What is the Difference Between a Will vs Trust and why do I need one, or both?
The decision as to how one plans for the transfer of one’s assets at death are largely dependent on the type of assets, value of the assets and concerns regarding if the public has access to those plans. Your Virginia Real Estate Lawyers at Fox and Moghul stand ready to assist you.
Last Will and Testament (“Will”)
The Last Will and Testament is an instrument in which an individual provides instructions as to how his belongings (“Estate”) will be distributed at death. It appoints a person that will carry out those instructions and comply with the filing of taxes, and arranging for burial instructions, and distribution of the assets in the Estate. The Virginia requirements for a valid will are described in Va. Code § 64.2-403.
The primary aspect of a Will that distinguishes it from a Trust, is public availability. In the case of a Will, the instrument is presented and recorded in the probate court in the county where the decedent passed away. This allows anyone to access the Will and know of the specific bequests and individual person appointed to manage the Estate.
There are various forms that can be used, but the most common and most encouraged is the ‘Will in Solemn Form’ which is a typed instrument signed by the testator and witnesses. The requirements for a valid Will in Virginia is contained in Va. Code §§ 64.2-400 through 64.2-409. In addition, Virginia has a form that can make the Will ‘self-proving’, and acceptable to the Probate Court without the necessity of the witnesses to appear before the court to prove validity of the Will (Va. Code § 64.2-452, 453).
A Will can revoked by either the execution of a new Will that specifically revokes all prior Wills or by destruction (tearing, burning, obliterating, destroying etc.) the original instrument or a Codicil (an amendment to the original Will) (Va. Code § 64.2-410).
Furthermore, in Virginia, a surviving spouse may choose to ‘elect to take against the will’ which generally allows the surviving spouse to take fifty percent (50%) of the decedent’s augmented estate (Va. Code § 64.2-308.3)
Trust (Living, Irrevocable or Revocable)
Regardless of the type of trust, these vehicles remove the legal ownership of assets from the individual and place them in the hands of the Trust, which is essentially a legal entity that can hold and sell, sue or be sued.
The aspect that makes a Trust private and not public, as in the case of a Will, is that a Trust is not recorded or reported in any state office or court. When removed from the legal ownership of the person and placed in a Trust, the Estate that remains after death of the principal (Trustor) does not include the assets conveyed to the Trust. Therefore, those assets are not reported to the Probate Court as assets belonging to the decedent at death and not valued for determination of probate taxes.
Other than the private nature of a Trust, all of the instructions that describe distribution in a Will are contained in the Trust. Therefore, a Trust still allows one to control how the assets are handled after death. The downside of a Trust is merely the requirements which make the creation more complicated. For a Trust to achieve the same results as a Will, all assets must be legally titled in the name of the Trust.
For example, in the case of real property, a new deed must be recorded to transfer ownership from the individual into the Trust. Likewise, bank accounts should also be renamed or created in the name of the Trust as well as stock portfolios, cars or other property.
As part of a Trust plan, it is also advisable to create a Pour Over Will, which contains an instruction that at death, all assed that remain in the estate after payment of debts, taxes and costs, will be transferred to the Trust, so that the instructions for those assets are similarly kept private. The Pour Over Will is submitted to the Probate Court, but the estate is limited to those assets not in the Trust at the time of death.
We at Fox & Moghul can help you determine the most favorable choices to provide for the distribution of your assets at death. Please call us if you have questions.
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