RESOURCES

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CONTENTS (scroll down)

1. Is a Trust for You or Will a Will Simply Do?

2. Establishing your Corporate Identity

Typically the first question posed by clients interested in planning their estates is whether they need a trust or a will and what’s the difference. Wills and trusts are both intended to direct how to distribute assets after death. While trusts are currently a popular alternative to simply executing a traditional will, each instrument has its own advantages and disadvantages. Clients are advised to weigh these advantages and disadvantages before deciding on one or the other. Dying without a valid will or trust is known as dying intestate, which means that state law controls how your property is distributed, usually to spouses and closest heirs. The old yarn says that if you die without a will, the government has one that’s just right for you!

What is a Will? 

A will is a legal document that provides for orderly distribution of your property, both real (houses and land) and personal (money and things). Once you create a will, it does not come into play until you die, at which time the local probate court supervises execution of its terms. The essential elements of creating a valid include 1) identifying a “Personal Representative,” who will oversee the administration of your estate; 2) designating beneficiaries who will receive specific items, or bequests, from your estate; and 3) nominating guardians or conservators for minors or incapacitated individuals. And, of course, a will needs to be witnessed and executed properly, pursuant to local law.

What is a Living Trust?

Unlike a will, a living trust is a document that is in force during your lifetime, and it is not subject to the jurisdiction of the local probate court. While you are alive, the living trust is used to manage your property and any income generated by it to your benefit. After death, the trust is used to distribute the assets in a manner similar to that of a will. If you should become incapacitated or disabled, the trust also is used to manage your affairs, usually by a “successor” trustee whom you have identified in advance. A living trust is revocable, which means that you can make changes to it, or simply dissolve it. This mechanism allows you to transfer “ownership” of your assets into the trust, which is a separate legal entity, and usually with its own tax identification number. Typically, the most significant asset held in trust is the family home, and the way to achieve this is to deed the property to the trust and then record the new deed at the Recorder of Deeds. Living trusts may be individual or joint, although the latter should only be used after thorough consideration with legal and financial professionals.

The Pros and Cons of Trusts and Wills

So, how to choose?  Here are the advantages and disadvantages of each:

1. Probate. A will is subject to probate, while a living trust is not. With a will, your out-of-state weekend home requires probate proceedings in that state as well, while a living trust avoids probate in both jurisdictions. Court supervision of a will provides an automatic mechanism for handling beneficiary challenges and creditor disputes, while a living trust provides no such mechanism. Finally, a will becomes a public document at the time of death, while a living trust remains private.

2. Taxes. Wills and living trusts provide the same tax advantages and disadvantages.

3. Asset Management. A living trust allows you as the grantor and initial trustee to manage trust assets as long as you are both able and willing, with the role assumed by a successor trustee to take over should you resign or become incapacitated. Managing assets with a will in place usually requires a combination of powers of attorney and court-approved financial guardianships.

4. Costs.  Living trusts are more expensive to prepare, fund and manage than simply executing a traditional will in part because even if you create a living trust, you will need also to execute what’s called a “pour-over’ will, which provides a way for any assets not held in the trust at the time of death to be put into the trust. However, the cost of probating a will can be very high, while the living trust avoids probate altogether. 

In sum, each estate planning situation tends to be different and the right choice for a testamentary document needs to be tailored to individual needs. Regardless of whether one chooses a will or a living trust, it is crucially important to have an asset management and distribution plan in place.

 Our firm is dedicated to helping our clients with several legal issues encountered in registering their corporate entities. In addition to preparing and ensuring timely and efficient filing of your organizational documents, We will ensure you establish the most advantageous corporate structure for tax and liability purposes, including statutory language in your Articles to protect your business and personal assets. The first thing any small business must do is determine the right structure for their business entity, such as a corporation or limited liability company.

A Corporation is considered by federal and state law to be an artificial legal entity that exists separately from the people who own, manage, control, and operate it. When you operate a business as a sole proprietorship, any liability is assumed by the owner of the company.  Therefore, the owners personal, as well as business assets, are vulnerable to litigation.  Incorporating your business, however, creates a separate entity from that of the owners or shareholders and therefore the personal liability is not exposed to any litigation.

A Limited Liability Company, or LLC, is similar to a partnership but has the legal protections of personal assets that a corporation offers without the burdensome formalities, paperwork and fees; however, the exact rules for forming an LLC vary by state. Forming an LLC may help a new business establish credibility with potential customers and provide tax benefits without the need to follow all the restrictions imposed on S corporations.

Our firm’s approach to corporate and business law practice involves assistance with nearly every aspect of business dealings:

1. Registering your business entity with your local jurisdiction by preparing and ensuring timely and efficient filing of Articles of Incorporation or Organization. 

2. Establishing your business entity’s Bylaws or Operating Agreement that details the business arrangement, including members’ percentage ownership, roles, rights and responsibilities.

3. Preparing the requisite tax documents to ensure proper registration with your local jurisdiction. We also secure your Federal Employer Identification Number (EIN) to comply with IRS regulations.

4. Establishing or serving as Registered Agent for your business entity, pursuant to your jurisdiction’s designation requirements.

5. Obtaining proper licensing or permits to ensure compliance with all applicable local, state and federal regulations, avoiding expensive fines and penalties that may jeopardize your entity.

We understand the legal issues involved with establishing your business entity and have the experience needed to help our clients with all areas of business operations. Making use of our extensive experience to incorporate applicable safeguards, we pay special attention to, and help our clients assess opportunities and assess applicable tax and other liability concerns, including the best methods of limiting the same.