What’s the difference between a will and a trust?

“A will is a legal document that says, ‘This is what I want to happen to my estate when I pass away,’” Korenic explained. “It only takes effect upon a person’s passing.”

Typically, a will includes post-death instructions for a person’s money, investments, real estate, businesses, and assets of value. Wills often include guardianship wishes for dependents, such as children and pets.

A trust, on the other hand, isn’t limited to death. A grantor (the person who creates a trust) can create, fund, and control a trust while they are alive and well for various reasons, including providing for a dependent or someone who can’t be trusted with a lump sum of money.

A trust also allows the grantor to “control from the grave,” creating rules for when payments will be distributed to trustees (those who receive benefits from a trust), for what purpose the money can be used, and what will happen to any leftover balance.

When should I start thinking about setting up a will and trust? Is it ever too late to start?

“I would say it’s never too late,” Korenic explained, “so long as you have capacity. The longer you wait and get into that late stage in life where people are starting to question whether you’re of sound mind, the more people will question what you did.”

Korenic advises those who wait until later in life to make their estate plans and those who are considering making choices that may upset the trustees to cover their bases to avoid challenges.

“Make sure you go to the doctor first and get a letter stating that you’re of sound mind,” she warned, “especially if you’re going to write someone out of your will.”

What components should be part of my estate plan?

There isn’t a “one size fits all” option when it comes to estate plans, but Korenic recommends the following:

18 and older: Medical power of attorney

A power of attorney is a document that allows someone else to represent or act on your behalf if you no longer have the capacity to do so. Korenic said that parents and guardians of children 18 and over would benefit from setting up a medical power of attorney to avoid potential issues if an emergency were to occur.

“That document is really, really important. If I were an 18-year-old college student and I hurt myself, my parents wouldn’t be able to make decisions on my behalf (without a power of attorney),” she explained. “Many parents forget to get that one before their kids go away to school.”

Individuals with assets over $100,000: Will

“A single person with assets in excess of $100,000 should, at the very minimum, have a will,” Korenic advised, noting that the will creator should include “payable upon death” or “transferable upon death” on the legal forms associated with their accounts to avoid triggering the probate process.

Couples who are starting a family: Will designating guardianship

Korenic recommends that couples with children each create a will that designates who they want to serve as guardians in the event of a simultaneous death. 

“Communicate with those people — you want to be clear on your intentions for raising your children and how you want their assets being spent,” Korenic said. 

Korenic also forewarned that others may not react positively to your guardianship decisions. “That can get a little tricky. People might get offended if they’re not named. People also might say, ‘I don’t want to raise your kids.’ You don’t want any surprises.”

Higher net individuals or anyone “who wants to control from the grave”: Trust

“If you don’t want your beneficiaries or heirs to get everything outright when you die, the only way to do that is through a trust,” Korenic explained. “Also, if you have a significantly large estate or need to do some tax planning, the only way to do that is through trust vehicles.”

Can I write my own will?

While there’s little to stop someone from writing and signing their own will, otherwise known as a holographic will, not all states will recognize them. For example, Illinois does not recognize holographic wills. As for the states that do, each has varying witnessing requirements for them to be considered legal.

“There are many instances of people writing things out,” Korenic explained. “All that does — especially if someone is on their death bed, sick, or could be considered incapacitated — is raise questions of potential undue influence. Maybe somebody else was in the room and said, ‘Don’t you want me to get your car, Mom?’”

“I would never, never, never recommend writing out your own will without at least having an attorney review it, transcribe it into a legal document, and conform to the formalities required for the will to be valid,” Korenic advised, citing the challenges that came with famous holographic will-writers Larry King and Princess Diana, both resulting in lengthy legal challenges.

“It causes unnecessary delays and increased expenses because all parties need to be represented by counsel during these disputes. That’s a high-ticket item that takes away from the estate.”

I’m meeting with my attorney and financial planner about my estate plan — how can I prepare?

Creating a holographic will may not be the best idea, but writing out a general idea of how you’d like your estate plans to look ahead of time can be beneficial.

“If you think about ‘who, what, where, when, and how’ before and write it all out,” Korenic explained, “or have something that you can turn over to the attorney and say, ‘Here’s what I want to see happen,’ you’ve now saved yourself hours of attorney time. However you manage your asset statement, your budget — things like that — bring it to the initial meeting with your attorney.”

The Chicago Trust Company provides their clients with an Estate Planning Questionnaire, which includes questions about their assets, how they want them distributed, and who they would like to serve as the executor and trustee, to give them a head start before their first meeting with an attorney.

What should I make sure to cover when I’m creating my will and trust?

Aside from the actual assets, Korenic stressed the importance of reviewing other specifics in your estate plan. For example, if you plan to split your assets by percentages instead of distributing specific amounts to your designated heirs and beneficiaries, Korenic recommends double-checking your math.

“We’ve seen this before, where we’ll add up the percentages, and they don’t add up to 100%,” Korenic noted, explaining that inaccurate numbers can cause delays and confusion.

Additionally, Korenic recommends being very clear regarding definitions of words within your trust.

“If you say, ‘My trustee will get a distribution of principal for health, education, maintenance, and support,’ what do you mean by health? Did you mean plastic surgery, everything not covered by insurance, mental health care expenses? Does education include room and board? You can be as specific as you want within your trust agreement or as broad as you want, but we prefer you be very specific.”

Specificity is also essential when it comes to personal property.

“What people fight over the most isn’t the money — they fight over the stuff,” Korenic explained. “Always have a separate memorandum that’s signed, witnessed, and dated. I use the example of the aunt who left a diamond ring to her niece, but she owned four diamond rings at the time of her death. If she’s not designating which diamond ring, you know which ring the niece will take — the largest one. So be very specific, especially if you have more than one item of the same category.”

If you choose to go broad on some details, Korenic warns that at the very least, details on incapacity should be precise.

“How do you define incapacity? Does that mean a doctor has to declare me, or should a doctor and my spouse declare me together? Incapacity is a hot topic because incapacity and durations of incapacity are more prevalent than immediate death,” Korenic explained. “So once somebody becomes incapable of managing their affairs, a successor trustee or a power of attorney steps in. You’ve got to be careful who you name in those situations; it has to be a very trustworthy individual.”

What are your top pieces of advice when writing your estate plan?

“Number one is hire an attorney,” Korenic advised, “and don’t hire an attorney specializing in criminal law — you don’t go to a foot doctor for a heart problem. Get somebody who is experienced in estate planning.”

“Number two is to update your plans after a major life event. Divorce, a death, incapacity of a loved one, maybe you want to write somebody out. Update, update, update. As life changes, so should your estate plan.”

Korenic’s third tip is to ensure that your will follows the formalities your state requires to be considered valid.

“For example, in Illinois, you must have two witnesses,” Korenic explained, “and those witnesses must sign an attestation clause. Don’t cut corners. Maybe you got a draft from the attorney, and you don’t want to wait for the appointment to sign it, but you go ahead and sign it, and you don’t sign it in front of the witnesses — now your will is invalid, and you went through all that trouble for nothing.”

How can The Chicago Trust Company help me with my estate plan?

In addition to serving as a corporate or successor trustee for many of their clients, The Chicago Trust Company can provide attorney referrals, conduct estate plan reviews, and provide feedback to attorneys and clients as they’re writing up estate plans.

In cases where a trustee may need additional assistance to ensure that their inheritance lasts throughout their life, The Chicago Trust Company can pay bills and expenses of the trust on behalf of the trust beneficiaries and hire case managers in difficult personal situations to ensure they are abiding by the intentions of the grantor. Additionally, if a trust includes components that a trustee doesn’t have the expertise to take on, such as a family business, The Chicago Trust Company can hire outside agents to provide their guidance and knowledge. The Chicago Trust Company can also step in as trustee where the beneficiaries do not get along, as they have a duty of impartiality towards all beneficiaries unless the trust agreement directs otherwise.

“We’re the ones administering trusts,” Korenic explained. “At the end of the day, the holy grail is the trust agreement, so we’ll follow what the trust agreement says.”

Estate planning can be a sensitive topic. How do you recommend people start the conversation about their wishes with their loved ones?

Korenic recommends starting with a family meeting no matter what stage in life you are at.

“The biggest takeaway is communication,” Korenic said. “The more you can talk about it outright without focusing on the morbid nature of the conversation, the better off everyone is. I think the best approach is, ‘Look, I know you guys don’t want to think about the day when I pass away, but you’ll thank me later for explaining the who, what, when, why, where, and how before my passing or incapacity.’ You never want to leave your loved ones guessing your intentions.”

“You don’t have to necessarily give people information on what you have in total, but one of the most frustrating things for any trustee is locating assets and having access to assets. The more open you can be about the location of assets and the professionals you have on your team, the better.”

More questions? Contact The Chicago Trust Company for help and get started on your estate plan.