The common name for a trust that benefits the trust creator’s spouse. A sub-trust is a type of trust that is “created under” another Trust (or a “trust within a trust”).
Who Typically Uses a Marital Trust?
Blended families.
High net worth families (i.e., estate and generation-skipping transfer taxes).
Families with assets to be kept within the family (e.g., family business).
A Marital Trust is useful for someone who has children from a previous relationship, worries about someone influencing their spouse to disinherit their beneficiaries, or is wealthy enough to worry about the estate and generation-skipping transfer taxes.
How Does a Marital Trust Work?
They receive a deceased spouse’s assets for the benefit of the surviving spouse. They generally protect assets from creditors while preserving the deceased spouse’s wishes for how their assets will be distributed and used, including at the surviving spouse’s death. When properly structured for tax planning purposes, they can preserve the deceased spouse’s generation-skipping transfer tax exemption amount without jeopardizing the unlimited marital deduction.
5 Key Features of the wealth.com Marital Trust
There are many ways to design a Marital Trust. If you want your spouse’s inheritance to qualify for a benefit called the “unlimited marital deduction” (i.e., passing an unlimited amount of property at your death to your spouse completely free of estate tax and without using your estate tax exemption), the Tax Code has stringent requirements for the design of this Trust. The Trust must qualify as a “qualified terminable interest property” (or QTIP) Trust. The wealth.com Marital Trust is this type of Trust.
Only your spouse can be the beneficiary of the Marital Trust.
The Trustee must distribute any “income” generated inside the Marital Trust (e.g., rent if the Marital Trust owns a rental unit) at least once a year, but can do so more frequently if desired.
The Trustee can make distributions for your spouse’s health, education, maintenance, or support. If the distribution is for any other reason, an independent trustee (who cannot be your spouse) should be appointed to provide checks and balances.
You can choose whether your spouse may serve as trustee. If you are concerned about your spouse serving as trustee (e.g., because your spouse will be unable to manage the inherited assets or you would like checks and balances on your spouse’s ability to spend the inheritance), you will be able to prohibit your spouse from serving as the trustee and appoint someone else as the trustee.
You can always change your mind about including the Marital Trust. This flexibility is built into the wealth.com platform for maximum personalization as your life circumstances change.
Download A Printable Version of this Marital Trust Guide
*Disclaimer: wealth.com is not a law firm and is not practicing law. That said, our platform is maintained with care by attorneys who used to practice at the top trust & estate law firms in the U.S. so you can be sure each legal document created with Wealth.com is of the highest quality and is legally valid and optimized for its state, covering all 50 of the United States and Washington D.C.
A good estate plan allows you to understand what happens to your assets when you pass away.
Generally speaking, there are three factors that can impact what happens to your assets at death:
How your asset is owned.
Your estate planning documents.
Whether or not you have designated beneficiaries.
It is not commonly understood that there are certain assets, such as a 401k, with beneficiary distribution rules that can override what is outlined in a Will or Trust.
This means that understanding the totality of various beneficiary designations is crucial to your estate plan functioning as you intend.
If that seems daunting, you’re not wrong. Trying to consolidate and manage everything that requires beneficiary designation manually can be tricky, especially as your life circumstances change over time. Fortunately, the wealth.com platform makes all of this easier to manage.
More on that in a bit — first we further explain how beneficiary designations function within optimized estate planning.
Beneficiary Designations
Many types of assets allow for a formal “beneficiary designation,” which directs where that asset will go upon your death regardless of the terms of a Will or Trust. Common examples of such assets include retirement accounts and life insurance policies. .
A closely related cousin of the beneficiary designation is a “pay on death” (POD) or “transfer on death” (TOD) designation. The same idea applies: if you pass away, your designation will bypass your Will or your Trust. Some states allow vehicles, personal objects, and real estate to pass through TOD, but the documentation must be carefully prepared to meet the legal requirements. Bank and brokerage accounts, closely-held stock and other securities may also pass by POD or TOD depending on the bank or custodian that maintains the account for you.
Typically, beneficiary designations are made through the institution where the asset is held (a custodian or administrator). Once a beneficiary designation has been made through the institution, it is important to keep track of who you designated as beneficiary for each asset so it aligns with and does not contradict how you want asset distribution to go in your estate planning documents.
Not all assets are eligible to have a designated, POD or TOD beneficiary. For example, there is currently no cryptocurrency exchange or investment platform that will allow you to designate a beneficiary for your crypto assets. It turns out a Will or Trust is one of the best ways to make sure your crypto will go where you want them to at your death.
Type of Ownership
Your assets can be owned in different ways. You can own them jointly with others and the titling carries implications for the designation upon death, or through an entity like a trust or corporation.
Certain ownership types, like “With Right of Survivorship,” “Joint Tenancy” or “Tenancy by the Entirety,” legally indicate that at one of the joint owner’s death, the other surviving joint owner(s) will automatically inherit the asset. In that case, the last survivor takes the entire asset and will be able to pass the asset to their beneficiaries through their Will or Trust. These forms of titling are especially common when you purchase real property with someone else.
The automatic transfer on death processes supersede any beneficiary designation or terms in your Will or Trust.
If you own an asset through an entity or arrangement governed by an agreement, the agreement may specify what your rights and restrictions are upon death. For example, you may own real property through an LLC.
The operating agreement for the LLC may contain provisions restricting your ability to transfer your LLC interests to your own beneficiaries upon your death, or give a right of first refusal to the other LLC members to purchase your interests.
If post-death rights are not spelled out, those LLC interests would likely default into your estate and pass to your beneficiaries through your Will or Trust.
Estate Plan Documents
Finally, many assets do not transfer to someone else automatically upon your death, as outlined in the two categories above.
These assets typically pass pursuant to your Will or Trust.
Conclusion
These three methods of asset distribution can work together as part of your overall estate plan to dictate where your assets will go upon your death.
However, understanding which assets have beneficiary designations and whether how you have titled the asset affects the default rights upon your death can be difficult because they are often disaggregated.
This is where the wealth.com platform comes in: our Asset Aggregation and Ownership Balance Sheet tools help record how you own your assets and what their various beneficiary designations are all in one place.
This information at the asset by asset level can be seamlessly paired with your estate planning documents to give you an understanding of how your assets will be distributed and with whom they will end up after your death.
Wealth.com helps you create and maintain a cohesive estate plan — providing the peace of mind that comes from knowing the friction your heirs will experience is minimized and your estate will be administered correctly when the time comes.
Note: Recording or updating beneficiary designations in the wealth.com platform does not alter your beneficiary designations; instead, we make recording all of your externally designated beneficiaries simple which helps maintain updated records and aids in the estate administration process.
The Checklist available for download below is designed to help people understand their responsibilities and organize tasks following the death of an individual who asked them to administer an estate.
Advisors can use this as a general guide to help clients navigate the administration of an estate through to its conclusion.
Adding value to a client doesn’t have to be complicated; sometimes, it’s as simple as making sure your client’s loved ones are taken care of if something were to happen to your client.
The checklists available to download below can be used to help clients optimize their planning — wherever they are in their estate planning journey.
But first, what is estate planning?
Estate planning encompasses two types of planning:
Foundational estate planning, which is a “starter pack” of legal documents in case the client is incapacitated, unavailable, or has passed away.
Wealth or tax planning, which is tax- or control-driven transfers into trusts, entities or accounts.
Every single one of your clients needs a foundational estate plan – and knows it. You can deliver massive value just by helping them check that box off. Then, you can graduate your client into the more complex transfers if they need it.
What Comprises the Foundational Estate Plan?
Will
Revocable or Living Trust
Advance Directive Over Health Care Matters
Durable Power of Attorney Over Financial Matters
Review the legal documents alongside all beneficiary designations (e.g., IRAs, 401 (k)s and life insurance) and right of survivorship designations (e.g., WROS on financial accounts and real estate). These designations override the Will or Trust, which may come as a surprise to your client. Designations are often used as stop gap solutions until someone has a proper Will or Trust, at which point the designations may be removed in favor of the estate or be “funded” (i.e., transferred) into the Trust.
*An attorney or digital estate planning platform like wealth.com can help your client determine if a Trust is more appropriate than a standalone Will. The key consideration is whether avoiding a full-blown probate process, including privacy, is important to your client.
Case Study
How often do you find wrong or missing beneficiaries when you go over the Will or Trust of a client (or potential client)?
Our partner Retirement Tax Services found that over 60% of prospective clients have wrong or missing beneficiaries, when they have an estate plan at all. That means the prospective client would be leaving assets to someone they didn’t expect at all. This is when the client has that “aha” or “I can’t believe this” moment.
Using the checklists included in the PDF below can help advisors create these “aha” moments and improve their clients overall financial wellbeing with better estate planning.
Online options for things we once did in person are on the rise, and estate planning is no exception. Inexpensive and easy-to-use digital planning tools now allow you to create your Will, Advance Health Care Directive, and other estate planning documents at a fraction of the cost of hiring an attorney. But how do you know if digital estate planning is the right choice for you?
Below we answer common questions regarding ease of use, privacy, and security considerations when selecting a digital estate planning platform.
Q: Does the digital estate planning platform keep my information secure?
A: An online estate planning service should maintain rigorous security standards to protect user privacy. Wealth uses multi-factor authentication and bank-level encryption to secure all data from any potential breach.
Q: Is my situation too complicated for online estate planning?
A: Most online estate planning platforms work well for uncomplicated family and financial situations. The Wealth platform provides for unique situations, including blended families, gifts of specific items, creation of estate tax-exempt Trusts (e.g., the credit shelter or bypass Trust), and family-owned businesses. If you have any questions regarding your estate, you should consult a qualified attorney. Even if you’ve already created a Will or Trust with an attorney, you can still use online estate planning to modify those documents and manage your estate plan and keep track of your Trust assets.
Q: What are the pros and cons of digital estate planning?
A: Online digital estate planning can be much less expensive than meeting with an estate attorney in person. Additionally, you can revise your estate documents if you change your mind about gifts, agents, or if your life circumstances change. Digital estate documents do not include legal advice specific to your situation. If you have any questions about your estate documents, you should speak to a qualified attorney.
Q: What information do I need to get started with my digital estate plan?
A: You can start your digital estate plan by simply providing your contact information and creating an online account. Once your account has been set up, Wealth will guide you step by step through the process of adding family members, beneficiaries, assets, gifts you would like to give, etc. Wealth provides guidance on how to select trusted agents, validate documents, and alerts you when issues might arise when transferring property or giving gifts.
Q: How do I know my digital estate planning documents are valid?
A: Each state has its own laws about signing, witnessing, and notarizing estate planning documents. Wealth provides signature pages that are valid in your state of residence. Additionally, your Wealth documents will include detailed signing instructions and will alert you if a notary and/or witness(es) is required at the time of signing.
Q: I’m ready to begin my online estate plan. Why should I choose Wealth?
A: Wealth estate planning documents have been customized for the laws of your state and have been reviewed by a licensed attorney in your state.Wealth uses multi-factor authentication and bank-level encryption to secure your data from any potential breach. You can revise your documents at any time on your Wealth Portal online account. For an additional fee, an attorney licensed in your state is available to answer questions specific to your estate needs.
Ready to begin creating your estate plan? Click here to get started.
TL/DR: Estate planning isn’t as complex as it may seem and you don’t need a legal degree to create one. In short, estate planning is simply recording your wishes for what happens if you’re unable to manage your own affairs. This quick and comprehensive overview will give you a working understanding of the estate planning basics.
No one likes to think about death, especially their own. But think about this: What will happen to your stuff—money, family heirlooms, even a pet—if something happens to you? If you haven’t created a document that tells your loved ones who should get what, and who should sign off on those decisions and do all the paperwork, your loved ones will have to decide for (and potentially argue among) themselves. You can provide for your family’s needs, ensure your wishes are honored, and save your loved ones a lot of anguish during an already stressful time by creating an estate plan.
Although estate planning is essential for ensuring your money and property are distributed in exactly the way you want, only one-third of adults in the U.S. have a Will. That overall number has fallen steadily over the past five years, but the COVID-19 pandemic did inspire those ages 18 to 34 to write a Will—63% more people in that age group created a Will in 2021 than in 2020.
So why don’t more people do it? The five main reasons are:
I just haven’t gotten around to it.
I don’t have enough money saved.
I don’t know how to begin.
I don’t know anything about it.
I don’t own anything valuable.
Unfortunately, these misconceptions are preventing people from putting even a basic plan in place. People perceive estate planning to be complicated, scary, or simply not relevant to them. The reality is, you don’t have to be a millionaire or own multiple homes to benefit from an estate plan.
You need an estate plan if:
You worry that your pet(s) could be given to a shelter
You want to make a final gift to a grandchild, niece, or nephew, or a friend or charity at your death
You have specific wishes about your health care and end-of-life care
You feel strongly about who should manage your affairs if you were unable to do so yourself
You really want your children to end up with your assets, if there is anything left after your spouse passes away
Some of your family members don’t get along and might disagree about who gets what or who should manage your affairs
You do not want a certain family member to receive your assets, to make health care decisions for you, or to manage your affairs
You own a significant amount of cryptocurrency
Do any of these sound like you? Because most everyone can benefit from the peace of mind an estate plan brings, we want to demystify the process so everyone—yes, even those without a law degree—can see that it’s simpler and more accessible than they think. And, hopefully, the information in this guide will equip you with enough information to quit putting off this important task.
Getting Started: Estate Planning Documents
At its most basic level, estate planning is making preparations for when you’re no longer able to make decisions for yourself. It requires creating and signing a few legal documents; but more importantly, it requires thoughtful decisions so that the money and possessions you have earned and accumulated can be passed down to your family or whomever you choose.
Let’s talk about what you’ll put in place as part of a basic estate plan. The legal documents are:
Last Will and testament: This document, which becomes active after you die, expresses your wishes for how to divide up your property and possessions and names the people you prefer to manage your financial affairs (the “executor”) and take care for your children who are minors or have special needs (the “guardian”). A revocable Trust can offer some advantages over a Will (more on Trusts vs. Wills here). However, you can only designate an executor or a guardian through a Will, not a Trust. For this reason, you still need a short Will (called a “pourover Will”), even if the centerpiece of your estate plan is a Trust.
Financial power of attorney: Think of this document as a permission slip that gives the person you name (the “agent”) the ability to conduct financial transactions, sign documents, and make other legal decisions as if they were you. In most states, you can choose if your agent has this permission immediately after you sign or only once you are incapacitated. This document terminates at your death.
Advance health care directive: This document empowers the person you name to make decisions about your medical treatment, symptom management, and end-of-life care. Depending on your home state, this document may go by a variety of different names, including a health care power of attorney or proxy. The document usually includes or is paired with a living will, which are your written instructions for health care providers about the type of life-prolonging medical care you want to receive if you are unable to make decisions for yourself.
Trust: A Trust is created by a contract or agreement and acts like a bucket of “stuff.” The Trust agreement is the set of rules that the creator of the Trust puts in place for the trustee who oversees the Trust. The rules include what powers the trustee has over the Trust, to whom and under what circumstances the trustee can give assets out of the Trust. After you create a Trust, you can transfer your assets into the Trust right away, before you die. There are many types of Trusts that accomplish different goals. If you create a Trust as the centerpiece of your estate plan instead of a Will (more on Trusts vs. Wills here), you will set up a type of Trust called a “revocable Trust” or “living Trust.” You will be the trustee of your revocable Trust in the beginning. You can also designate the person who will step in for you as trustee so that when you are unable to manage your own affairs eventually, that successor trustee can distribute your stuff according to your instructions. Unlike a Will, a Trust is active the day it is created, which means that your successor trustee can also help you manage the stuff inside of your Trust in case you are incapacitated.
There are two types of Trusts.
Revocable or living Trusts can be altered at any time by the creator of the Trust (you). These Trusts are often used as a substitute for a Will in estate planning.
Irrevocable Trusts are difficult and expensive to alter once created. They can be used to achieve many types of goals, including minimizing taxes protecting assets from creditors, naming an adult to manage property for children before they reach a certain age, and ensuring that assets stay within the same family. In your Will or your revocable Trust, you can instruct your executor or trustee to create an irrevocable Trust to take advantage of the benefits of irrevocable Trusts.
Why Do I Need an Estate Plan?
No one needs an estate plan. That is, unless you want to avoid confusion, chaos, hurt feelings, family drama, and delayed distribution due to probate. So, maybe you do need one?
An estate plan lets you give the gift of clarity to your loved ones—and does all the legal heavy lifting so they don’t have to. When you spell out your wishes in the legal documents listed above, there’s less second-guessing about your intentions for how your stuff should be distributed.
The opposite is true if you die without a Will or Trust in place. Legally, you are dying intestate, and your home state’s succession laws will determine how your assets will be distributed and to whom. These succession laws differ from state to state, but were likely drafted a long time ago, based on the most common wishes of a typical, American nuclear family, and likely do not reflect the complexities of your family and cultural heritage.
By not creating an estate plan, you are just letting the state legislature from decades ago take a guess as to what your wishes are. This is especially true if you’re single and don’t have dependents.
You may own assets that will not pass through your estate, either because of the title on the asset or because you designated a beneficiary. For example, jointly owned property–real estate, a car, or bank account–will automatically pass to the survivor, or you may have designated a beneficiary for a life insurance policy or retirement account. However, it is still important to have a Will or a Trust for several reasons. Certain assets must pass through your estate (for example, personal objects or cryptocurrency), so the only way to direct where they go at your death is through a legal document. Having no assets in your estate will make it difficult to pay for your last expenses, including funeral costs, legal fees, and any taxes.
Who’s Involved in an Estate Plan?
Now that we’ve looked at the important reasons why to have an estate plan, it’s time to turn to the who in an estate plan.
The most important person is you, the creator of the Will (testator) or Trust (called grantor, settlor, or trustor–not to be confused with the trustee!). By taking the time for careful consideration and creating various legal documents, you are establishing clear expectations for how you want your money and property to be handled upon your death.
The other essential players involved in estate planning include:
Beneficiaries: These are family members, loved ones, or charitable organizations—anyone who receives an asset of yours in your Will or Trust. Assets can include cash, real estate, or that piano you inherited from your grandparents.
Heirs: If you die without an estate plan (or all the beneficiaries you listed in your estate plan have passed away or otherwise do not qualify to receive your assets), the people who will receive your assets are known as your heirs. Your heirs are determined under default succession laws. They are not necessarily the people you would have named as your beneficiaries.
Executor: If you create a Will, you will name an executor (sometimes called an administrator or personal representative) to manage your affairs after you die. This person will collect your property, pay any debts and taxes, and distribute the remaining property according to the terms of your Will. This often takes a bit of legwork, including contacting banks, investment and insurance companies, and appraisers.
Trustee: When the centerpiece of your estate plan is a Trust rather than a Will, this person manages your affairs just like an executor would. Because the roles are so similar, generally the same person is named in the role of successor trustee and executor. Moreover, if you put assets into your Trust during life, the trustee can manage them during your incapacity, instead of relying on a financial power of attorney.
Agent or attorney-in-fact: Not to be confused with an actual lawyer, this is the person you named in your financial or health care power of attorney to act or make decisions on your behalf.
Guardian: If you have children who are minors or have special needs, this is the person you name to care for the wellbeing in case both you and the other parent are unable to care for those children.
If you’re wondering whether a lawyer is also part of this list, it depends. Most people can set up and manage their estate plan on their own using online tools, like Wealth, which are backed by extensive legal expertise.
When you put together the what, why, and who behind estate planning, you can see it really boils down to thinking about and documenting your final wishes, then appointing someone you trust to be in charge of executing those wishes after you die. It’s a simple, thoughtful act that protects your family and your legacy.
We hope these explanations have shown that estate planning is important but not impossible. Like death itself, it’s not something people talk about much, which has led to a myth that it’s too complicated for the average person to tackle. The reality is, estate planning takes time and consideration, but it’s time well spent to safeguard your loved ones’ wellbeing.
So much of estate planning is thinking through how you want things handled after you die, before you start actually making a documented plan. The idea of a financial power of attorney (FPoA) flips that a bit, because it’s about appointing someone to handle your affairs in case you become incapacitated and can’t make your own decisions. The process seems complex, but we’ll simplify it so you can make sense of the basics you need to know to include this important element in your estate plan.
What Role Does a FPoA Play in Estate Planning?
In a nutshell, a financial power of attorney is a document in which you appoint a trusted person to act on your behalf to make financial decisions. In establishing a FPoA, you hand over the legal reins to another person to conduct financial transactions, sign documents, or make other legal decisions as if they were you. This might happen for only a limited period of time (during a serious illness or after an accident, for example), or it can take effect immediately upon signing and last up to your end of life. Once your FPoA is completed, your trusted person, the agent, sometimes called an attorney-in-fact or fiduciary, can be responsible for managing your financial affairs. You will need to use a second document, called an Advance Health Care Directive (sometimes known as health care proxy or health care power of attorney), to designate who should handle all of your medical decisions. There are several types of FPoA, so consider the specific needs of your estate before selecting one.
Durable Power of Attorney
The type of FPoA most commonly used in estate planning is a durable power of attorney. “Durable” indicates that your agent has your permission to act on your behalf even though you are incapacitated or disabled. In other words, the FPoA is effective until you either revoke the document or have passed away.
You can spell out your agent’s powers, responsibilities and restrictions in the FPoA. The powers vary from state to state but usually include the ability to:
Sell or manage property and real estate
Sign legal documents and checks
Manage personal and business-related financial accounts
Pay medical bills (but not make healthcare decisions)
File taxes and settle claims on your behalf
Hire professional assistance, such as a lawyer or advisor
Non-Durable Financial Power of Attorney
When an FPoA is not “durable,” your agent’s powers end when you become incapacitated or disabled. In other words, you want to supervise your agent’s use of the FPoA powers. This can be a good option for transactions that are not driven by estate planning needs. For example, you might grant your advisor a non-durable FPoA to conduct time-sensitive trades on your behalf.
In addition, you may be comfortable allowing your agent to change your estate plan or the rights of your beneficiaries; because these are such sensitive powers, in most states, you must affirmatively grant each estate planning power.
Why Include a Durable Power of Attorney in Your Estate Plan?
A complete estate plan should provide not only for death, but incapacity and unavailability. Putting a FPoA in place allows someone to continue managing your financial affairs if you cannot sign important documents yourself in case of emergency, a routine surgery, or even travel abroad.
Keep in mind that to complete your FPoA, it must be signed in accordance with your specific state’s requirements, which might mean signing before a notary public or witness(es).
The wealth.com platform makes it straightforward to get your Financial Power of Attorney drafted and securely stored in our Vault, and provides state-specific guidance on how to fill out and sign your FPoA.
Get this guide to Financial Power of Attorney as a printable PDF
What’s the Difference and Which One Is Right for Me?
TL/DR: In simple terms, a Will is a legal instruction to the court about what should happen to what you own after you have passed away. A Trust is a contract you make with someone whom you trust about what you own, regardless of whether you have passed away. There are many types of Trusts, but the Revocable Trust (or Living Trust) is most commonly used as a substitute for a Will. The Revocable Trust may offer you some advantages that a Will doesn’t, as this article will explain.
In climactic movie scenes and music videos when a family gathers to hear how the dead person’s fortune will be split up, it’s always the deceased’s Will being read out loud for the big reveal. In real life, however, a Will doesn’t get read out loud; instead, the executor sends a copy to all known beneficiaries.
Even without a dramatic reading, you might still have concerns about keeping your last wishes private. A Will becomes a publicly available document on the probate court’s docket. Probate is often how the press learns the details of a celebrity’s assets and who the heirs are after the celebrity has died.
If maintaining your privacy is important to you, consider making a Trust – and not a Will – the centerpiece of your estate plan.
A Revocable Trust (or Living Trust)* can be a great alternative for many reasons, beyond privacy. These fall into four main categories:
Avoiding the court process at death
Keeping your wishes private
Planning for your incapacity
Learning a new set of words
Note that just because most Americans have a Will* and not a Trust does not mean that you should have a Will. Depending on your situation and wishes, a Revocable Trust may be the best option for you.
If, after we dig deeper into each of the differences, you’re still not sure, take our quiz here.
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*1 The rest of this article may refer to this type of Trust as simply “Trust.” A Revocable Trust (or Living Trust) is not to be confused with an Irrevocable Trust. Learn more about this topic here.
*2 A lot more people have a will (60% of the people we surveyed in our estate-planning research who have an estate plan) vs. a trust (38% have a living or revocable trust, and just 19% have an irrevocable trust).
Avoiding the Court Process at Death
The main reason people choose a Trust is to simplify the court process that happens at death, which is called “probate.” If you die with a Will that distributes your assets (or without an estate plan at all), a probate judge will oversee how your assets will be distributed.
This process can be difficult and expensive and take a long time. If one or more factors indicate that probate will be more onerous for your estate, you should consider putting in place a Trust to avoid probate. These factors are:
(a) You live in a state that tends to have a complicated or expensive probate process.
(b) You own real estate (or tangible objects of significant value) that is located in a state other than your home state.
(c) You own assets that are complex and may require more active court supervision, like stock that is not publicly traded.
Unpacking each of these factors:
(A) Some states charge probate or court fees based on the size of your estate (i.e., how much you owned in your name at death). Attorneys may charge up to tens of thousands of dollars to help your executor navigate probate. All those fees are first paid from your assets, so there will be less left to distribute among your loved ones. And even when your assets are not particularly complex, probate in your home state could tie up your assets for up to two years. If you live in a state like this, a revocable trust will allow you to put more control in the hands of your trustee and “bypass” much of the probate process.
(B) If you own real estate or personal property in another state, dying with only a Will means that your executor must start probate processes not only in your home state, but in all the other states as well. By putting the property located in other states in your revocable trust,* your trustee will be able to avoid these “offshoot” probate proceedings.
(C) If you own assets that are a little more complex, such as stock that is not publicly traded, your executor will have to coordinate more closely with the probate court to make sure the stock is properly transferred to the appropriate beneficiaries. This can lengthen the time for probate.
If you anticipate that probate would be costly and time-consuming for your loved ones, a Revocable Trust might be the best option for you.
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*If you place the real estate or personal property in an entity like a limited liability company (LLC), you may also be able to avoid probate, but that analysis must be done by an attorney licensed to practice law in the state where your real estate or personal property is located.
Keeping Your Wishes Private
As part of the probate process, a Will becomes part of the public record. Revocable Trusts typically avoid probate (unless there is an issue like an angry family member who brings a legal claim against your Trust). With a Revocable Trust, your estate plan is more likely to remain private.
Information that will become public if part of your Will include:
(a) Who you consider to be your family members.
(b) Who you want to exclude from receiving your assets or having a trusted role in your estate plan.
(c) Who will receive your assets, and how much of your assets they will receive.
(d) How you would like your last remains to be handled.
If you would prefer to keep these details private, a Revocable Trust might be the best option for you.
When They Become Effective
A Will does not become effective until you die, whereas a Trust is effective immediately on the day you create it. As a result, a trust has legal effect before your death – i.e., while you are alive but either incapacitated or unavailable. If it is important for you that someone take over responsibility for your financial affairs immediately if something were to happen to you, then a Revocable Trust gives you a more powerful vehicle compared to a Will or a financial power of attorney.
Ensuring that “it’s business as usual,” can be especially important if you own a closely-held business and you are expected to be involved in the day-to-day operations or in making high-level decisions by voting your shares. Your succession planning for your business should include transferring your shares into a Trust so that your trustee can step into your shoes if something happens to you.
Learning a New Set of Words
A Trust can be used as an alternative to a Will, but the vocabulary will be different and less familiar to most people, which contributes to the feeling that Trusts are more complicated than Wills. For example, instead of referring to an “executor” or “personal representative,” the trusted individual who will manage your affairs is called a “trustee.”
That being said, if there are factors indicating that you should have a Revocable Trust, you should not let legal terms discourage you from using a Trust as the centerpiece of your estate plan.
What Are Common Misconceptions about What a Trust Can Do For Me That a Will Can’t?
1. If you have a Revocable Trust, you won’t need a Will.
Even if you have a Revocable Trust, you will still need a Will. If you pass away with any assets in your own name, you need a Will to make sure all of those assets go into your Trust, where the Trust will instruct where those assets will go. This type of Will, which accompanies a Revocable Trust, is much shorter than a standalone Will and is commonly known as a “pour-over Will.” This is important because some assets must be owned in your own name while you’re alive, like a retirement account, and you may not get around to putting all your assets in the name of your Trust before you pass away.
You will also need a pour-over Will to name an executor and guardian(s) for your children, if any.
2. As long as I have a Revocable Trust, my loved ones will definitely avoid probate.
A Will must go through probate, whereas a Revocable Trust has the opportunity to avoid probate.
First, you will need to “fund” your Trust, which means transferring as much of your assets as possible into your Revocable Trust. Some courts, like in California, may allow you to avoid a full-blown probate if you show that you intended to fund your trust by signing a general assignment of all your assets into the trust. Other states will instead require that you actually re-title any real estate and change the owner on your bank accounts and other assets.
Lastly, the probate court may become involved to resolve any issues among your beneficiaries or trustees. For example, someone may call into question whether your Will and Trust are not valid.
3. A Revocable Trust will make it harder for someone to sue my estate.
We all fear that someone will be unhappy with the wishes of the decedent or how the estate administration is being handled and bring a lawsuit against the estate. Having a Revocable Trust instead of a Will will not deter a motivated person from suing against your assets at your death.*
Note that a Revocable Trust should not be confused with an Irrevocable Trust, which may offer some level of asset protection. Asset protection means that a creditor (for example, someone to whom the Trust beneficiary owes money for an accident) may not be able to reach the Trust assets because the assets are considered to be separate from the beneficiary and cannot be used to fulfill the beneficiary’s debt.
4. If I anticipate that my estate will owe death taxes, I must have a Revocable Trust.
Tax planning for estate and generation-skipping transfer taxes can be accomplished with either a Will or a Revocable Trust as the centerpiece of your estate plan. You do not need a Revocable Trust just because you may have a death tax issue. The important thing is to make sure your Will or Trust has the proper provisions to meet your tax planning goals. Your Will or Trust must create Trusts after you’ve passed away (a testamentary sub-Trust) that comply with the Tax Code and direct your assets into those sub-Trusts using rules or formulas that will minimize taxes in the long term.
Sub-Trusts are Irrevocable Trusts created at your death and are not to be confused with Revocable Trusts that you create while you are alive as an alternative to writing a Will.
5. If I would like more control over how my assets are used after my death or keeping my assets within my family across generations, I must have a Revocable Trust.
If you would like to maintain some control over how your assets are used or gifted away after your death, you should make sure sub-Trusts (see 4 above) are created after your death. To create this type of sub-Trust, you can use either a Will or a Revocable Trust as the centerpiece of your estate plan.
Sub-Trusts are Irrevocable Trusts created at your death and are not to be confused with Revocable Trusts that you create while you are alive as an alternative to writing a Will.
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*Certain estate planning tools exist to deter someone from suing your assets, including “no contest” or “in terrorem” clauses. These tools can be implemented in a Will or a Trust with the advice of an attorney.
The chart below summarizes the overlap and differences between a Will and a Revocable Trust in most U.S. states.
Tips on dealing with your digital afterlife in your estate plan
No matter how many fans, followers, or friends we have in this life, at some point we’re all going to die. Here are some of the most common questions people have about what happens to their social media presence after they’re gone.
Q: What happens to my social media accounts when I die?
A: The short answer: Nothing. Not automatically, anyway. Unless you take steps to outline your wishes—or adjust some simple settings on Facebook—your accounts will remain visible and “active.”
Q: How will my loved ones get access to my social media accounts?
A: As with your financial accounts, you’ll want a secure way to provide usernames, passwords, and any multi-factor authentication information to the person you designate. Remember, your Will is not the best place to reveal this information because it can become part of the public record.
There are many options for securely storing your social media access information, but we hope you’ll consider using our bank-level encrypted Vault where you can feel confident filing any important documents you want secure cloud-access to.
Q: How do I designate someone to manage my accounts?
In Facebook’s General Account Settings, under Memorialization settings, you can request to have your Facebook profile permanently deleted after you die or identify a Legacy Contact to look after your account. That person can accept new friend requests, manage tribute posts, delete posts, change the profile picture, and remove you from tags, but they cannot see your messages or add or remove friends.
Instagram, Twitter, and LinkedIn accounts don’t yet have the same “legacy” option. However, those accounts can be deleted by a direct family member or person you’ve designated as your power of attorney by providing proof of your death.
Q: How do I decide if I want someone to delete or deactivate my social media accounts?
A: Figuring out the future of your Facebook page may seem like a slightly silly discussion topic amid all the other important end-of-life decisions you need to talk about with your family. But as with many things concerning your estate, they are the ones who have to live with the decision. Talk with them to see how they feel. A couple things to think about: Some family members might think of your social posts and photos as akin to a diary and would never consider deleting something so priceless. On the flip side, those helpful birthday reminders and “you have memories” notifications that social sites send could be painful, especially while your loved ones are still grieving. Keeping a social media page but having the legacy contact turn off notifications can be a good compromise.
With many things in life, when you make a mistake, you fix it, learn from it, and move on. With estate planning, though, your mistakes may not manifest until after you’re gone. No learning, no fixing, no moving on. These mistakes can have lasting effects for your loved ones—from simple to serious—so let’s take a look at how you can avoid the six most common estate planning errors.
1. Not making a plan.
Let’s get the biggest estate planning mistake out of the way first. You need some sort of estate plan in place to ensure your loved ones are taken care of after you die. You can make all the excuses you want—I’m not old enough, or rich enough, or smart enough to make a plan—but we’re here to help make it a simple and smooth process.
2. Not talking about your plan.
Discussing your estate plan with your loved ones and your executor or trustee guarantees that they are clear about your wishes and won’t be confused or surprised regarding anything in your documents. It also provides an opportunity for candid conversations about what your beneficiaries really want. For example, you might think that leaving your house to your daughter is a great gift, but she might be planning to move out of state. Talk through issues like these, because your estate plan is meant to prepare, not burden, your loved ones. While you’re having these discussions, be sure to note where your original, signed estate planning documents are located (in a safe deposit box or file cabinet, or with a lawyer), and if you’re storing any electronic copies on your computer or online (like in the Wealth Vault) and how to access them.
3. Not thinking more broadly about your legacy.
It might seem easiest when you’re creating your estate plan to leave everything to one beneficiary. Don’t forget: your estate plan is your last opportunity to leave something meaningful to your favorite charity or someone who would find the most meaning in a prized possession of yours. Your estate encompasses all your possessions. Perhaps you would like to leave old photographs with your niece, who keeps the family genealogy, or you would like to leave a last cash gift to the animal shelter where you have volunteered for years.
4. Not leaving a full inventory of your assets.
When it comes time to distribute your assets, your executor or trustee will need to gather (marshall) all your assets. Without an up-to-date record of everything you own, some assets can get lost. Retirement accounts, storage units, safe deposit boxes, and cryptocurrency are all commonly forgotten or lost during administration. If these assets are left unclaimed, they may never make it to your chosen beneficiaries. For example, it’s estimated that over 20% of all 401K funds are lost or forgotten.
5. Neglecting your online assets.
Maybe your grandparents didn’t have to worry about digital assets, but nearly everyone today has some sort of online account that will need to be managed after their death. You should think about whether you want your loved ones to take down (or continue to manage) your social media accounts, preserve important files you stored in the cloud, access software for smart systems that run your house, and download your digital photos. Consider leaving the usernames and passwords for your smartphone and most important online accounts with your estate planning documents.
6. Forgetting that your estate plan isn’t just for after you die.
Several important estate planning documents help you manage affairs while you’re still alive. Establishing a financial power of attorney and a health care power of attorney will appoint someone to help with legal, financial, and medical decisions when you’re unable to make them for yourself. For some people, setting up a trust allows a trustee to step into your shoes more easily if you need help managing your affairs during your life.
Whether you’re creating your estate plan from scratch or updating an existing plan, being aware of these common mistakes can help you avoid them.
A How-To Guide for talking to the people you love about what happens when you die:
Most of us have been taught that politics, religion, and money are topics to avoid with family and friends. They are charged with emotion, highlight our differences, and lead to some uncomfortable interactions. Another topic people tend to avoid talking about—especially with our families—is what happens when we die. You know it’s important, but you steer clear of it anyway.
We want to help you to be better prepared to approach these awkward, but necessary, conversations about end-of-life preparations. Whatever your family dynamics look like, there are tips and tools you can use to have more empathetic conversations with your children, siblings, parents, and other loved ones.
Talking With Your Kids
Losing a parent is hard on a child, regardless of the child’s age. But how you prepare your children for when you are gone will change over time as they grow older. School-age kids should be comforted knowing they’ll be taken care of by someone who loves them. As they become older teenagers and adults, it’s time to have more candid conversations about your estate plan, especially if you’ve selected one or more of them to be your:
They don’t have to be privy to every element of your plan, but it can be helpful to keep them in the loop on the location of your estate planning documents and how to access other accounts as needed.
If you’ve selected one of your children over another to be part of managing your estate, you might want to discuss your rationale—one child lives closer, is more organized, or is older—so there are no hard feelings among siblings. If your children will be responsible for your last wishes, outline the details in your estate plan and also discuss what you want to happen to your body (cremation, burial, donating your body to science), as well as specific instructions for your funeral or other type of celebration or ceremony. This also is an opportune time to discuss end-of-life health care decisions. A 2021 study found that although 90% of people think having conversations about their end-of-life healthcare decisions is essential, just over a quarter (27%) have done so. If you have an advance directive or living Will, your wishes should be spelled out, but discussing them out loud ensures there are no surprises.
Talking With Your Parents or Older Relatives
Once you’re an adult, it’s time to discuss with your parents what kind of plan they have in place. If you know they’ve neglected estate planning, you and your siblings or other relatives are going to be the ones trying to clean up the chaos when they die.
At some point, you also may be the person left to care for older aunts, uncles, in-laws, or grandparents. If these individuals have not designated anyone else to manage their affairs, discuss making your role more official, such as naming you as the agent in their powers of attorney, so you’ll be able to take care of financial and healthcare decisions for them.
If you have a good relationship with your siblings, try to get aligned before having a conversation with your parents so everyone is on the same page. And if you can’t seem to make any headway simply talking about the topic, try sharing informational articles, walking them through a digital estate planning site, or scheduling an appointment to meet with an estate planning attorney. You can’t force them to create an estate plan, but you can help to demystify and simplify the process for them.
Having The Talk
You don’t want to ruin a family celebration by talking about death, but if the holidays or birthdays are the only time you get together as a family, set aside a separate chunk of time to have an estate planning discussion. Be prepared for some emotion and be open to questions and differing perspectives. It’s important to be honest but not overwhelming. These are important decisions that need to happen, but they don’t all have to be finalized in one conversation. Focus on the fact that estate planning provides peace of mind for everyone—both the person dying and their loved ones left behind.
Having a loose agenda or checklist of topics can help ensure you cover all the essentials. Be sure to include Wills or Trusts, financial power of attorney, and healthcare power of attorney.
TL/DR: What happens when you die without a Will is that you have little to no control over how your affairs are settled. This article breaks down how dying without a Will leaves the people you care about in a lurch.
You might think you won’t care what happens to your stuff after you die. It’s just stuff, right? And you’re gone anyway.
But if you die without a Will* or other estate-planning documents in place, your loved ones might never see the money you worked so hard to save for their future.
Who Decides What Happens to My Estate?
Dying without a Will—or, as it’s legally known, dying “intestate”—takes all the decisions about who gets your money and property out of your hands and puts them in the state’s hands: the probate judge ultimately signs off on all decisions made about your estate.
To help the court, the court will appoint the administrator (or executor) of your estate—typically your spouse or one or more of your adult children. If no one volunteers, a public trustee will be appointed. The administrator will play the most significant role in ensuring all your assets are found, who gets what exactly, and who will take care of your children or pets. Importantly, that administrator will be entitled to reasonable payment from your estate, in addition to any share of your assets that this person might otherwise receive.
The administrator has a lot of power. Having a Will allows you to tell the court who you trust to have this role rather than letting the court decide.
How Is Division of My Estate Decided?
Working with your administrator, the probate court will decide how your property and money should be distributed. While the court wants to follow what you intended (if that can be proven), the court has to follow state intestate succession laws. These laws, and how they handle things like domestic partnerships and marital property, can vary depending upon where you live. They are based on the average person’s final wishes – and all 50 states disagree on what those average wishes might be – at the time the law was made, which might be decades old.
These laws likely do not address your family situation, with more modern concerns and complexities. They also do not allow you to define your legacy by including beneficiaries outside your bloodline, such as friends or charities. If your estate might be paying taxes, those laws do not attempt to minimize those taxes so that more of your assets will end up with your loves ones.
Probate takes time. This is especially true if you do not leave strong enough proof (like a Will) of what you wanted because it opens the door to disagreements among your family members. When family members disagree, the litigation can sometimes take over a decade to be resolved, and during this time, your assets will largely be tied up.
So, Who Gets What?
In general, if you are married with children and die without a Will, in some states your whole estate will go to your spouse and in others it will be divided among your spouse and children.
If you are single and don’t have kids, next up in the order of priority are your parents, if still living. Then come siblings, nieces and nephews, aunts and uncles, and more distant relatives. If the court can’t locate any blood relatives, all of your possessions could pass to the state.
If you have a blended family and children from a previous marriage, those children may not receive any of your assets once your spouse passes away. If you live in a state where by default everything goes to your spouse, then your spouse’s heirs will receive your assets at your spouse’s death. Thus, if you want to make sure your spouse can’t override your wishes, you need not only a Will, but a Will that creates a Trust to secure your wishes.
Anyone not related to you with whom you had intended to share in your estate—stepchildren, a best friend’s daughter, or a charity—won’t receive a penny if you have not named them in a legal document.
That may also apply to someone you’ve been in a long-term relationship with but haven’t married, depending on your state. In those states that recognize domestic partnerships or common-law marriages, unmarried partners may be eligible for inheritance similar to a spouse in probate courts. However, in all other states, unmarried couples are technically not relatives, so your partner may not be able to inherit any of your estate or continue using your shared home if you own that home.
What Happens to My Kids?
Being the parent of a minor child is one of the most important reasons to have a Will. In that document, you can appoint a guardian for children who are minor or have special needs. It is just as essential that you have a Will if you feel strongly about who should take your children as who should not take your children.
The court will strongly take your choice into consideration. Without indicating your choice, the court will evaluate your family members to see who would be most appropriate to serve as guardian.. The court is then left to consider competing arguments among your family members, and the court may have chosen differently if you had a say through your Will.
This information should make clear all the legal complexities and complications created when you die without a Will. Each of these challenges requires your loved ones to wonder when and if they’ll be able to access the resources you’ve accumulated. Putting an estate plan in place today can give your family peace of mind that they’ll be taken care of even after you die.
* This Article refers to a Will, but also includes a trust-based estate plan. In any event, you should have a Will even if you have a revocable Trust because you will likely own assets at your death that you could not transfer into your Trust (i.e., you will have an estate, even if you fully funded your Trust). That kind of Will simply “forwards” or “pours over” your estate to your Trust and is commonly called a “pour-over” Will.
