Understanding the Relationship Between a Will and a Trust in My Arkansas Estate Plan

Will trust Arkansas

When you begin creating an estate plan, you may operate under the assumption that you need to choose between a Last Will and Testament and a trust. Estate planning, however, is often more complicated than simply deciding which of these documents is better. A Will and a trust can both be used to distribute estate assets, but they can also both perform different additional functions. Consequently, a comprehensive Arkansas estate plan may use both a Will and a trust to ensure that all your estate planning goals and objectives are achieved. Understanding how these two estate planning tools interact can help you create a coordinated plan that protects you during your lifetime and carries out your wishes after you are gone. Toward that end, the attorneys at Wilcox Attorneys, PA discuss the relationship between a Will and a trust in your Arkansas estate plan.

A Will and a Trust Are Not Necessarily Competing Estate Planning Tools

A common misconception about estate planning is that establishing a trust eliminates the need for a Will. Another is that having a Will makes creating a trust unnecessary. Neither assumption recognizes the different jobs these documents can perform within your overall estate plan.

Your Last Will and Testament generally controls assets that remain part of your probate estate when you die while a living trust controls assets that have been transferred into the trust, either during your lifetime or immediately after your death. Consequently, the documents can coexist within the same estate plan without duplicating one another.

The appropriate combination depends on what you want your estate plan to accomplish. Your family structure, the nature and value of your assets, concerns about probate, the ages and circumstances of your beneficiaries, and the possibility of future incapacity can all influence the role that each document should play.

What Does a Last Will and Testament Do in an Arkansas Estate Plan?

A Last Will and Testament provides instructions regarding the disposition of property subject to probate after your death. You can use your Will to identify beneficiaries, make specific or general gifts, leave property to charities, and determine how the remainder of your probate estate should be divided. Your Will also allows you to nominate an Executor who will be responsible for administering your probate estate after your death. A Will has another particularly important function if you have minor children because only a Will allows you to nominate the person you want to serve as Guardian if your children are left without a parent able to care for them. The ultimate appointment remains a matter for the court, but providing a clear nomination allows you to communicate your wishes instead of leaving the court without guidance. Although a Will can be an extremely important estate planning document, it does have limitations, including the inability to prevent assets governed by the Will from going through probate.

How Does a Trust Work?

A trust creates a legal arrangement through which a Trustee holds and manages assets for one or more beneficiaries according to instructions established by the person creating the trust. The person creating and executing the trust may be called the Settlor, Grantor, or Maker. Trusts can take numerous forms and accomplish a wide range of planning objectives, making them an extremely versatile and popular estate planning tool. One commonly used type of trust is a revocable living trust. Unlike a Will, which does not become operative as an asset-distribution instrument until death, a living trust exists and can own property during your lifetime. When you create a revocable living trust, you can initially serve as your own Trustee and retain control over the assets transferred into it. Because the trust is revocable, you can modify its provisions or revoke the arrangement during your lifetime. When you create the trust, you name a successor Trustee who can assume responsibility in the event of your death or incapacity. Following your death, the successor Trustee administers the trust property and distributes or continues managing it according to your instructions.

The Relationship Between Trust Funding and Probate

One of the most important concepts to understand about the relationship between your Will and trust involves ownership of your assets. Creating and signing a revocable living trust does not automatically place all your property into the trust. You must properly fund the trust by taking the steps necessary to transfer appropriate assets to it. For example, funding might require changing title to real estate or financial accounts. Properly transferring assets into the trust is crucial because a living trust only avoids probate for assets actually owned by the trust. Assets properly transferred to a living trust can be managed and/or distributed by the successor Trustee without waiting for the probate court to authorize their distribution. If an asset remains individually owned at your death and does not have another effective non-probate transfer mechanism, that property may become part of your probate estate despite the existence of your trust.

Why You May Still Need a Pour-Over Will When You Have a Trust

If a revocable living trust serves as your primary distribution mechanism, your estate plan will commonly include a special type of Will known as a Pour-Over Will. A Pour-Over Will acts as a backup for assets that were not successfully transferred into your trust before your death. You might purchase an asset shortly before your death, forget to retitle an account, or simply overlook property while funding the trust. Without a Pour-Over Will, property left outside your trust could unintentionally create an intestate estate that must go through probate and be distributed using the Arkansas intestate succession laws instead of pursuant to your wishes. A Pour-Over Will addresses this problem by directing remaining probate property into your trust after your death. After the property reaches the trust, it becomes subject to the trust’s distribution provisions. Property that remains outside the trust and must be transferred through the Pour-Over Will may still have to pass through probate before reaching the trust. For that reason, a Pour-Over Will should be viewed as a safety net rather than a substitute for properly funding your trust.

Do You Have Questions about How a Will and a Trust Fit Into Your Arkansas Estate Plan?

For additional information, please sign up for one of our FREE estate planning webinars. If you have additional questions or concerns about how a Will and a trust fit into your Arkansas estate plan, contact the experienced Washington County, Fayetteville, Springdale, Rogers, Bentonville, and Northwest Arkansas estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.

Audra Wilcox
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