Estate Planning FAQ

What is a last will and testament?

A will is a legal document that serves as a set of instructions for how to distribute property at your death. While you are still alive, a will can be revoked. People can and often do execute multiple wills over the course of their lifetime. The term “last will and testament” is a common way to refer to a person’s most recent will. 

Do I need a lawyer to make a will?

It is possible to make a will without a lawyer, but your will is not effective until a court accepts it for probate. There are many factors outside the document itself that can make probate more difficult or cause the will to be rejected. Most wills accepted for probate in Alabama are drafted by lawyers.

How can I find out if my will is valid?

No one can say with 100% certainty whether a will is valid until it is accepted for probate, which can’t happen until after death. There are many factors outside the document itself that can cause a will to be rejected. If you are concerned that your will might not be valid in Alabama, you should have it reviewed by a lawyer here. An Alabama lawyer with experience drafting wills and trusts can help identify the reasons why your will might not be valid.

What is probate?

There are several different ways that property can pass at death, and probate is one of them. What is different about probate is where it happens and who is the ultimate decision maker – probate happens in court where a judge is the ultimate decision maker. Probate can be either testate – if the person had a valid will – or intestate – if they did not. In a testate probate, the property will generally pass according to the terms of the will. In an intestate probate, Alabama law controls who gets the property. 

Is probate always required for property to pass at death?

No. There are many ways that property can pass at death without probate. Joint titles, beneficiary designations and payable-on-death designations can be used to avoid probate. Property that has been transferred to a living trust can also avoid probate.

Should I use beneficiary and payable-on-death designations instead of a will?

We usually don’t recommend using beneficiary and payable-on-death designations to avoid probate. This is especially true if you want your property to pass equally at your death to a group of people such as your children. Using beneficiary and payable-on-death designations may result in a set of instructions that is more like a patchwork quilt than a well-organized plan. This increases the risk that some beneficiaries may not receive the share that you intend. The chances of an unintended result are even greater if you experience a period of incapacity before death, as many people do. Here is a typical example:

A payable-on-death designation gone wrong.

Atticus and Jean have two children, Jem and Scout. After Jean dies, Atticus divides his savings equally into two bank accounts. One account is payable-on-death to Jem, the other is payable-on-death to Scout. Atticus names his younger brother Jack as an agent on his financial power of attorney. For most of his life, Atticus is careful to keep his savings evenly divided between the two accounts. In his later years, Atticus moves to an assisted living facility.  Unaware of the payable-on-death provision, Jack pays the cost of assisted living from the account that is payable-on-death to Jem, exhausting most of those funds. When Atticus dies, Scout receives substantially more than Jem.

What could Atticus have done to avoid this result?

If he had not made any payable on death designation, the bank accounts would have passed under the terms of his will, which divided his estate equally between Jem and Scout. Or he could have titled the accounts in a living trust instead, which would have allowed the accounts to pass equally to Jem and Scout while avoiding probate.

What is a trust?

A trust is an agreement between three parties: the trust-maker (also known as the settlor), the trustee, and one or more beneficiaries. A trust acts like a bucket that can hold property, such as your home, other real estate, bank accounts, stocks and other financial accounts. The rules of the trust only apply to the property that is put into the bucket. The process of adding property to the trust is called funding.

I want a trust. Will you draft one for me?

When someone tells us that they want a trust, our usual response is: what are you trying to accomplish? There are many different types of trusts that are designed to accomplish different goals, and no one type of trust can do everything. Some of the common reasons for establishing a trust include avoiding probate, managing property for young children, protecting assets for children in blended families, and protecting assets from creditors. If you tell us that you want a trust, we will start by identifying your goals.

What is the difference between a living trust and a testamentary trust?

A living trust is one that a settlor creates during their lifetime. If we think of the trust as a bucket, you can put property into a living trust bucket as soon as it is created. A testamentary trust is one that is included in a will. The testamentary trust will not exist until the settlor dies and the will is accepted for probate.  A testamentary trust cannot hold any property during the settlor’s lifetime.

What is the difference between a revocable and an irrevocable trust?

A revocable trust can be undone or changed by the trust-maker, also known as the settlor.  An irrevocable trust generally cannot be undone or changed by the settlor, but there may be other ways to avoid the results of an irrevocable trust, such as distributing property out of the trust.

Do I need a will or a trust?

The backbone of any estate plan is usually either a will or a revocable living trust (RLT). Trust-based plans can be effective at avoiding probate if they are managed and funded correctly. However, probate is generally less complicated and less expensive in Alabama than in other states. As a result, the total cost of a trust-based plan in Alabama from creation to final settlement is usually higher than the total cost of a will-based plan.  Read more about will-based versus trust-based plans.  Our lawyers create both will-based and trust-based plans and can help you decide which type is right for you.

Should I leave my retirement benefits in trust?

If an ordinary trust is named as beneficiary of an IRA or 401(k), the five-year rule will apply, requiring all assets to be distributed and taxed within five years of the participant’s death. Specially drafted trusts may avoid this five-year rule. The rules for inherited retirement accounts are very complicated and it appears that Congress is likely to change them soon. Retirement accounts are often the largest part of a person’s assets at death, and they deserve careful planning along with the rest of your estate.