Wills

Your Last Will and Testament does just a few things.

It designates who you want to inherit your property and possessions. It names the person that you want to serve as your Executor. And, if you have minor children, it nominates the people whom you want to raise your children.

For a Simple Will, that’s really all that it does. The document can be very short and to-the-point. In our practice, a Simple Will is rarely more than three or four pages long. Our take is that Simple Wills can and should be kept short and simple.

For those who have children or other heirs who are not yet mature enough to receive an inheritance and manage it responsibly, a second type of Will may be used – a Will that includes a Testamentary Trust.

A Testamentary Trust is simply a trust that does not actually come into existence until the person who made the Will has passed away. Then, as part of the process of probating that Will, the Testamentary Trust is created in accordance with the details spelled out in the Will.

The Testamentary Trust will designate a Trustee who will establish and manage the Trust. It will also normally name at least one alternate or successor trustee who will serve in the event that the primary Trustee is unable or unwilling to serve.

The property and possessions that are to be inherited are then divided under the terms of the Trust, by the Trustee. For those heirs who are then the minimum age dictated by the person making the Will, their inheritance shares can be distributed to those heirs right away.

For those heirs who are not yet mature enough to handle their inheritance, the Trustee will retain their shares in the trust. The Trustee will invest the shares in appropriate investments. Likewise, the Trustee can also disburse the assets of the Testamentary Trust to pay for the cost of raising and educating the beneficiary.

Then, when the immature heir reaches the appropriate age or ages, the Trustee will distribute the remainder of the inheritance to that heir. That can be done in a single distribution – for example at age 21 or age 25. Or the disbursement can be done in multiple installments – for example, 10% at age 21; then 20% at age 25; and the balance at age 30.

An advantage of an inheritance being paid out in multiple installments is that the process actually trains the heir to handle the inheritance responsibly. Even if the heir mishandles the smaller share received at age 21, that does not jeopardize the remainder of the inheritance. The heir will hopefully learn from his or her mistakes. By the time of the final distribution when the heir reaches age 30, for example, the heir will have learned from his or her prior mistakes and will be more likely to handle and invest the bulk of the inheritance well.

The one significant disadvantage of both a Simple Will and the Will with a Testamentary Trust is that they do not avoid probate. The Executor named under the Will must still go through the full probate process upon the death of the person who made the Will.

To make matters worse, where some of the heirs are young, the Trustee or the Executor will be required to file paperwork with the court every year until the young heir reaches the age at which the final distribution is made.

All of these court procedures and documents will usually end up being quite expensive and time-consuming. But there is an alternate arrangement that is affordable and which avoids that time and expense.

For those who want to avoid probate and the annual trips to the courthouse for their Executor and Trustee, a Family Trust is the preferred method.

By setting up a Family Trust and moving one’s assets into that trust when it is set up, all of the probate and related delays and expenses are entirely avoided. But the person who created the Family Trust will continue to control all of his or her own assets as the Trustee of that trust as long as he or she lives.

For the significant majority of our firm’s clients, the use of a Family Trust is an affordable solution that saves tremendous costs in the long run. It also produces an estate plan that has the flexibility to be tailored to the unique circumstances of each client.