05 Aug What a Will Does and Doesn’t Do (Part 1)
What a Will Does and Doesn’t Do (Part 1)
Barry E. Haimo, Esq.
August 5, 2014
A Last Will and Testament or a “Will” is a legal document that expresses your postmortem wishes; mainly with respect to devising assets and appointing fiduciaries. It designates a personal representative or executor to administer your estate. It designates a guardian of the person and property of minor children. It usually covers burial instructions, funeral expenses and estate tax apportionment. However, it is most commonly understood to govern the transfer of a deceased person’s property to his/her designated beneficiaries.
The transfer of assets to beneficiaries is usually done in one of two (2) ways: i) an outright devise to a beneficiary means that the beneficiary will inherit the asset in his or her name. The beneficiary will be able to exercise unfettered dominion and control over the asset immediately upon receipt. This leaves the asset susceptible to loss, waste and worse — creditors of the beneficiary. ii) Alternatively, assets may be left in another vehicle, such as a trust. A trust is a separate entity that owns the asset(s). The trust is managed by your designated trustee for the benefit of your chosen beneficiaries. The trustee has a fiduciary obligation to administer the trust estate pursuant to its precise instructions. In this way, you control how the assets are managed, devised, and invested. You can defer vesting your beneficiaries with control for as long as you believe is appropriate. Arguably most importantly, by placing assets in trust, your beneficiaries’ interest in the trust is protected from themselves as well as their creditors.
The other critical component of a Will is that it appoints fiduciaries. In particular, it appoints your personal representative of your estate (if you have one). If you fail to plan ahead, your estate will go through estate administration, or probate administration. Probate requires hiring an attorney. With the assistance of the attorney, the personal representative is charged with identifying estate assets, beneficiaries and creditors. Creditors are afforded an opportunity to collect debts and beneficiaries — designated by estate planning documents or via statute — receive the balance. This process is led by the personal representative.
Another fiduciary appointed in a Will is the guardian of person and property of minor children. Lastly, if the Will is directs the personal representative to create a testamentary trust, the Will contains all instructions relating to its governance, including, of course, appointment of the trustees (discussed above).
Stay tuned to find out more about what a Last Will and Testament does NOT do in the next post.
Barry E. Haimo, Esq.
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