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Wills and trusts offer options

Wills and trusts offer options ginabarrynew0308.jpg
Gina Barry
August 2012 By Gina M. Barry Bacon Wilson, P.C. Special to PRIME One of the most common decisions you will face when establishing an estate plan, is whether to create a will or a revocable trust. Both devices enable distribution of your estate upon your death, but most estate plans do not require a revocable trust for stated goals to be met. In order to determine which is option is best, it is necessary to understand the differences between them. A will instructs the personal representative how to distribute the assets of your probate estate; which, at the time of your death, consists of the assests held in your name alone, without a designated beneficiary. In order for a will to "speak," it must be probated. Somewhat simplified, probate is a state court proceeding in which your will is proven, your debts are paid and your property is transferred to your beneficiaries as directed in your will. The negative aspects associated with probating are the expense, it will cost approximately 3 to 4 percent of the value of the probate assets; the time, at least one year is needed for completion; and the burden, generally the process requires substantial administrative work by your family members. Will substitutes, such as joint ownership and beneficiary designations, pass your assets to your heirs without the necessity of probate. In cases where will substitutes are not sufficient or desirable, a trust may be in order. A revocable trust is a written declaration and contract. It states that you are transferring your property into a trust, for the benefit of yourself during your lifetime and for the benefit of your desired beneficiaries after your passing. You can amend or revoke this type of trust at any time during your lifetime, so long as you are competent to do so. This type of trust typically involves three parties: the grantor, the trustee, and the beneficiary.
  • The grantor is the person who creates the trust and places assets into it. There can be more than one; for example, a husband and wife who create a trust jointly.
  • The trustee is the person who holds legal title to the trust property and is responsible for managing and investing it. Often, the grantor and trustee are one in the same. A successor trustee is usually named to serve if the grantor becomes incapacitated or passes away.
  • The beneficiary is the person or people who will receive income or principal from the trust.
Once an revocable trust is established, it must be funded to avoid probate and to ensure the instructions are followed. Funding simply means changing the title of your assets from your individual name to the name of your trust. If all assets are transfered to the trust, there won't be court proceedings, distribution delays, extra fees, or onerous administrative work for your family members, upon your death. Please note, if you establish this type of trust, competent counsel will recommend that you also establish a will, known as a pour-over, which leaves all your assets to your trust, ensuring your wishes are carried out. A trust can provide a solution to a myriad of estate planning concerns, but is often more desirable when your estate plan includes minor or unstable beneficiaries; family disharmony, that could lead to a will contest; or assets held in multiple states, which could require multiple probates if a trust is not established. Your estate plan should be specific to your situation and goals, and only you can decide whether you should establish a will or a revocable trust. Contact an advisor to discuss your situation and goals, so he or she can assist you in determining which option is best for you. Gina M. Barry is a Partner with the law firm of Bacon Wilson, P.C., Attorneys at Law. She is a member of the National Association of Elder Law Attorneys, the Estate Planning Council, and the Western Massachusetts Elder Care Professionals Association. She concentrates her practice in the areas of Estate and Asset Protection Planning, Probate Administration and Litigation, Guardianships, Conservatorships and Residential Real Estate. Contact Barry may be reached at 413-781-0560 or gbarry@baconwilson.com. Bookmark and Share