Wills and trust, although different in modes of operation, are both planning tools used for distribution of beneficial estate. These tools allow you to choose how your assets are distributed to the intended beneficiaries. Before creating a will or a trust, it’s vital to know the pertinent details about the claim process to ensure an effective transfer of your estate even if you are not around anymore.
This article explains some essential things that you should know about wills/trusts to make the process of asset distribution easier.
What Are Wills And Trusts?
Will and trusts are two sides of the same coin. A will is a legal document that sets out the intention/wishes of a person as to how his estate is to be managed/distributed after death.
A trust, on the other hand, is a legal document that shows the arrangement that allows a third party, otherwise referred to as a trustee, to legally hold assets on behalf of a beneficiary or beneficiaries, as the case might be.
It’s important to note that wills are only effective after a person's death. Therefore, a will is ambulatory, which means that it can be revoked and redrafted before the maker passes away. In contrast, a trust can be effective during such a person's lifetime as well.
Trusts are grouped into two broad categories – living trusts and testamentary trusts. As the name implies, a living trust is established by an individual during his or her lifetime, while a will creates a testamentary trust.
More so, couples can together establish a joint trust, which is mostly revocable. However, it can become irrevocable under some conditions. So, when does a joint revocable trust become irrevocable? The death of the guarantor transforms a revocable trust into an irrevocable trust.
Things You Should Know About Will And Trusts
When a person dies (the decedent) leaving a valid will, the estate's administration is done through a probate process as the court must prove its validity. As a general rule, a will has no legal effect until it’s probated.
Thus, the person in possession of the will, usually the decedent's attorney or personal representative, will produce the will within a limited period at the probate court. The court determines the validity of the will to know if it should be given legal effect.
Notices of the court hearings on the petition are usually given to all the heirs of the decedent and the beneficiaries. Consequently, anyone with an objection to the validity of the will may contest it in the probate court. Moreover, a will can still be challenged after the grant of probate if there are sufficient reasons to contest it.
Where a will is contested, in part or as a whole, the estate's administration is placed on hold. The matter is then prosecuted in the court until the court comes to the final decision. Once the probate has been obtained, a personal representative is appointed by the court. The representative is then vested with the authority to administer the decedent estate according to the provisions in the will.
Accordingly, the personal representative makes a list of the decedent's estate. An independent appraiser is hired by the estate to appraise the non-cash assets. In some cases, a court-appointed appraiser is also made responsible for valuing the asset. Notices are given to all the creditors of the estate. A creditor who wants to make a claim on any of the assets in the estate must do so within a limited period.
The personal representative has the responsibility of determining the legitimacy of the creditor's claims before paying off the creditor from the estate's assets. After settling the creditors, the professionals involved in the probate process are paid their legal fees from the estate. Thereafter, the personal representative distributes the rest of the assets to the beneficiaries of the will.
Where the will has established a trust for the benefit of a minor, an incapacitated member of the family, or any other person, such money or property is transferred to the trustee. The trustee is then responsible for managing such property.
A trustee owes the beneficiaries a fiduciary duty and is responsible for managing the assets solely for the benefit of the recipient, without converting it to his advantage.
Once the personal administrator is done with the estate administration, he draws up an account on how the estate was administered and files the details in the court. Once the court declares him to have discharged his duties in a free and fair manner according to the dictates of the will, he is discharged of his duties.
In cases where you’ve been named a beneficiary of a trust, several legal rights are accrued to you by law. The rights include the following:
- Request for special accounting/trust information: Although the trustee has a responsibility to be accountable on the trust assets, you can request a special accounting whenever you have a reason to doubt the trustee's efficiency/accountability.
- Removal/Replacement of a trustee: A beneficiary has the right to file a petition with the local probate court for the removal/replacement of an incompetent/fraudulent trustee.
- Review of a trustee's decision: Where a trustee has made some decisions regarding the trust property, you can approach the court for a review of such decisions.
You also have the right to seek legal advice when you’re a bit confused about the provision of the law.
The administration of a beneficial estate can take a considerable amount of time depending on the size of the decedent estate and whether there has been a legal challenge against the validity of the will. It’s, therefore, important to know the process as described above to know your rights and responsibilities within the ambit of a valid will/trust.