Trusts vs. Wills
A will is what many people think of when they first consider estate planning. Everyone should have a will, whether or not they make a more extensive estate plan. A will specifies who gets property covered by that document when the client dies. A will can also serve other vital purposes, such as appointing a personal guardian (e.g., for a minor or impaired child). Property left by a will must normally go through probate. Despite the downside of probate, every estate plan should at least include a backup will to cover things that probate avoidance devices do not cover.
If your client prepares a thorough estate plan and arranges to avoid probate for all of his/her property, he/she should still have at least a simple will (a backup will), as part of the estate plan for the following reasons:
• To leave property generally best left by will. Some types of property are not suitable to leave by living trust and often do not work well with other probate avoidance devices. The most common example is a car. Living trusts do not work well for cars, because most insurance companies are unwilling to insure a car owned by a trust; the companies claim they cannot tell who is authorized to transfer the car. Occasionally, another probate avoidance device can be used for a car—owning it in joint tenancy, or holding title in a transfer-on-death registration. Most people simply leave their car or cars as part of their will property.
• To dispose of suddenly acquired property. Anyone may end up acquiring valuable property at or shortly before death, such as a sudden gift or inheritance, winnings or even a lottery prize. If a client has a will, that property will go to your residuary beneficiary, who, by definition, takes the rest of your client’s property—everything that is not left to some named beneficiary. There is no easy way to leave leftover property through a living trust, because property must be formally added to the trust for it to be subject to the trust provisions.
• To dispose of property not transferred by a probate avoidance device. If the client buys property but does not title it in the name of the trust, a will is a valuable backup device, ensuring the property will go to whomever the client wants to have it (your residuary beneficiary), and not pass under state law.
• To name a personal guardian for your minor children. If there are minor or incompetent children, the client will need a will to name a personal guardian for them. In the vast majority of states, the client cannot use any other device for this purpose.
• To leave property the client does not currently own but expects to receive. If someone has left the client property by will and that property is still enmeshed in probate when the client dies, the client cannot arrange to transfer it by a probate avoidance device such as a living trust, because the client does not have title to the property. But under a will, that property goes to the residuary beneficiary.
Similarly, if the client expects to get money from a lawsuit settlement, only a will can be used to transfer that property. Of course, no one knows what property they might receive shortly before death, which is one reason to have a will.
• To disinherit a child or spouse. You can expressly disinherit a child in a will. You can disinherit a spouse in the will only if you live in a community property state.
• To name the executor. In the will, your client names the executor, the person with legal authority to supervise distribution of property left by the will, and to represent the estate. It is a good idea to have an executor even if there is a living trust and a named successor trustee because financial institutions can be reassured to know an executor exists. The successor trustee and executor is often the same person.
• In case probate is not required. Some states do not require probate, or greatly simplify probate, for small or modest estates. If the estate qualifies for simplified treatment, there may be no need to use a series of probate avoidance devices—a will may be enough.