A will or a trust?
An expert shares basic differences and important tips.
MICHELLE H. GOOZE-MILLER, JD’97, a partner in the Chicago law firm Patzik, Frank & Samotny Ltd., clarified the difference between wills and revocable trusts at a February meeting of the University of Chicago Women’s Alliance, an interdisciplinary shared-interest group targeted to women. Gooze-Miller also shared some tips for properly planned estates.
Wills and trusts defined
A WILL, she told the group, establishes a structure to govern and distribute assets titled in a person’s name. It is an opportunity to address loved ones and bequeath gifts, specify executors, and name guardians for any surviving minor children.
Yet a will doesn’t handle everything, she explained. “Retirement accounts, life insurance, and payable on death accounts pass to heirs through beneficiary designation, and are not handled by a will.”
A LIVING WILL, on the other hand, is unrelated. It allows you to describe your final health care wishes Gooze-Miller said, “and has nothing to do with the disposition of your property after your death.”
A REVOCABLE TRUST is another common instrument, an entity created during a person’s lifetime to hold assets, including real estate. It is amendable and changeable during one’s life but becomes irrevocable at death. As such, it contains provisions for distributing property to heirs.
“For those who value privacy, a revocable trust may be a helpful instrument,” said Gooze-Miller, “since it bypasses probate court and details of the trust remain private.” In contrast, a will becomes public record after a person dies.
A POUR-OVER WILL is often used in conjunction with a revocable trust and typically "acts as a safety net or an executor to transfer those assets not titled in your name at the time of your death into the trust,” Gooze-Miller said. It is important to title assets you acquire in the name of the revocable trust.
Estate planning tips
Individuals without an estate plan, Gooze-Miller advised, should consider the consequences on family and friends who survive them, as well as on nonprofits they wish to support. Without a basic will, assets are divided based upon a set formula of state intestacy laws, which vary widely.
Some states, for example, permit the disinheritance of a spouse, said Gooze-Miller, who is qualified to practice law in Illinois and Florida. “In Illinois, you may directly disinherit a spouse through your will,” she said. “However, the surviving spouse can still renounce the will and collect a one-third share of the estate. Yet if you disinherit a spouse from a trust, the spouse would have to file a claim in court and may still be disinherited.”
Without proper planning, assets may also fall into unintended hands, and heirs may face a lengthy, expensive process in settling the estate before a probate court.
Gooze-Miller cautioned against placing a will in a safe deposit box, because the will is needed to gain access to the box. “Instead, make sure your will is kept in a clearly marked location at your home or entrusted with your estate planning attorney.”
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