An Introduction To Wills & Trusts
There are many myths and misconceptions about wills and trusts. Tragically, many of these are perpetuated by attorneys who literally profit from it. We’ll share many of the misconceptions about wills and trusts before sharing the truth.
Myth 1: A Will Is All You Need to Set Up a Trust
In theory, your will can set up a trust. However, that won’t prevent your assets from going through probate if the will is what sets up the trust. If you want to avoid probate, set up the trust before you die. Furthermore, you need to fund the trust. This includes moving assets into the trust by making the trust the legal owner and updating accounts to make the trust instead of your heirs your beneficiary. Learn more about Trusts.
Myth 2: The Will or Trust Must Be Perfect
You do want a will or trust that reflects your current goals. And any will or trust created by an attorney should be legally valid. However, there is nothing wrong with several iterations of the document until you finally agree on it.
But it is rare for a will or trust to be good forever. Your family status and your family’s needs change over time. You don’t need to set up a trust on behalf of minor children once your children reach the majority. A special needs trust is an option for special needs adults, but that should be utilized if the young adult is not competent. You need to keep up with the assets in the trust, such as adding new rental properties or investments.
A will is another document that needs to be updated as life goes on. Change the will as you add or lose heirs. You may want to name your grandchildren as direct heirs, skipping over their parents. You must update a will upon divorce or remarriage, because Arizona community property laws may override your wishes if you have two feuding families upon your death. Allocate property or money to each current and former spouse as well as their children.
Myth 3: You Have to Update the Will or Trust Every 3-5 Years
This isn’t true, but attorneys love to bill you for the time spent assessing your legal documents. In reality, your will or trust only needs to change along with your life circumstances. Update your will if you no longer want X to inherit Y. Update your will if the witnesses have passed away or you want to name someone else to be the guardian of your children. A will that provides for your children is not suddenly invalidated if the firstborn turns 18. It should be updated if your oldest child is left disabled after a car crash or your spouse can no longer take care of themselves.
Note that your will must be updated when you move across state laws. If you’re retiring to Arizona, talk to a Chandler AZ estate planning attorney to draw up an Arizona will. A will or trust that was written in accordance with another state’s laws may not be valid. And it could be difficult for someone now living on the other side of the country to be the executor of your estate.
Myth 4: All You Need Is a Will or Trust
A 19-year-old joining the military may get away with only a will. As you age and accumulate assets, you need an estate plan. An estate plan starts with an overarching vision. What do you own? What do you owe? Who do you want to inherit your property? Who do you need to take care of?
You could use a variety of methods to implement an estate plan, though a will and trust are part of that plan. For example, an estate plan may include life insurance to pay off debt or inheritance taxes. Or you may list your desired heirs as a beneficiary of your retirement accounts and bank accounts. Those designations typically outweigh whatever you say in your will.
Myth 5: Your Heirs Will Fight at Probate
While this is a possibility, you can reduce the odds of it occurring by having a good estate plan in place and informing everyone of what will happen upon your death. You might even ask them what they would prefer to happen. Then you don’t leave a family home or business to an heir who would sell it if they inherit it. Consider how you can divide property and cash so that anyone who prefers cash can be bought out by their siblings or other relatives. Don’t divide ownership of a home or other large asset. You’ll leave them feuding every time a decision needs to be made.
Myth 6: Your Spouse/Oldest Child Must Oversee Probate
While it is common for a will to name a next of kin as the executor, they don’t have to be. You can name your attorney as the executor of your will. Furthermore, you can name a friend, attorney, or bank official as the administrator of a trust, whether it is set up upon your death by your will or created while you were alive.
Myth 7: Wills and Trusts Are All You Need
A trust may go into effect while you’re alive or upon your death. A will only go into effect when you die. Yet a large number of us will be incapacitated at some point while we’re still alive. If you don’t have a medical and financial power of attorney in place before this happens, your family will have to go to court to determine who can make decisions on your behalf if and until you recover. Choose someone to make medical decisions as a medical POA agent that shares your values. You may want to choose a non-relative so that the decision to withdraw life support is not as contentious. You can designate almost anyone as an agent for financial power of attorney. For example, you could have a co-owner of your business take over management until you’ve recovered. This won’t affect the rights your heirs have to the business when you die.