Wills and trusts are two common elements of a comprehensive estate plan, and if you were to believe various online services and websites, they do not seem very hard to draft and create by yourself.
But do not be fooled into thinking that a cheap or free estate planning software can substitute the legal advice of an experienced professional, or that a do-it-yourself starter template for a will or trust document amounts to pretty much the same thing as what you might get from the services of a law firm.
These tools are represented and defined by their respective documents, which utilize specific legal language to establish the contents of a person’s estate, and how they should be utilized or distributed after death.
Online Templates Are Insufficient
Firstly, people make the mistake of thinking that wills and trusts are two sides of the same coin, when they are very different estate planning tools with entirely different uses.
Secondly, while the language might seem mirrored from document to document, there are countless details and minute differences that make a professional legal document unique in any given case.
Lastly, wills and trusts are more than a simple affidavit. These can be complex legal works that set out to encapsulate a person’s wills and wishes in a legally binding way, or create even more ambitious schemes, such as a trust fund lasting years after its grantor’s death.
An online template might cover the necessities of what it takes for a document to be called a will or trust, but these templates offer no guarantee of quality or effectiveness, let alone individualization and nuance.
A Primer on Wills and Trusts
A do-it-yourself attitude is never a bad thing, but it is important to know when you can afford to test your aptitude for addressing a problem single-handedly, and when it is much wiser to call upon the help of a professional.
You wouldn’t want to set out to fix a broken electrical transformer affecting the neighborhood block without prior knowledge and experience as an accredited electrician, and you wouldn’t want to be forced to perform an appendectomy on yourself or anyone else without prior experience as a surgeon.
While not as directly life-threatening as these two examples, creating an insufficient or poorly-worded will or trust can have life-altering consequences for your loved ones.
Understanding wills and trusts is important, even if you do not set out to create any of your own. Your doctor would want you to know how the appendectomy works and what you should expect during recovery, and much the same way, a good lawyer will talk you through the steps of creating an estate plan, and the purpose of each given element.
What is a Will?
A will, also known as a last will and testament, is a legal document defining your wishes with regards to your minor dependents (any children you leave behind, as well as other individuals in your care) and the contents of your estate, encompassing nearly all that you own.
Wills are an important document, and only the last will written and notarized before death is considered valid. The process of validating a will and overseeing the distribution of the estate is called the probate process, and the portion of the law dedicated to this process is called probate law.
There are limits to what a will can and cannot do. For example, if you are married, you typically cannot use your will to write your spouse out of your inheritance without them agreeing to this, usually through a prenuptial or postnuptial agreement. There are also certain states wherein community property laws defend a surviving spouse’s right to inherit a certain amount of the estate.
Wills cannot distribute assets and properties that already have beneficiaries attached to them. If your retirement account is set to transfer its remainder to your daughter after death, you cannot leave the contents of the account to your son in your will. If your home is co-owned by your surviving spouse, you cannot transfer the entirety of the home’s ownership to your grandchild. Wills have limitations, both general and state-specific ones.
What is a Trust?
Trusts are a very different kind of legal tool. Trusts are entities that hold assets and properties under the terms of a trust document, and through the continuous management of an appointed trustee. Unlike wills, which are testamentary and only go into effect upon the creator’s death, trusts can be set up and managed the moment the document is notarized, while the grantor/creator is still alive.
This makes trusts much more flexible than wills. You can use a trust to irrevocably separate yourself from property that might overvalue your estate and cause you to owe taxes upon death. You can use a trust to protect certain assets from creditors. You can use a trust to bypass the probate process. You can use a trust to delay inheritance, until your heirs reach a certain age, finish college, or start a business. You can use a trust to invest certain assets before your death and provide a steady income for your loved ones, rather than a single lump sum.
However, trusts should be treated like the genie in the bottle. You must be very specific with the language you use to materialize your wishes. A well-crafted trust can help you take some of your wealth and set it aside to grow and provide financial security for your loved ones for years to come. A poorly-crafted trust can complicate the inheritance process, and produce an expensive mistake.
The Importance of a Cohesive Estate Plan
In addition to potentially harboring costly mistakes, one of the most important differences between taking a DIY approach to will writing and approaching a professional is cohesion. An estate plan is ultimately more than the sum of its parts.
You are not just talking to a professional about creating a trust, then a will, then a power of attorney. These are individual elements in a larger plan that must work together.
An estate planning professional will revisit and revise older estate planning tools with you, make updates to several estate planning documents rather than just one of them, and help you ensure that every change made to your plan will help it go into effect, even if you should pass away unexpectedly.