What is a Will? What is a Trust? A Last Will and Testament, known as a Will, is simply a formal, legal document that outlines a person’s last wishes, specifies how their property is to be distributed upon their death, appoints a person to administer the Will, and other related post-death matters. A Will becomes effective upon the Will creator’s death, also known as the “Testator.” A Will should typically name who is to be the “Executor” (if the person is a male) or the “Executrix” (if the person is a female) of the Testator’s estate. The Executor/Executrix is the person named in the Will and appointed by the probate court after the Testator’s death to administer the Will, to administer and probate the estate, and to wind up the affairs of the Testator. Some things to know about Wills in Arkansas:
- They can be difficult to change;
- They are required to go through the process of probate;
- They are inexpensive to obtain;
- They become a matter of public record;
- They only become effective when the Testator dies, meaning that they do not provide any protection to a person who is simply incapacitated; and
- It can take a substantial amount of time and money to probate and administer a Will.
As opposed to a Will, a Trust acts as a separate entity that simply holds assets for you, like a filing cabinet, where you put assets into that Trust and those assets are used by you and for your benefit until your passing. The primary type of Trust that is used for estate planning and business succession purposes in Arkansas is the “Revocable Living Trust.” It is called “living” because it is created during the lifetime of the person establishing the trust, also known as the “Grantor”, and you will put certain assets into that Trust during the course of your life called “Trust Assets”. It is called “Revocable” because the person creating the trust can designate himself, herself, their spouse, or each as “Trustee” or “Co-Trustee” and they have the power to change and amend the Trust rules and terms at any time. I think it’s important now to get a grasp of the various trust related terms used in estate planning under Arkansas law.
“Beneficiary” – This is the person(s), entity, charity, trust, or any other entity or being who will receive assets from the trust as outlined by the Grantor in the trust.
“Grantor” or “Settlor” – this is the person who is establishing the Trust for themselves and their family.
“Incapacitated” – if you are ill, injured or otherwise unable to take care of yourself and your finances.
“Pour-Over Will” – This is a Will that add any unfunded or unallocated assets to the Trust. Think of it as a safety net which will pick up any assets that you do not specifically put into the Trust.
“Successor Trustee” – this is the person who will serve as the trustee of the Trust when the initial trustee can no longer serve as the trustee.
“Trust Assets” – assets and property that are transferred into the trust which can include, among other things, your house, any property you own, valuable possessions, bank accounts, retirement accounts, investments, and most other types of assets.
“Trustee” or “Co-Trustee” – this is the person who is designated by the Grantor to manage the trust. The trustee has a fiduciary duty to manage the trust in a prudent manner and in the best interests of the beneficiaries of the trust. A Co-trustee is simply a name given to the trustees of a trust when there are multiple trustees designated by the Grantor.
Generally, the answers to the following questions will dictate how the trust will operate: who is to be the trustee, who is to be the successor trustee, who are the beneficiaries, what happens to the Grantor’s affairs if they are incapacitated, what property will go into the trust, how will that property be distributed upon the Grantor’s death, and which beneficiaries will receive which property and under what conditions will they receive it.
Once the Trust is established and it is determined how the Trust will operate, the Grantor will then “fund” the trust which means that certain assets will be put into the Trust itself. Once that property, asset, bank account, etc., is put into the Trust, the Trust is then funded and fully functional. At that point and until the Grantor’s incapacitation or death, the Grantor will have complete control of the Revocable Living Trust, they will be entitled to any money or income in the Trust, they will be able to put any assets into the Trust or take any assets out of the Trust at any time, and they will be able to sell any Trust property at any time. This provides a lot of flexibility while also providing protection at the same time so there is virtually no risk to setting up a Trust under Arkansas trust law. Upon the death or incapacitation of the Grantor, the Trust terms will then kick in and the Trust will be administered per the wishes of the Grantor as spelled out in the Trust. At this point, the successor trustee will then be responsible for administering the Trust and carrying out the wishes of the Grantor and the distribution of the Trust property to the beneficiaries as outlined in the Trust document.
A Revocable Living Trust really is a pretty remarkable instrument. Quite frankly, I don’t know why anyone in Arkansas wouldn’t want to set up a Trust for themselves and their spouse as soon as possible because there really is no downside. It will save your family money on the back end by avoiding probate, it is administered much quicker than a Will, it provides more flexibility and protection than a Will, it will keep your information private and not a matter of public record, and most importantly, it makes things so much easier on your family and your loved ones when you are gone. Let me know how we can help you take care of your estate and set up a plan that gives you the final say in your property, provides you flexibility, and also makes things easier and cheaper on your loved ones.
If you own a home and have an estate valued at more than about $150,000, then you may want to look at setting up a Revocable Living Trust for your assets, property, and your estate in Arkansas. A Trust is a wonderful tool that provides several benefits that a Will does not provide including keeping all of your financial records and details private, it serves to avoid the process of probate all together, and it is much faster and cheaper to administer than going through probate. As you may already know or have already experienced with a loved one, probate can get very expensive and it can last a long time, sometimes upwards of a year or more in Arkansas.
Also, unlike a Will, a Trust can cover you while you are still alive by outlining what is to happen to your finances and who is to pay your bills if you become incapacitated. Who do you want to handle your affairs in the event that something bad happens to you and you are unable to take care of your affairs yourself? A trust can dictate who and how your affairs will be administered and taken care of if you are incapacitated by appointing a successor trustee to help administer your Trust and assets.
Located in Batesville, Melbourne, and Heber Springs, Arkansas, and serving all of Arkansas, Reeves Law Firm stands ready to handle any civil, estate, family law, guardianship, personal injury, probate, or any other litigation matters that may arise.
Reeves Law Firm primarily serves Independence County (Batesville), Jackson County (Newport), Sharp County (Ash Flat, Highland, Cherokee Village), Lawrence County (Walnut Ridge), Cleburne County (Heber Springs, Greers Ferry, Fairfield Bay), Izard County (Melbourne), Stone County (Mountain View), White County (Searcy), and Baxter County (Mountain Home).
Give us a call in Batesville, Arkansas, at (870) 793-0021
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