An Explanation of Wills and Trusts, Considering Children

Three common statements tax attorneys hear regarding estate planning are, “I need a will,” “I need a trust,” and “I need to avoid probate on my death.”

 

The answer for all three is, “It depends.” Every situation is different. You may not need any of the above; but, if you do, substantial benefits exist from advanced planning. Some appropriate follow up questions are, “Do you have children?” and, “Is your estate large enough where you can benefit from tax planning?”

 

Wills

A will is a document providing for administration and distribution of property following death. The parties are the testator, who makes the will, beneficiaries, who receive benefit under the will, personal representative (executor), who manages the estate to assure compliance with the will and governing law. A guardian and conservator may be appointed to care for minor beneficiaries and property they are receiving. Not everyone needs a will, but personal circumstances should be considered. Wills may provide for minor children, plan for special circumstances, and allow tax planning and flexibility.

 

A substantial reason for a will is to designate a guardian for children. Designation assures the appropriate uncle, godparent, or friend will take care of minor children, instead of relying on the Court to sort through the process.

 

Unlike the scare tactics presented in ads, if you die without a will, property rarely goes to the state. The administration and distribution of the property is governed by state law. Typically, without a will, property will go first to the spouse, and if the spouse is not alive it will go equally to the children. Law reasonably reflects common desires and serves well in routine cases, but leaves no flexibility. To provide for distribution of specific items, or unequal distribution (for example, the oldest son is to receive the donkey, two goats and prized koumboloya), then a will is necessary to provide for that distribution. Charitable gifts also can be made through a will.

 

A will only covers property in the probate estate. Property held in joint tenancy will pass to the surviving joint tenant. Gifts made prior to death are no longer in your estate. Life insurance, financial accounts and other accounts or policies with beneficiary designations other than the estate are distributable according to those contracts and are also not part of the probate estate.