If you ask someone what a will is in an estate planning context, they are going to tell you that a last will is a document that you can use to state your final wishes. In the will, you name inheritors, and you arrange for your estate to be distributed among these inheritors in accordance with your wishes after you pass away.
When it comes to trusts, you may have heard of the revocable living trust. This is the most commonly utilized type of trust, and it can be a good choice for a wide range of people.
You can find a lot of good information about last wills and living trusts on this website, but there are other wills and trusts that fly under the radar. Let’s look at a few of them.
Pour-Over Wills
If you decide to use a living trust as your asset transfer tool, you may assume that you don’t need a will, because you are expressing your final wishes in your trust agreement. In fact, you should have a certain type of will even if you have a living trust.
When you initially fund the trust, you may decide to keep certain assets out of the trust while you are living. Plus, you may acquire property after the trust has been established. You can convey property into a living trust after its original inception, but you may forget, or decide not to do so for some reason.
To account for property that is in your direct personal possession at the time of your passing, you can include a pour-over will as an accompaniment to your living trust. This document would allow the trust to absorb assets that you had in your direct possession at the time of your death so that your estate is consolidated.
Ethical Wills
The financial end of the estate planning equation is pretty self-evident. At the same time, when you are sitting back considering the impact of your passing, you may feel a peculiar sense of loss. We are used to being there for our loved ones when they need advice, and unfortunately, we can’t be there forever. This can be a bit disconcerting when you have been a parent and grandparent for many years.
This emotion has been felt by people for thousands of years, and you can address the matter through the creation of an ethical will. An ethical will is not legally binding, but it can have an extraordinarily positive impact on your family.
These wills stem from the Judaic tradition, and they have been used for centuries to pass along moral and spiritual values in writing. When you include an ethical will in your estate plan, your loved ones can access your moral compass and get a first-hand glimpse into your thought processes.
Incentive Trusts
You may feel as though there is someone on your inheritance list who is not prepared to handle bequests without any guidance involved. This can be a younger family member who has not yet reached his or her full potential. A large inheritance could ultimately do more harm than good on a personal, developmental level.
There could also be someone who has substance abuse problems, or other personal problems.
To account for these scenarios, you could establish an incentive trust. As the name would indicate, you can include stipulations that must be met in order for assets to be distributed to the beneficiary.
You could include incentives that guide a younger person toward educational and professional achievement. It would also be possible to steer a family member away from destructive behavior through the terms of an incentive trust.
Qualified Terminable Interest Property Trusts
If you are getting remarried as a parent with children from a previous marriage, you may want to take certain steps to protect your children. This can be accomplished through the creation of a qualified terminable interest property (QTIP) trust.
The trustee that you name in the document would be able to distribute the earnings from the trust to your surviving spouse throughout his or her life if you do in fact die first. Your children would be the second beneficiaries, and they would inherit the assets in the trust after the death of your spouse.
Schedule a Consultation
In this blog post we have looked at some of the often overlooked wills and trusts that can be used when you are planning your estate. If you would like to discuss all of your options with a licensed professional, call us at (317) 684-1100 or send us a message through our contact page to set up a consultation.
Paul A. Kraft, Estate Planning Attorney
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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