Month: October, 2015
by Vern Miranda, co-founder of iComfortis.com
* Information presented here is for educational purposes only. Be sure to consult with competent legal counsel before creating any type of documents described herein.
With the extreme emotions survivors feel at the passing of a loved one, it’s easy to forget that there’s a lot of paperwork that goes along with dying. In this post, I’ll be sharing some insights* about two of the most important documents you’ll want to have in place before the time comes — at the very least a will, or for better protection a trust.
Having the Will
A will is a legal document by which a person names one or more other persons to manage his or her estate and take care of distributing his or her property at death. It is thought that the concept of a will was developed around 400 BC by Solon, a statesman and lawmaker in ancient Athens as a device intended originally solely for men who died without an heir.
Today wills are used — or should be used — by everyone, regardless of how much or how little property they have.
A will documents to county and state authorities, financial institutions, and others how your belongings are to be distributed after you pass away. Your final wishes and instructions must be written down and your signature authenticated (usually by a Notary Public) in order to be accepted by the authorities before property can be legally distributed.
If there is no will or trust, which I’ll review briefly below, state and county officials must step in and decide to whom your mother’s 12-carat diamond wedding ring, your father’s 2 million shares of Google, and your valuable comic book collection will go. Lawyers are usually involved to represent all parties involved and trudging through the probate court system can be a lengthy and expensive process. And, your assets may not go to the person you intended, but to someone else.
Remember, you won’t be around to tell the authorities what you want done with your stuff. That’s why having even a simple will can save your family and friends a lot of anguish, expense and time.
Wills that didn’t Work Well
You can scratch your will out on a piece of paper with a pencil, use an online service, or software. Sign it in front of a Notary Public and a couple of non-beneficiary witnesses and you’re good to go. Or are you?
No matter how you create your will, always have it reviewed by legal counsel so you can avoid problems later, like billionaire J. Howard Marshall II who left an estate of $1.6 billion when he died at age 91. When his lovely wife, Playboy Playmate Anna Nicole Smith, found out she was left out of the will, she sued the estate claiming Howard promised her half of everything although apparently nothing was in writing. Smith passed away in 2007, but the case is still tied up in the legal system.
Other wills that ran into problems include those of John Seward Johnson I, co-founder of Johnson & Johnson, singer James Brown, baseball champ Ted Williams, film actor John Wayne, and others. And if it can happen to these rich and famous icons, it could happen to you.
Who Do You Trust?
A trust is a much better tool for making sure your family and friends each get their fair share of your estate as you wish and not your hare-brained half-brother. A trust is more complex than a simple will; however, it can greatly reduce the amount of time required to distribute your assets by avoiding expensive lawyers and the painfully slow probate court system.
Also, a trust keeps all the details of your estate and how you want it distributed out of public records, which happens when a will goes through the probate process. Anyone, such as a very distant and disreputable cousin, can access those public records and see what you own and decide it might be worth contesting the will — even though you may have never met them.
A trust is a legal entity that can own property, stocks, bonds, bank accounts and other assets. When creating a trust, you transfer ownership of most of your assets into the trust. As the trustee of your trust, you still maintain total control of those assets. When you pass on, either a co-trustee or your executor distributes your wealth according to details spelled out in the trust. The important thing to remember: your assets must be transferred into the trust in order for the trust to work properly.
Different Types of Trusts
There are two basic types of trusts and it’s critical that you know the difference before creating one. They are:
- Revocable Trust — a type of trust that can be changed at any time. Simply put, if you change your mind about any portion the trust, you can modify it through a trust amendment. The downside to this type of trust is that assets in the trust are still considered your personal property, which means creditors and tax collectors can go after them.
- Irrevocable Trust — as the name implies, this type of trust can’t be changed except under very specific conditions. Irrevocable trusts are commonly used for estate tax reduction, asset protection, and charitable estate planning.
Make Sure You Act
Wills and trusts are both extremely valuable tools you can use to make sure your estate goes to those you want it to, instead of letting lawyers and judges make those decisions for you. Whichever route you decide to take, make sure you take it. After all, you can’t take it with you.