What Is Traditional Estate Planning?

Understanding Wills, Trusts, and Your Estate Plan

As-salāmu ʿalaykum, everyone. Welcome to Faith, Law, and Legacy with Abed Awad.

I’m a New Jersey and New York estate planning attorney with a unique specialization in Sharia-compliant estate planning and Sharia-compliant family law.

Today, we’re going to cover a fundamental question: What is estate planning?

A lot of times, everybody says, “I want a will.” But it’s not just a will.

Estate planning is a plan. It’s a package.

There are two types of estate plans: a will-based estate plan and a trust-based estate plan.

What Is a Will-Based Estate Plan?

In a will-based estate plan, you’re going to have your last will and testament, a general power of attorney, and a healthcare directive or living will.

These three documents work together.

The will is enforced when you pass away. It needs to be probated and go to court, so it covers what happens in the event of death.

But what happens in the event of incapacity?

Your general power of attorney allows your trusted agent such as your parent, spouse, or sibling to manage your affairs when you’re not able to.

The healthcare directive allows you to tell your family that, in the event of a serious illness, you’ve already made decisions about your end-of-life protocols and wishes.

Do you want life support? Do you want to be resuscitated? If you’re brain dead, is that enough to remove life support? Do you want to donate organs, or are there restrictions on those donations?

Who is going to be the guardian of your children?

All of that is part of a will-based estate plan.

Why Do You Need a Will?

Everybody in the United States should have a will.

If you don’t have a will, state law will govern. That means you have no control over how your estate is going to be distributed.

You have no control over who is going to be the guardian of your children. You have no control over your medical decisions.

You’re potentially putting those serious and sensitive decisions in the hands of your children or family and burdening them with making those decisions for you.

That’s a will-based estate plan.

What Is a Trust-Based Estate Plan?

The other option is a trust-based estate plan.

In a trust-based estate plan, you have a trust, a pour-over will, a power of attorney, and a living will or healthcare directive.

The difference between a trust-based estate plan and a will-based estate plan is when and how they operate.

A will becomes relevant when you pass away. That’s when it’s going to be probated and validated.

A trust, on the other hand, is legal, applicable, and enforceable from the day you sign it.

It starts during your lifetime, not at the time of death.

The trust is a private legal document in which you, as the grantor, beneficiary, and trustee, establish an agreement in those capacities to manage your affairs during your lifetime and determine end-of-life distributions.

Will vs. Trust: What’s the Difference?

A trust-based estate plan avoids probate.

It’s a private matter.

A will becomes part of the probate process and can become a public document available through the appropriate court records. A trust generally remains a private document.

With a trust, you can manage your affairs privately without the same probate court supervision to administer your estate and assets.

That’s a significant difference between a will and a trust.

A will operates at death, while a trust can cover your lifetime, incapacity, and death.

This is very important when deciding which estate plan makes sense for you.

Do You Need a Will or a Trust?

I often get the question: Do I really need a will, or do I need a trust?

If you own a home, you should consider having a trust.

Even if you own substantial or complicated investment accounts, a trust may be preferable because of what happens after death under a will-based estate plan.

When you pass away with a will, your family has to go to court to get the will probated.

During probate, the court appoints your executor.

Your assets may be inaccessible until an executor is appointed and receives authorization to access your accounts.

Depending on which state you live in, it could take four or five weeks, or it could take months, before the executor is appointed.

While your family is grieving, the last thing they need to worry about is paperwork, figuring out what to do at court, and meeting with lawyers.

How a Trust Can Make the Process Easier

With a properly established trust, your successor trustee can access and manage trust assets without waiting for a probate court to appoint an executor.

There’s no probate delay before the successor trustee can begin handling the assets held by the trust.

They can access the appropriate accounts to pay the mortgage and other bills after you pass away.

The process of organizing and ultimately distributing the assets can begin within a reasonable time.

So, there’s a significant difference between a will and a trust.

A will generally involves probate. A properly funded trust can avoid probate for the assets held in the trust.

Individual and Joint Trusts

Trusts can also be individual trusts or joint trusts.

In the United States, estate-planning law generally gives you significant freedom over who receives your property, subject to applicable state law.

You may decide, for example, that you want to leave property to a charity instead of particular family members.

Spousal rights, however, can limit that freedom.

Depending on applicable state law, a surviving spouse may have rights that prevent them from being completely disinherited.

A surviving spouse may have what’s called an elective share option.

That means if a spouse receives only a limited percentage of an estate, the spouse may be able to challenge that distribution and claim the elective share available under applicable state law.

The exact rules and percentages depend on the state and the circumstances.

Estate Planning Gives You Control

These are the basics of trust-based and will-based estate plans.

You need an estate plan so that you can control your destiny.

You decide who’s going to be the guardian of your kids.

You decide how your assets are distributed.

You decide who’s going to be the financial manager.

You decide who’s going to be your trustee or executor.

You make these decisions.

Why allow a disinterested third party a judge who doesn’t know who you are to make decisions about important aspects of your life and estate?

Estate planning gives you the opportunity to make those decisions yourself.

How Much Does Estate Planning Cost?

Estate planning doesn’t necessarily have to be extremely expensive.

If you need a lawyer, you can go to a law firm and have the firm handle the process for you.

Lawyers may charge around $1,000 to $1,500 for a will and around $3,000 to $5,000 for a relatively simple trust, although fees can vary significantly depending on the lawyer, location, and complexity of the estate.

There are also online estate-planning options.

If you don’t have a complex estate, you may be able to prepare certain documents online for significantly less for example, a few hundred dollars for a will or several hundred dollars for a trust.

The appropriate option depends on the complexity of your circumstances.

Estate Planning Is a Process, Not an Event

Many Americans procrastinate when it comes to estate planning because nobody thinks they’re going to die tomorrow.

But there’s another important point to understand before we close:

Estate planning is not an event.

Estate planning is a process.

I say this to my clients all the time.

If you’re in a car accident tomorrow and you pass away, what do you want to happen?

Who should be the guardian of your kids? What should happen to your assets?

We plan for the worst-case scenario.

But four years later, things may have changed.

You come back, make modifications, make updates, make edits, and change things depending on the factual circumstances at that time.

Keep in mind that estate planning is not a one-time event.

It’s a process that’s going to make your life easier, remove a burden from your chest, and allow your family to focus on grieving rather than going to court and trying to figure out what to do.

If you have any questions, please contact me through our website or by email.

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Until our next episode, fi amanillah.

As-salāmu ʿalaykum wa rahmatullah.