A will is a legal document directing the disposition of assets upon a person's death.
A living trust is a legal arrangement under which property is transferred to a trustee to administer in accordance with the instructions of the person who sets up the living trust. A trust's life is not limited by the life of the person who sets up the trust.
Executors are named in a will to carry out (execute) your instructions after your death. If you only have a will and don't have a living trust - the executor of your will is the one who will be responsible for getting your estate through probate.
You name trustees to carry out the instructions of your living trust - before and after your death. As long as you are mentally and physically capable, you (and your spouse) may serve as trustee of your own living trust. When more than one trustee serves at the same time, they are referred to as co-trustees. Following your death (and the death of your spouse), successor trustees serve.
If you are married, after one spouse dies the surviving spouse can serve alone as sole trustee or can serve with a co-trustee. To protect the interests of the deceased spouse in the case where the surviving spouse may remarry, it is usually a good idea to include the provision that, at the death of the first spouse to die, a successor trustee come on as co-trustee.
Where a married couple has children from different marriages, it is sometimes recommended that a co-trustee from each set of children always serves together in order to protect the inheritance rights of both sets of children.
As you can see from the above examples, if done right a living trust can go a long way towards ensuring family peace. And if not done at all or done the wrong way, there are strong possibilities for major family feuds.
If you only have a will, who you name as executor is very important because this person will have to deal with your estate going through probate. If, on the other hand, you have a living trust, your executor's main duties have to do with funeral arrangements and expenses.
A "pour-over" will puts all assets not transferred before death into your living trust. Thus it is the trustee who carries out the terms of your living trust after you die.
To make sure things go smoothly, it is recommended that the executor and successor trustee named be the same person.
When considering who to name as executor and trustee as well as successor executors and successor trustees, keep in mind whether:
- people you name can be trusted with your assets;
- it is convenient for these people to administer the will and trust (one thing to consider is where these people live);
- they are likely to outlive you;
- they will be capable of dealing with the administration of your estate, such as hiring lawyers, accountants, appraisers, investment advisors, or whoever else is needed to help them;
- they will, in fact, carry out your intentions.
You might want to ask these people if they agree to serve before naming them.
Of course, an executor or trustee can chose to resign. The next successor trustee or executor would then take over. A bank can be named as executor or trustee, although some people find banks difficult to work with and expensive.
Reasonable compensation may be paid to executors and trustees for administering an estate. You can talk to your own estate planning attorney as to whether you want to include in your living trust and/or will how much that compensation should be.
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