Most lawyers are familiar with a Last Will and Testament, but for many, a trust remains a mystery. Let’s lift the veil and discuss how these planning devices are similar, how they differ, and why it might be beneficial for a lawyer to learn trust drafting.
Last Will and Testament
The person signing the Last Will and Testament is called a Testator. A Last Will and Testament takes effect upon the Testator’s death and requires a court process called probate. The Last Will and Testament gives the court directions on what the Testator wants to happen during this probate process.
Probate could be very long and costly. If a beneficiary doesn’t agree with what the Testator says in the Last Will and Testament, the case becomes contested and could result in a very long family battle. As with all court processes, the final decision will be up to the judge and the Testator’s wishes could possibly not be honored. And since probate involves a court, the case, including the Last Will and Testament document, is available for the public to see.
The document will tell the court who the Testator wants named as Executor. This person will find and notify beneficiaries, notify and deal with creditors, deal with banks and financial institutions, attend court hearings, handle all the distributions and accountings, sell property as needed, and basically do everything needed to wrap up the Testator’s affairs.
The Last Will and Testament will tell the court who the Testator wants to receive certain property, name Guardians for minor children, and state how the Testator would like their remains disposed of. The Last Will and Testament could also create a testamentary trust, such as when a beneficiary’s share is held in trust or the creation of a special needs trust for the surviving spouse or other beneficiaries.
A Trust
The person who signs a trust is called the Grantor. Unlike the Last Will and Testament, an inter vivos trust is effective during the Grantor’s lifetime. The trust will name a Trustee, and this person is in charge of carrying out the terms of the trust. A trust, in plainest terms, is a contract between the Grantor and the Trustee.
The Grantor transfers his property to the trust after signing it and now the Trustee holds legal title to the property. Because the Grantor does not have any property directly in his name, probate is avoided. At the Grantor’s death, no court process is required.
As with the Last Will and Testament, the trust will also give instructions on how the Grantor wants property distributed at the Grantor’s death. A Pour-Over Will can also name Guardians for minor children and dictate the Grantor’s disposition of remains.
A trust can also have other purposes. WealthCounsel’s document-drafting system, Elder Docx™, has trusts that focus on three main categories: Medicaid protection, Veterans benefits protection, and special needs.
The Medicaid Asset Protection Trust protects the Grantor’s assets while allowing the Grantor to qualify for Medicaid benefits. Usually, these Medicaid benefits are those for long-term care, such as assisted living or nursing home care. Likewise, the Veterans Asset Protection Trust allows the Grantor to protect assets while qualifying for Veterans pension benefits.
Elder Docx has several trusts focused on those with special needs. The First-party Special Needs Trust is used when the Grantor is the one trying to protect their own assets while qualifying for public benefits, usually Social Security. The Third-Party Special Needs Trust is used when someone other than the person receiving public benefits wants to set aside funds to be used for the benefits-recipient’s care and comfort. The Secure Special Needs Trust is used to hold and administer retirement-fund assets, such as proceeds from the Grantor’s 401(k) after the Grantor’s death.
Elder Docx also has a Revocable Living Trust which the Grantor can revoke or amend at any time. Usually, the Grantor names himself as Trustee and he carries on managing his property just as before he transferred it into the trust. The Revocable Living Trust is most commonly used when the Grantor is healthy and when public benefits are not a concern.
These trusts are often more desirable than using a Last Will and Testament because the trusts can avoid probate, offer asset protection and taxation benefits, keep family matters private, and allow beneficiaries to maintain eligibility for public benefits.
But that’s not all…
Elder Docx offers a few more trusts, such as a Sole Benefit Trust, Miller Trust, and Medicaid Family Protection Trust. But in addition to the plethora of trusts offered, an Elder Docx user can also draft a number of other helpful documents, from client letters, letters to third parties, a Caregiver Agreement, Promissory Note, and Medicaid Asset Protection Letter. (And for clients who do only need a Last Will and Testament, Elder Docx has that, too.) Not only does Elder Docx make trust drafting easier, the multitude of educational resources offered by WealthCounsel will have any attorney up to speed and comfortable with trust drafting in no time.
Having the capability to offer clients either a Last Will and Testament or a trust will enable practitioners to create a custom plan for their clients’ needs. And as evidenced above, some clients will need trust drafting for other purposes, such as Medicaid planning, Veterans benefits planning, or special needs planning. Instead of referring these clients out, an attorney with Elder Docx and WealthCounsel’s educational resources will be able to keep these clients’ business close to home. Contact us today to learn more about membership.
