Wills and Trusts: Wills

Your will can do more than simply relay instructions on how to distribute your property after death. You can name relatives, friends, charities, or any other recipient you wish. You can also relay other instructions, such as specifying an executor for your estate or a legal guardian for your children. It is important to ensure that the named guardian has accepted this role, because they are allowed to refuse. The executor is responsible for administering your estate and making sure that your instructions are followed. The executor also represents your estate if it must pass through probate court. Given these responsibilities and the large amount of time they require, you should give careful thought to your choice of executor.

You should never consider your will a final document. Laws and legal interpretations change, as does your personal, financial, and familial situation. You should periodically review and update your will with the help of an attorney. Your will can either be replaced by a new will or revised by drafting an amendment or "codicil". Wills and codicils must be written using specific legal formulas in order to be valid. You should consult an experienced attorney when drafting or revising a will.

Wills and Trusts: Trusts

A trust is a legal entity which transfers property or assets to a manager or "trustee". The person who creates the trust, or "trustor", determines how the trust's proceeds should be distributed and the trustee manages the property for the beneficiary.

The major types of trust are:

Living Trusts. A trust established during the life of the trustor. It can provide significant tax benefits, and can allow the trustor to avoid estate taxes. A revocable living trust can be changed or ended by the trustor, while an irrevocable trust cannot be ended by the trustor without court action.

Testamentary Trusts. Testamentary trusts take effect upon the death of the trustor, who can make changes to its details at any time before death. A testamentary trust therefore allows the trustor to maintain close control over their property.

QTIP Trusts. A Qualified Terminal Interest Property, or "QTIP", is a marital trust. It postpones any estate tax until both spouses have died. The delay may mean higher estate taxes, but it allows the surviving spouse to reap the maximum benefit of the assets before his or her death.

Generation Skipping Trust. A generation skipping trust gives a trustor's assets to their grandchildren while providing income to the trustor's children. These trusts are complicated to establish, and current law taxes these trusts above a certain monetary limit.

There are many other types of trusts, tailored to specific local laws and individual situations. A trust can be an important part of your estate planning, but the complex nature of these legal entities and the variation between them means that you should consult an experienced attorney before establishing a trust of any kind.