred to as trust assets, managed on behalf of someone else, who is generally referred to the trustee. As with wills, trust laws can vary widely from state to state.
Trusts are generally an efficient way for people to transfer their assets in such a way that they can still control and manage. An example of this would be how they may place certain conditions on the trust property which must be fulfilled before the property is transferred to the trustee or beneficiary.
An express trust is an intentionally, deliberately created trust. The trust’s creator distributes property or funds to a trustee, who then holds the property “in trust.” What this means is that the trustee holds legal title to the trust, subject to the rights of individuals. These individuals are known as beneficiaries, and they are the individuals that are entitled to receive the trust property.
There are two types of express trusts that are recognized by law. The first is known as a lifetime, or inter vivos trust. The second is known as a testamentary trust. An inter vivos life trust is set up during the lifetime of the person who created the trust, known as the settlor.
Generally speaking, the requirements that must be satisfied in order for a trust to be valid include:
- There must be a settlor (or, creator of the trust);
- The settlor must deliver legal title to any named property;
- The property, which may also be referred to as res, corpus, or trust principal, must be delivered to a named trustee;
- The named trustee must hold legal title to the property;
- The legal title must be held for the benefit of one or more trust beneficiaries;
- Creating the trust must be intentional;
- This intent to create a trust must be for a lawful purpose, and cannot be for illegal purposes; and
- The document which embodies the trust must be validly executed.
How Do Wills And Trusts Differ From Each Other?
As you can see, wills and trusts are quite similar to each other. However, there are some notable differences between the two estate planning documents.
Unlike wills, the effects of a trust can happen while the creator is still alive. As previously mentioned, this is known as an “inter vivos” or “living” trust. Although a will distributes a person’s property upon their death, a trust can distribute a person’s property before their death.
A valid will generally must be put through the probate process, in which the assets and property of the testator are distributed. This is often a complicated, long, and expensive process. Alternatively, trusts do not have to go through any sort of probate process; however, the creation of a trust is generally considered to be more expensive than the creation of a will. Additionally, the trust property must be managed by a trustee. What this means is that there are additional expenses beyond the creation of the trust instrument.
Finally, when wills are admitted to probate, the testator’s assets and property are exposed to the public. This is because the probate process is public. However, trusts and trust property are private and confidential. Another difference is that trust property may be exempt from the reach of creditors. An example of this would be how if a valid spendthrift trust is created, the trust property will be not reachable by certain creditors.
What Else Should I Know About Wills And Trusts?
If you die before you create a will, you have died intestate. To put it simply, intestate means dying without first making a will in order to distribute your property upon your death. Each state has differing rules regarding intestacy.
Generally speaking, your property will be divided equally amongst your surviving family at the first generational level. Your property will then be distributed in equal shares, meaning that your spouse or children may not receive your property according to your wishes. This is because the laws of your state determine who receives what proportion of your property.
Additionally, if you wish for your siblings or parents to receive certain specific property upon your death, it is better to draft a will before you die. This will designate and determine who receives what property. Further, it is important to note that some property cannot be distributed in a will.
In terms of trust creation, there can be many different legal conflicts and disputes that may arise. Some examples of common trust issues connected with its creation include, but may not be limited to:
- Disputes regarding who the named beneficiaries are;
- Disputes associated with selection of the trustee, as well as the extent of their fiduciary duties;
- Questions or concerns in terms of the type of trust that has been selected; and
- Issues associated with setting up a trust in such a way that it violates the law.
Do I Need An Attorney For Help With Wills And Trusts?
If you have any questions about the differences between wills and trusts, or if you wish to create one or both of these estate planning documents, you should consult with an experienced and local estate lawyer. An area attorney will be skilled and knowledgeable in helping you understand your state’s laws regarding the matter.
Additionally, an attorney can also help you draft documents that adhere to these laws. They will also be able to represent you in court, as needed, should any issues arise.