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Whether you are looking to form an estate plan, or you are looking at someone else’s estate plan wondering what to do after an accident, the terms can be confusing. Let’s shed a little light on a few of the basics. Each state is different, and some use the uniform probate code, and some do not. Some states, like California, are much more complicated than others, but almost with every one of the 50 states, the basic difference between a last will and a trust for estate planning purposes, is the same.
When a testator executes a will, he or she will list all of his or her heirs. Next, the testator will appoint a personal representative to manage the estate while the property is being distributed. Finally, the testator will declare what is to happen to his or her property upon her or her death.
A last will is fairly simple. Lawyers can make them complicated by planning for contingencies, but if a will does not prepare for contingencies it can be invalid. An example for a couple with children: If one spouse survives the other, he or she will inherit 100 percent of the other’s property. If one spouse pre-deceases the other of their two children shall each inherit 50 percent of their property. And so on and so on. Lawyers even prepare for there to be no heirs.
Wills can be revoked and changed at any time, so long as the new will is properly dated, witnessed, and signed. The latest will is always the most valid. However, a will does not go into effect until the testator dies.
In the practice of law a “Trust” can be used for many things. They can be revocable and amendable and irrevocable and permanent; for the transfer of property or on behalf of your beloved pet turtle; but when most people are making an estate plan their attorney drafts a revocable trust. That means that is a document that can be changed repeatedly.
Trusts are different than wills because a trust takes effect the day it is signed. Property is moved into the trust and managed by a trustee for the benefit of the beneficiaries. Usually, in an estate-planning trust, someone is a trustee of their own property until they die and then someone else becomes trustee of the trust and distributes the property from the trust to the heirs and beneficiaries of the trust.
The most important difference between a will and a trust is that if you have a trust, you can avoid probate court. The procedure is this: in order to transfer property under a last will, the will must be presented to a judge and the personal representative appointed by a probate court. Under a trust, the trustee changes without approval of a court, and that property can pass under through a trust without going to court. It seems like everyone should have a trust, and wills should go out of style, but there is one more hurdle.
If a piece of property is not properly transferred into the trust while the original trustee if alive it cannot be transferred after the original trustee’s death. There will be other procedural hurdles, and the family will still end up in probate court.
Estate-planning lawyers often advise, young couples, families with children, and anyone planning to buy or sell real estate to prepare an estate plan by writing a last will. When life slows down, and your assets are stable, and unlikely to change, it is easier to make a revocable trust.
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