You do not need to reach a certain age, amass a valuable estate, or start a family before the need for a Last Will and Testament arises. Every adult can benefit from having at least a simple Will in place. At a bare minimum, executing a Will ensures that the State of New York will not determine what happens to your estate assets and will avoid the possibility of expensive – and often contentious – litigation after your death. It also allows you to choose the Executor of your estate and afford you the only official opportunity you will have to nominate a Guardian for your minor children.
This is a very common mistake people make. In today’s electronic age, it is easy to find just about any DIY legal form you might need. Although it is understandable that you might see an opportunity to save time and money by using one of these forms, the reality is that you are more likely to cost your loved ones a considerable amount of unnecessary time and money when it comes time to probate your estate. DIY Will forms are notorious for having mistakes, errors, and omissions that lead to protracted litigation during the probate of an estate. Your Last Will and Testament is something you want done right – the first time. To make sure that is the case, work with an experienced estate planning attorney during the creation and execution of your Will.
Shortly after your death, the individual appointed as the Executor of your Will must submit the original Will to the appropriate court for probate. The Executor is also required to notify beneficiaries and heirs of the estate that probate is underway and any federal (and/or state if applicable) gift and estate taxes due must be paid. Eventually, the terms of your Will are used to determine how the remaining estate assets are distributed.
At its most basic, a trust is a relationship whereby property is held by one party for the benefit of another. Over the last century or so, trusts have evolved to the point where there is a specialized trust to fit almost any estate planning goal or need. All trusts, however, require the same five elements for creation, including:
- Settlor– the person who creates the trust. A Settlor may also be referred to as the Trustor, Grantor or Maker of the trust.
- Trustee – an individual or entity that administers the trust terms as well as manages and invests the trust assets.
- Beneficiary– a beneficiary is the person, entity, or even family pet that receives the benefit of the trust assets.
- Terms– created by the Settlor and may be anything that is not illegal or unconscionable.
- Funding– almost anything of value can be used to a fund a trust, including cash, securities, and real property.
This is something that can truly only be decided after consulting with an experienced estate planning attorney; however, there are some common considerations when deciding whether a Will or a trust should be used. If your estate is small enough to qualify for small estate administration, and you do not have minor children (nor plan to have any in the near future), a Will should suffice. If, however, your estate is large enough that probate avoidance is a consideration and/or you do have minor children who will inherit from your estate, a trust is often the better choice to distribute your estate. Using a trust also keeps the terms of your estate plan private and offers the added benefit of incapacity planning as well.
The individual who holds the trust property is the Trustee and is appointed by the Settlor. In general, a Trustee is responsible for administering the trust terms as well as protecting and investing trust assets. In practice, however, the duties and responsibilities of a Trustee are often diverse and complex. One of the most common mistakes Settlors of a trust make is to name someone as their Trustee without first gaining an in-depth understanding of what will be required of the Trustee and the skills and abilities a Trustee needs to properly administer the trust. For larger, more complex, trusts, it is often best to appoint a professional Trustee.
The terms of a trust, which are created by the Settlor, are reduced to writing in the form of a trust agreement. Once the trust is active, someone must make sure those terms are followed and make sure the trust assets are safe. All of that is part of trust administration. Administering a trust can be a fairly easy job if the trust is simple and the trust assets minimal; however, a moderate to large trust, or one with very complex trust terms will need more expertise.
The duties and responsibilities of a Trustee can be wide ranging and will differ from one trust to another; however, there are some common duties and responsibilities most Trustees have, including:
- Following all trust terms unless they are illegal or unconscionable.
- Communicating with beneficiaries.
- Investing trust assets using the “prudent investor” standard.
- Managing trust assets.
- Distributing trust assets.
- Keeping trust records.
- Preparing and filing trust taxes.
- Defending the trust against legal challenges.