| Home | Contact
Connecting  women we can empower women, imbue women with purpose, inspire women to be passionate about living each day to its fullest , lead women to live lives of prosperity both in the spirit and real world. - Connections for Women
Life's a Blog with Connections for Women
Life Blog Life Blog Curl Up With a Good Book
Save Today
Share with a Friend


Email Article Print
Bookmark and Share    
Wills vs Revocable Trusts. What's the Difference?

First things first, if any person dies without a Will, in legal terms, they are said to have died “intestate” and any assets in their estate will be distributed in accordance with the laws of intestate succession adopted by their State. In Arizona, this means that a married woman’s assets will typically be distributed to her spouse, unless she has children from a prior marriage. For unmarried persons, Arizona’s intestate succession statute provides for assets to be distributed to his or her children (or held in trust for minor children until they reach age 21), if any. If an unmarried person dies without living descendants, his or her assets will be distributed to his or her parents, if living, or his or her siblings, if both parents are deceased. The list of potential beneficiaries of an intestate estate goes on from here, but the point is that, unless they are the last living descendant of their grandparents, a person’s estate does not typically get distributed to the government.

Probate is the process of requesting that a court appoint a person who is responsible for carrying out the terms of a Will or applying the State’s intestate succession laws. It is important to note that many assets can be titled in such a way as to pass to beneficiaries without probate (i.e., without the application of intestate succession laws or a Will by a court). These are assets which pass at a person’s death as a result of a beneficiary designation or right of survivorship. These assets may include assets held in trusts, real estate or bank accounts held as joint tenants with rights of survivorship or life insurance or retirement plans with a completed beneficiary designation. It is very important to note that assets held in this manner will not be subject to the terms of a person’s Will, as assets with these types of transfer designations automatically pass to the surviving owners or named beneficiaries at death.

Provided that you do not intend to leave the beneficiaries and timing of distribution of your estate up to the State, you will want some sort of mechanism to carry out your wishes. Wills and Revocable Trusts (sometimes referred to as “living trusts”) are both estate planning tools, which can govern the distribution of your assets upon your death.

A Will is a written statement wherein you designate: (i) who will receive the assets of your estate upon your death (the “beneficiaries”); (ii) how those persons or entities will receive the assets (either outright or in trust); (iii) who will act as the guardian and conservator of your minor children, if any; and (iv) who is responsible for carrying out these directions (the “personal representative”) after your death.

A Will can provide for an outright distribution of your assets upon your death or it may provide for assets to be held in trust for the benefit of your designated beneficiaries. Holding these assets in trust does not necessarily mean that the beneficiary has no ability to utilize the trust assets, it simply means that his or her right to utilize the assets is restricted and may require the consent of the person you have designated to act as the trustee. Thus, while the assets may be held in trust, the trustee may have the right to make distributions for the beneficiary’s education, healthcare, support, or any other purpose you may designate in your Will.

While a Will only takes effect upon your death, a Revocable Trust establishes a lifetime contract between the grantor, or creator of the trust, and the trustee as to the management, investment and distribution of the assets transferred into the Trust for the beneficiaries. A Revocable Trust has a written governing document called a Trust Agreement. The Trust Agreement provides for the distribution of trust assets both during your lifetime and after your death. Like a Will, the Trust Agreement may provide for an outright distribution of trust assets upon your death or can provide for the trust assets to continue to be held in trust for your beneficiaries upon such terms and conditions as you may designate.

A Revocable Trust established during your lifetime will typically name you as the trustee and the lifetime beneficiary. Thus, you will continue to manage and control the distribution of the assets contributed to your trust. However, instead of holding the assets as “Jane Doe”, you would hold them as “Jane Doe, Trustee of the Jane Doe Trust”. However, only assets which are contributed to your trust are subject to the terms of the Trust Agreement. As a result, even if you have a Revocable Trust, you should still have a Will, the sole beneficiary of which is typically your Revocable Trust. This type of Will, often called a “pour over” Will, simply contributes any assets which are subject to probate at the time of your death into your trust. Furthermore, as a result of community property, in Arizona a majority of married couples can have a joint trust, which covers the distribution of all of the family’s assets.

Wills and Revocable Trusts are really just two different methods for accomplishing the same goal. Both are revocable and amendable so long as you are not incompetent. Both can be contested by your heirs. Both can be drafted to minimize estate taxes by incorporating credit shelter trusts and either can be drafted in a way to allow a designated trustee to manage the assets of a beneficiary to whom you believe it would be unwise to directly distribute an asset.

One item that is often incorrectly perceived to be a difference between a will and a living trust is that a living trust offers you some sort of asset protection. In most states, including Arizona, this is simply not true. A Revocable Trust does not typically offer any greater asset protection from your creditors than holding the same assets in your own name.

The main differences between a Will and a Revocable Trust typically relate to cost and the need for the appointment of a conservator for you, if you became incompetent.

While the up front costs of a relatively simple Revocable Trust are typically greater than a similar Will, as the documents become more complex the cost differential is often minimized. Any increased cost is typically a result of the increased time spent in drafting, explaining and transferring assets to the trust.

While it is not always the case, a fully funded Revocable Trust can avoid the need for a probate, which can result in substantial savings in attorney’s fees. It also makes the entire process of gathering the assets and making the distributions to beneficiaries easier on your survivors. Furthermore, in the event you become incompetent, the successor trustee, whom you name in the Trust Agreement, will automatically take over control of the trust assets, which can eliminate the need for a court appointed conservator with regard to trust assets.

Since every person is different, it is important that you consult with a licensed attorney to determine what estate planning devices are best for you. The cost of obtaining an estate plan is not insubstantial. Therefore, you should take your time in researching the person or firm you intend to work with to make sure they specialize in this area of law.

The foregoing information about Will, Living Trusts and Probate is designed to help readers safely cope with their own legal needs. However, such information is not the same as legal advice -- the application of laws relating to your specific circumstances. Although the information contained herein is believed to be accurate and useful, the author recommends you consult a lawyer if you want professional assurance that the foregoing information, and your interpretation of it, is appropriate to your particular situation.

Related Articles:

 For alerts on new articles, Register Now.
It's free to register and we promise no spam.
Bookmark and Share    
Email Article Print


About Us | Advertise With Us | Business & Services | Contact Us | Connections | Privacy Policy | Terms of Use
Connections For Women, All rights reserved.
® Connections for Women is a registered trademark of Connections for Women, LLC