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Why Should You Make a Will?*
There are a number of reasons why people make a Will. The primary reason for making a Will, however, is to leave your property to those you care about, and in the proportions you choose.
If You Die Without a Will
If you die without a Will, the property in your name in most instances will be distributed, pursuant to law, among your family members. This distribution may not be exactly the way you prefer. For example, if you are survived by a spouse and children, your spouse receives the first $50,000 and one-half of the balance of the property, and the children share the rest.
If You Die Without a Will Leaving Children Under 18
If you and your spouse should die without a Will leaving children under 18 years of age, the court may appoint a guardian for your children without considering your wishes.A court-appointed guardian will also be required to manage assets that you leave to your children who are under 18 years of age at your death. If your spouse survives you, the court probably would appoint your spouse as guardian, but a bond may have to be posted. Payment of the bond premiums will cost money--money that could be used to pay for your child's education, clothing or living costs. The court will also require annual accountings of income and expenses. In addition, investment of the funds by the guardian may be limited by the court. Because of these limitations, the child's funds may not grow at an acceptable pace if the guardianship lasts for any length of time. All of these problems could be easily avoided with a properly drafted Will.
As you can see, it is important that you make provision not only for a guardian of the property of any child under age 18 but also, and perhaps more importantly, you should name a guardian of the child's person. A guardian of the person is given custody of the child during minority.
A Will is Your Personal Plan
A Will is tailored to your own particular needs. Through a Will you can choose how your wishes will be carried out after you die. In the Will you name "executors" who will handle your property. An executor can be a relative, a friend, your lawyer or a bank or trust company that specializes in the handling of estates.While you can make your own Will using pre-printed forms prepared in your own handwriting, it may not be legally valid and it may not be the best Will for your personal situation. Making the best plan and the best Will takes knowledge and expert advice. For example, did you know that property held jointly with another may not be distributed by Will? Or that life insurance, individual retirement accounts, pension plans and other assets may not be distributed by Will depending who is named as beneficiary? Or that a spouse has a right to a car and some other items, and to a large share of the property no matter what your will may say? The best plan recognizes that the best Will is only part of the total plan for the distribution of your property.
Your Lawyer's Fee
You should discuss your lawyer's fee in advance. The cost of drafting a Will usually depends on the amount of time your lawyer spends on the matter and the complexity of your assets. In small estates, when a Will contains no complicated provisions or unusual problems, the fees are nominal. Remember, making a Will is one of the wisest investments of your life--and after. To have the best plan for yourself and for your beneficiaries, call a lawyer and make an appointment to discuss your Will. Remember, the advice of an expert may prove invaluable.
What is a Living Will?
A Living Will is an expression of your wishes with respect to the use of "extraordinary" life sustaining measures in the event that you become unable to make your own health care decisions. Adults of all ages should consider preparing a living will, which will become effective only in the event that you are incapacitated and cannot make decisions for yourself. Different states have different rules for what living wills should contain, but all states permit you to decline "extraordinary" life sustaining measures if the situation should arise in which there is no reasonable expectation of your recovery from extreme physical or mental disability.
What is a Revocable Trust?
A revocable trust is an arrangement by which you transfer ownership of your assets to another entity, called a trust. You may establish a trust during your lifetime ("inter vivos trust") or you may provide for one in your Will ("testamentary trust"). You generally have the power to revoke the trust when you wish.
If you establish a trust during your lifetime, you (the settlor) can set up the trust with your own assets and retain management and control of these assets if you act as your own trustee. You can also designate someone else as your trustee; for instance, in the event you become incapacitated.
An inter vivos trust is an good arrangement for many. An inter vivos trust can be used as a substitute for a Will, in that it provides for the distribution of assets upon the settlor's death. The trust assets are distributed directly to the beneficiaries and, unlike a Will, there is no automatic court supervision or probate. One advantage is that the allocation of assets is faster and less costly than through distribution pursuant to a Will.
Persons who are considering a trust arrangement should be aware that there is no ongoing court supervision of the trustee; therefore there is less protection if the assets are mismanaged. A trust costs more to draft than a Will; these expenses occur during your lifetime, as opposed to probate costs paid by heirs. Transferring ownership of all your assets to the trust can be a lengthy process. Many financial advisors recommend also drafting a Will, to ensure that any assets not captured by the trust are transferred upon the settlor's death.
What is an Irrevocable Trust?
A irrevocable trust is one which cannot be changed or canceled once it is set up without the consent of the beneficiary. Contributions cannot be taken out of the trust by the grantor. Irrevocable trusts offer many tax advantages which often make it plausible for a person to give money and assets away even before he/she dies.
There are a number of types of irrevocable trusts that can be used to make gifts to other persons with the assets under the control and management of a trustee. Transfers of property to an irrevocable trust are sometimes motivated by a desire to minimize taxes or to shelter assets from the claims of future creditors and other claimants (including spouses in divorce cases and plaintiffs in civil lawsuits).
To be effective for estate-reduction purposes, the trust must be irrevocable, and the trust's settlor should not be a beneficiary of the trust. It is also best if the settlor is not a trustee, either. Again, there are many
types of irrevocable trusts, here are a few examples:
A trust can be established for younger beneficiaries to provide for education and/or other needs of life. Federal tax law has facilitated the creation of trusts for beneficiaries under the age of 21 years, but trusts can be designed to continue until any age or during a beneficiary's entire lifetime.
Supplemental Needs Trusts
If an intended beneficiary is a recipient of Medicaid, SSI, or other governmental assistance programs, an outright gift or a gift in trust may disqualify the beneficiary from continuing to receive such assistance. Trusts can be designed so that distributions are made only to "supplement" the benefits already being received. So long as distributions made by the trustee are discretionary and not mandatory, the trust assets and trust distributions are not, under most programs, considered disqualifying resources.
Irrevocable trusts can be designed in an infinite number of ways. There are some very special types of irrevocable trusts that have evolved over the years as basic estate planning tools, including irrevocable life insurance trusts and charitable trusts.
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