2009-10-16 / Columnists

Spotlight on Elderlaw

The Differences Between A Last Will And Testament And A Trust
Commentary By Nancy J. Brady, RN, Esq. And Linda Faith Marshak, Esq.

A Last Will and Testament is a document which expresses an individual's instructions as to how his "estate" should pass upon death. An estate consists of all assets - real property, financial assets and personal belongings - owned by the decedent (called "testator" in the Will). The Will only needs to be "probated," or submitted to the county Surrogate's court to be proven valid - if the testator possessed assets which were titled in his name alone - with no joint owner or beneficiary - at the time of his death.

So, then what is a Trust? To begin with, a Trust is a formal document in which the Grantor, or person creating the Trust, appoints a Trustee or a person who agrees to manage the assets titled under the Trust, according to the terms the Trust agreement directs. A trust is a "living" trust if it's created during the Grantor's lifetime, and it's "revocable" when the Grantor retains the power to change or alter the trust at any time, for any reason, as long as he/she is mentally competent. Usually revocable trusts become irrevocable on the incapacity, or death of the Grantor.

Unlike a Last Will and Testament, which only has legal effect upon the death of the person creating it, a Trust becomes effective as of the date signed, and, in the case of Revocable Trusts, can be changed by the Grantor during the Grantor's lifetime. Additionally, a Trust is a private agreement which allows the Trustee (the successor Trustee after the Grantor has passed away) to distribute the assets held in the name of the Trust to the named beneficiaries without the expense and delays associated with the probate process. (Probate is the legal process of proving one's Will valid, with formal notification of all persons who stood to inherit if the individual had passed away without a Will).

Our articles often focus on asset protection planning using Irrevocable Trusts, to protect assets from the costs of long term nursing home or home care. If you own real property, and significant financial assets, you should strongly consider establishing this type of trust to plan for the possibility of protecting assets in the event you should require long term care either in a nursing home or at home.

We frequently use Revocable Trusts in estate planning, for reasons other than Medicaid planning.

Trusts can be especially useful for the following reasons:

1. Trusts can avoid multiple probates when an individual owns real estate in more than one state, since real estate is subject to the probate process in the state in which the property is located;

2. Trusts are private agreements, and allow the transfer of assets to your intended beneficiaries to remain private (and avoid Will contests). Probate of a Last Will and Testament can expose your estate to public scrutiny.

3. A Trust can protect the inheritance of your minor children by including directions as to how and when the assets can be spent.

4. Used in combination with a credit shelter trust in one's Will, a Trust is an important part of an overall estate plan to help reduce estate taxes for married couples.

Not everyone needs a Revocable Trust to accomplish the most effective estate plan. Probate can be avoided for liquid (financial) assets by other means, especially if one's estate is relatively small. For some individuals, however, especially those with real property in more than one state, or married couples with taxable estates, the Revocable Trust is a valuable estate planning tool that should not be overlooked. Each person's estate plan should be tailored to meet his or her specific needs taking into account the type of assets comprising the estate, whether the estate will be a "taxable" estate, and the family structure and goals. Taking the time to meet with an estate planning attorney reviewing your specific needs is the best way to determine which plan is best for you and your family and loved ones!

The attorneys can be reached at 718- 945-7777; 718-738-8500.

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