Most people understand that having some sort of an estate plan is a good thing. However, many of us don't take the steps to have an estate plan prepared because we don't understand the nuances between wills and trusts – and dying without either.
Here's what will generally happen if you die, intestate (without a will or trust), with a will, and with a trust.
For this example, we're assuming you have children, but no spouse:
- Intestate. If you should die intestate, your estate will go through estate administration and all the world will know what you owned, what you owed, and who got what. Your mortgage company, car loan company, and credit card companies will all seek payment on balances you owed at the time of your death.
After that, New York law will decide who gets what and when:
- For example, your New York's intestate statute may mandate divvying up proceeds equally among your children.
- Your older children will get their shares immediately if they've attained adulthood.
- But the court will appoint a guardian of its choosing to manage the money for your minor children until they become adults and possibly a separate guardian to raise your minor children.
- Shockingly, that guardian can charge a lot of money to manage the money for your minor children and be a total stranger – as can the guardian who raises your minor children.
- If you die without a valid will, the court, not you, will decide the futures of your minor children.
Keep in mind that because your death has been published to alert valid creditors, it's possible for predators (fake creditors) to come forth and make demands for payment – even if they're not owed anything.
The bottom line? Dying intestate allows New York law and the court to make all the decisions on your behalf – regardless of what your intent might have been. Publicity is guaranteed.
- Will. If you die with a valid will, your assets will still go through the probate process (very similar to the estate administration process). However, after creditors have been satisfied, the remaining assets go to whom you've identified in your will.
- If you want to leave money to your children and name a guardian for the minor ones, the court will usually abide by your wishes.
- The same holds true if you specified that you wanted to give assets to a charity, your Aunt Betty, or your neighbor.
- Keep in mind that predatory creditors are still an issue as your death has been publicized. Even with a will, probate is a public process.
The bottom line? While a court oversees the process, having a will allows you to tell the court exactly how you want your estate to be handled. But, a public probate is still guaranteed.
- Trust. If you've created a trust, you've taken control of your estate plan and your assets. Trust assets are not subject to the probate or administration process and one of the most important benefits of trusts is that they are private. Although notices to creditors may be published, most of the other details (your assets, who is receiving what, etc.) remain private, helping your family minimize the risk of predators.
As part of the trust drafting process, you'll have named a trustee to manage your estate, when you are no longer able to, and provide him or her with specific instructions on how your assets should be dispersed and when.
- One word of caution – trusts must be funded in order to bypass probate or administration.
- Funding means that your assets have been retitled in the name of your trust.
- Think of your trust as a bushel basket. You must put the apples into the basket just as you must put your assets into the trust for either to have value.
Even if you have a trust prepared, you still need a will to pour any assets inadvertently or intentionally left out of your trust and to name guardians for minor children. However, this type of will is much shorter and less complicated than one that is responsible for disposing of all of your assets to your beneficiaries.
The bottom line? Trusts allow you to maintain control of your assets through your chosen trustee, avoid probate, and leave specific instructions so that your children are taken care of – without receiving a lump sum of money at an age where they are more likely to squander it or have it seized from them.
Don't let the will versus trust controversy slow you down. Call The Browne Firm today so we can answer any questions you may have and put together an estate plan that works for you and your family whether it be a will, trust, or both.