Wills and Estate Planning FAQ

Below are our responses to some of our most frequently asked questions regarding Memphis estate planning.

Q. What is estate planning?

A. In the past, estate planning was ordinarily described as the process of helping you plan for the care of your property and your family after your death. This was done by preparing and executing documents such as wills and trusts.

Estate planning now often includes a “disability” component, to help you plan for the care of your property and your family if you become disabled. This may require the preparation of documents such as a living will or a power of attorney for health care or for property.

But estate planning is much more than just the preparation of documents — at its heart, estate planning involves working with an attorney and your financial team to analze your finances and family situation, helping you assess your goals, and then working with you to achieve those goals.

Q. What does a will do?

A. By a will, you can…

a. Give away your probate property (see below); b. Name someone (in Mississippi and Tennessee, called an “executor”) to handle your affairs after your death; and c. Name someone (a “guardian”) to care for your minor children after your death.

To learn more about how a will takes effect at death, please read question 1 on our Probate FAQ page.

Q. What is probate property?

A. “Probate property” is property that is owned in the name of the deceased person at the time of their death. Probate property is not…

a. Jointly-owned property. When a joint tenant dies, this type of property automatically passes to the surviving joint tenant; b. Retirement benefits, such as property held in a 401(k) or IRA account. This property passes according to the beneficiary designation that you filled out during your life; c. Life insurance. This property also passes according to the beneficiary designation that you filled out during your life; or d. Property held in a trust. This property passes according to the terms of the trust. For more information on Probate go to our Probate FAQ page.

Q. What is a trust?

A. Essentially, a trust is an agreement between three parties: the trust’s creator (known as the “grantor”), the trust’s beneficiary, and the trustee of the trust.

A trust is typically created when the grantor and the trustee sign the trust agreement and the grantor transfers property to the trust and trustee. While the trustee holds legal title to the trust property, he or she cannot use it for just any purpose other than what is stipulated in the trust. Instead, the trustee must hold the property on the terms of the trust agreement, for the benefit of the beneficiary of the trust.

Many different kinds of trusts can be created. Perhaps the most popular trust is a “living trust” (discussed below). Other trusts (such as gift trusts, insurance trusts, and charitable trusts) can be created in order to minimize taxes.

Q. What is a living trust?

A. A living trust (sometimes known as a “declaration of trust” or a “revocable trust”) has become a very popular estate planning tool over the past several years. In a typical living trust, the grantor of the trust is also its beneficiary and the trustee. What this means  is that the grantor is not giving up any control over the trust property. You’re probably wondering why is it advantageous to hold property under such an arrangement? There are a number of reasons:

  1. Non-Probate Aspect. As I mentioned above, property held in a trust is not probate property, and is therefore not subject to probate.
  2. Privacy. Unlike a person’s will, a trust is a private document, and does not have to be probated and filed with the court or made accessible to the general public at any time.
  3. Guardianship Avoidance. If a person with a trust becomes disabled, his or her successor trustee can step in and administer the trust with little or no problem. If a person without a trust becomes disabled, guardianship proceedings may need to be initiated in order to care for the individual.
  4. Control. A trust allows you to control the way in which beneficiaries receive property from the trust. In contrast to an outright gift, money or property placed in trust can be held for the beneficiary on terms and conditions that you have chosen. For instance, you may decide that property in your son’s trust should be used only for his education, or that your daughter should not receive the money from her trust until she is 30 years old.
  5. Creditor Protection. Assets you place in trust for a child or grandchild cannot be reached by the child or grandchild’s spouse in a divorce proceeding, or by most other creditors.
  6. Estate Tax Minimization and Deferral. A trust provides the easiest way to create arrangements that minimize and/or defer estate taxes.

We are not suggesting that living trusts are appropriate for everyone, or that a person should have a living trust instead of a will. However, we do believe that living trusts have a number of advantages that make them an important part of most estate plans.

If you would like to set up a free estate planning consultation, please contact us