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THE LAST WILL AND TESTAMENT

Before we go on, it's important that we fully review just what a Last Will and Testament is, what it does, and why you should or should not have one. A Will is essentially a legal document that lays out how you want your assets distributed at death.

A Will is a public contract between you as the maker of the Will and the state in which you live. A Will does not become effective until you die. At that time, the state becomes a party to your Will and this proceeding is called probate. In a Will, you decide the person whom you want to be the "independent executor" and you name the beneficiaries of your estate. Because probate without a Will is the most expensive way to distribute your assets, everyone needs at least a Will. A Will is a testamentary instrument that merely appoints an executor, directs how property may or may not be disposed of, or revoke another Will.

A Will is nothing more than a contract between you and the state in which you live, with the probate judge acting as the official government representative seeing to it that your Will is carried out. In a sense, you can imagine a Last Will and Testament in this way:

Dear Judge,
Now that I am dead, these are my instructions for the distribution of my wealth, and these are the individuals whom I want to receive my estate.

To accomplish this task, the judge Will use an attorney and an executor.

An Independent Executor needs only to file an application to probate the Will, prove death facts (in other words, that you are truly dead, not just having a bad day), file an inventory of all your assets within 90 days of the hearing, and give notice to creditors. An Independent Executor can then carry out the directions of the Will and make distribution without interference from a court-appointed attorney. But remember: a Will does not avoid probate. A Will guarantees that your estate Will go through probate, it's a very poor estate planning document for most families.

SHOULD YOU HAVE A WILL?

Setting aside the fact that wills require probate, there may be some circumstances where a Will is the right choice.

For example, if you write your Will by yourself and in your own handwriting, this so-called holographic Will is the cheapest of estate planning choices, costing you virtually nothing at all. On the other hand, if you seek out an attorney to help you draft a simple Will, you may still be able to establish your estate plan for a very modest fee. Then, for the rest of your life, you can congratulate yourself for having accomplished this important task. You may never have to think twice about your Will, and you may never need to do another thing about your estate plan. It's as simple as that. Remember: a Will is a contract that goes into effect only after you are dead.

Finally, you can be relatively certain that your wishes will be carried out as you've stated them in your Will. During the probate, your Will is the central player in directing how your assets will be distributed. In Texas, your Will must be filed within four years of your death.

So, to review, a Will's chief advantages are:

• Its low establishment costs
• Its simplicity during your lifetime
• It provides a reasonable certainty that your wishes Will be carried out as you've stated them.

THE DISADVANTAGES OF A WILL

Even though the Will can be a low-cost alternative, requiring very little of you in life while providing you with a fairly good tool for distributing your wealth, you may still want to consider other options.

Why? Because although the Will is the simplest of tools for you, it can be anything but simple for those you leave behind. In fact, all the benefits that a Will confers upon you can turn into substantial disadvantages for your loved ones after you're gone.

Remember that with a Will, there's probate. And that means time delays, added expenses, publicity, and the potential for interlopers or disgruntled loved ones to contest your Will and create even more legal wrangling.

Although you won't be around to see these events transpire, your loved ones will be suffering through them, and at a time when their ability to cope may be stretched thin by their grief over losing you. So, keep this in mind: the easy choices you make in life can result in painful choices that cost your loved ones dearly, both emotionally and financially, after your death.

To sum up, the disadvantages of a Will include:

• A Will requires probate
• Because of probate, a Will reduces the size of the estate you leave behind
• Depending on the size of your estate, probate may take from one year to over three years

So far, we've talked about situations in which probate is nearly inevitable. But is it possible to avoid probate? Are there exceptions to the general rule that makes probate a requirement? The good news is: yes, there are three ways to avoid probate.

What is Probate?

Remember this general rule: if you execute a Will as your estate planning tool of choice then your estate will be probated. When you die, someone will have to file your Will and an application for probate in order to begin the process. A hearing will be held to obtain official acknowledgement of your death, and to appoint an independent executor over your estate. Also part of the process will be a review of the Will to determine if it truly is your Last Will and Testament. Once this hearing is completed an inventory of all the assets must be filed with the court within ninety (90) days and approved by the court. A notice in the newspaper must be filed giving notice that there has been a death and letting creditors know that they must make claims. After this has been completed all of your debts are paid, including the court cost and administrative expenses of the probate, then and often only then, will whatever assets remaining be distributed to your beneficiaries according to your wishes.

THREE EXCEPTIONS TO PROBATE

You can avoid probate in three ways. One is to own all your worldly possessions with another person (or persons) as joint tenants. We've already explained why we don't think you should take this option.

The second way to avoid probate is to leave no estate at all, or only a very small estate. Most states today offer a simplified probate for small estates with no debts.

Finally, there's a third way to avoid probate, and we've saved the best for last. The strategy that gives you the greatest degree of control over your assets while you live, lets you control their distribution after your death, and keeps your estate out of probate court is the "living trust".

THE "LIVING TRUST"

Of the three ways to avoid probate, let's turn our attention now to the living trust. Have you heard of this estate planning tool before? If so, keep in mind that not everything you may have heard about the living trust is necessarily true. Because misinformation abounds about what it can and cannot do. It can control all of your assets both during your life and after your death.

A living trust is a trust that is revocable, which means it can be altered at any time during the lifetime of the maker(s). A living trust can prevent the assets of the trust from going through the probate process.

A living trust is not subject to probate. This means that your estate can be transferred directly to your beneficiaries, without the time, cost, or publicity of the probate process. In addition, the living trust can ensure that your wishes are carried out in the event you become mentally or physically incapacitated.

**You may elect to use one living trust formed jointly by husband and wife.**

We'll now discuss it in detail, including its advantages and disadvantages.

LIVING TRUSTS VERSUS TESTAMENTARY TRUSTS

The kinds of trusts used for such purposes as estate planning are wide and varied. So, let's start with some important definitions.

A living trust is a trust you create while you're living, for your benefit while you're alive. A living trust is typically revocable, meaning you can modify it, add to it, remove assets, and place new assets within it at any time and for any reason.

A testamentary trust, on the other hand, is a trust created after your death. Usually, you provide the instructions for such a trust in your Last Will and Testament, and it is the judge overseeing the probate of your Will who creates the trust for you, or more precisely, approves of its creation. Testamentary trusts are irrevocable, which means assets can't move freely in and out of the trusts.