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What Happens If the Executor of a Will Dies?

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When someone passes away, it’s up to their executor to handle the probate process. But what happens if the executor of a will dies? While that’s a rarity, it can create complications as someone else will need to fill the executor role. Naming a successor executor is one way to avoid that scenario and other contingencies that might affect the settlement of an estate.

Talking to a financial advisor can be helpful for planning ahead for any obstacles that may arise during probate.

An Executor Plays a Pivotal Role in the Estate Settlement Process

In estate planning, an executor is someone who is charged with settling the estate of a deceased person. When someone writes a will, they can name a person of their choosing to act as executor. If someone dies without a will in place or did not name an executor, any interested party may petition the probate court to become the executor.

What does the executor of a will do? Broadly speaking, they settle the estate during the probate process. The duties and responsibilities of an executor include:

  • Creating an inventory of the deceased person’s estates
  • Notifying creditors of the person’s passing
  • Liquidating estate assets to pay creditors if necessary
  • Distributing remaining assets among the decedent’s heirs, according to the terms of their will

Executors are obligated to follow a fiduciary standard when settling estates. That means they must act in the best interest of the decedent’s heirs at all times. If they fail to do so, an executor can be removed.

What Happens If the Executor of a Will Dies Before the Testator?

The testator is the person who makes the will and the person on whose behalf an executor acts during probate. If the executor of a will passes away before the testator, then a new one can be named. That may require the testator to amend an existing will or nullify it and draft an entirely new one to change the executor.

If the testator takes no action and doesn’t amend their will or write a new one, then it’ll be up to the court to name an executor once they pass away. Again, any interested person can petition the court to become the executor.

That takes the burden of naming an executor off of the testator. However, it leaves the door open for someone who may not be qualified to step into the role, or who might not have the wishes of the testator in mind when executing the will.

What Happens If the Executor Dies During the Probate Process?

If the executor dies during the probate process, a successor executor can step in to finish the estate settlement. That assumes, however, that the testator was forward-thinking enough to name one or more successor executors to prevent the estate from being left without one.

When there is no successor executor named in the decedent’s will, then the court will have to name one. If only one person has submitted a petition to become the executor, the job might go to them. However, if there have been multiple petitions submitted the probate court can weigh the merits of each one before deciding.

How to Avoid Complications If an Executor Dies

If you’re the person who’s making a will, the easiest way to avoid complications that may result from the death of an executor is to name one or more individuals to succeed them. That way, if the executor passes away before you do or during the probate process, there will be someone else waiting in the wings to take up the reins.

You could also consider putting some of your assets into a trust, which would allow them to bypass probate altogether. With a trust, a trustee is in charge of managing assets on behalf of the beneficiaries that you name. You’ll have to name a trustee in this case, which could be the same person as your executor but does not have to be.

Placing certain assets in trust could avoid complications following the death of an executor since the trustee would be responsible for distributing them anyway. Instead of waiting for probate to conclude, the trust beneficiaries would be able to access their inheritance according to the terms you set in the trust document.

The Executor’s Guide to Probate Bond

As mentioned, acting as an executor entails certain responsibilities and you’re obligated to follow a fiduciary code of conduct. Before someone can be appointed as an executor, the court may require a probate bond to be issued.

Probate bonds are designed to ensure that estate executors act in good faith and do not abuse their privileges. The bond protects the estate’s beneficiaries, not the executor, but the executor is the one responsible for purchasing it.

A probate bond is essentially an insurance policy against any financial losses that might occur if the executor abuses their power or otherwise mismanages the estate. The amount of the bond can correspond to the amount of the estate in question.

If all the parties involved in the settlement of an estate agree, then a waiver of bond can be submitted to the court. However, that can leave the beneficiaries of the estate open to losses if the executor fails to do their job properly.

How to Transfer Vehicle Ownership of the Deceased

One common question executors may have to deal with is how to transfer a car title after the owner dies. The answer can depend on several factors, including whether the car was owned by one person or multiple persons and whether any provision was made in a will for its transfer.

If the title to the vehicle has more than one name on it, then the surviving owner may inherit the vehicle automatically. They can change the title to put in their name only, without any further intervention from the executor.

When the title is in the name of the deceased owner only, the title will have to be changed to whoever is going to assume ownership. If the car is included in probate because it hasn’t been transferred to a trust, then you likely won’t be able to do that until probate ends and ownership of the car is assigned to one of the decedent’s heirs.

There are a few documents you’ll typically need to transfer a vehicle title after death:

  • A copy of the owner’s death certificate
  • The original title
  • Probate court documents allowing the transfer

The process for transferring vehicle ownership after someone passes away can vary from state to state. It may be a good idea to consult probate rules and the local DMV to determine what’s needed to complete the transfer.

How Much Does It Cost to Probate a Will?

The amount of money required to probate a will can vary by state. It’s common, however, for the cost to range anywhere from 3% to 8% of the estate’s value. In terms of what’s involved, the various costs can include:

  • Court filing fees
  • Attorney’s fees
  • Fees paid to accountants
  • Certificate fees for official documents
  • Notification fees if you’re required to publish a public notice for creditors
  • Probate bond fees
  • Appraisal fees if you need to determine the value of estate assets
  • Postage and mailing fees
  • Storage fees if you have to keep assets in storage before probate ends
  • Notary fees, if necessary
  • Fees paid to the administrator of an estate sale, if applicable

It’s the executor’s job to keep track of fees associated with probate and pay them out of estate assets. There is one exception, as executors who are required to purchase a probate bond must typically pay the fee for that themselves.

Also, keep in mind that the executor is entitled to collect a fee for their services. The fee can vary from state to state but it’s not uncommon for an executor to receive anywhere from 2% to 5% of the estate’s value for their time.

The Bottom Line

Knowing what happens if the executor of a will dies can help you to avoid headaches if you find yourself dealing with that situation when a loved one passes away. Taking care to build some protections into your own estate plan by naming successor executors or setting up a trust for certain assets can allow for a smoother probate process after you’re gone.

Estate Planning Tips

  • If you’re named as the executor to a will, it’s important to know what obligations you have and how to avoid any breach of fiduciary duty. Talking to a financial advisor can give you a better understanding of what’s expected of you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you don’t have a will in place yet, you might want to consider drafting one. You could hire an estate planning attorney but it’s easy to draft a will online if you have a fairly simple estate. You may also consider adding a trust, power of attorney and advance health care directive to your estate plan to cover all the bases.

Photo credit: ©iStock.com/PeopleImages, ©iStock.com/shapecharge, ©iStock.com/kate_sept2004

Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

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How Does an Inheritance Advance Work? – SmartAsset

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Taking an inheritance advance is something you might consider if you expect to receive money from an estate, but don’t want to wait for probate to conclude. An inheritance advance, also called a probate advance or probate cash advance, allows you to receive a lump sum of money upfront.

In exchange, you agree to allow the advance company to purchase part of the inheritance. An inheritance advance can put money in your hands quickly, but there are some drawbacks to keep in mind. We will go over the details.

Talking to your financial advisor can help you create a plan for managing an inheritance.

Understanding Inheritance Advances

An inheritance advance is an advance against assets you stand to inherit. It’s similar to a payday advance loan in that you’re getting access to money now that you would otherwise have to wait until later to receive.

An inheritance advance is not a loan since you don’t pay anything back to the lender directly. Instead, you’re allowing the advance company to make a claim against part of the inherited assets you expect to receive. Once probate ends, the estate can pay out the agreed-upon amount to the advance company and forward any remaining assets to you.

Here’s an example of how an inheritance advance might work. Let’s say that your parents leave you $100,000 in their will when they pass away. After probate fees and expenses are paid, you expect to inherit $90,000. But you need $25,000 right now to pay for your child’s college tuition expenses.

You decide to work with an inheritance advance company that requests to purchase 30% of the inheritance or $27,000. In the meantime, the company agrees to pay the $25,000 you need to you in a lump sum. Once probate ends, the advance company collects the $27,000 it purchased and the $25,000 that was advanced to you from the estate, along with its fee. The remaining inheritance money would then be paid out to you.

Benefits of Inheritance Advances

There are several advantages associated with inheritance advances, starting with fast and convenient access to cash. While a probate loan may take several days or weeks to get approved and funded, it may be possible to get an inheritance advance in as little as 24 hours after approval.

Inheritance advances typically don’t require any credit checks, which could make them a good option for borrowers with poor credit. You won’t pay interest on an advance, though again, the lender can charge a flat fee.

An inheritance advance is a flexible way to borrow since you can use the money to cover just about any type of expense. You don’t have to offer any collateral for the advance.

And you don’t have to worry about making payments either since the advance company collects the amount owed to it directly from the estate.

Drawbacks of Inheritance Advances

Taking an advance against an inheritance can have some downsides. And they may not be right for everyone. The obvious drawback is you’re sacrificing part of your inheritance for the convenience of being able to get cash today.

Going back to the previous example, you’d have to consider carefully whether handing over $27,000 plus fees to the advance company is worth getting the $25,000 you need now to pay for education expenses. You might find that another funding option may be preferable.

For instance, taking out a Parent PLUS loan or even a private student loan might be a better alternative. Or you might decide to get a home equity loan instead if you’re comfortable using your home as collateral.

When to Consider an Inheritance Advance

The best time to consider an inheritance advance is when you need money and you’re certain that an inheritance is coming your way. Inheritance advance companies may not advance money to you if there are any doubts about how much you’ll receive or whether you’ll inherit from someone at all.

You might get an advance against your inheritance if you need money urgently and you’ve considered all other borrowing options. Other possibilities for borrowing can include home equity loans, a home equity line of credit or a personal loan. For smaller expenses, you might consider a credit card instead.

If you’re considering an inheritance advance, it can be helpful to estimate how much money you’ll need. You can then shop around to compare inheritance advance companies to see what you might be able to get upfront. Talking to a financial advisor can help you weigh the pros and cons if you’re on the fence about whether an advance is the right move.

How to Get an Inheritance Advance

To get an inheritance advance, you’ll first need to find a company that offers them. You can search online for inheritance advance companies, as this type of funding usually isn’t available at banks or credit unions.

Next, you can look at the advance company’s requirements to see if you’re eligible for an advance. If you’re not sure whether you qualify, you can contact the company for a consultation. If you are eligible, you’ll need to share some details about the inheritance and provide certain documents, including:

  • Copy of the death certificate
  • Copy of the will if one is available to you
  • Probate petition and letters of administration
  • Valid ID

You’ll also need to give the advance company the name of the executor or trustee who’s handling the estate settlement. You won’t need to provide information about your income or credit scores.

Once the inheritance advance company has everything it needs, it will review your case and make an advance offer. If you accept the offer, the inheritance advance company will pay the money to you, sometimes as quickly as 24 hours later.

Choosing the Right Inheritance Advance Company

An internet search will turn up a number of results for inheritance advance companies, like inheritancefunding.com for example. But it’s important to find the right one to work with. When comparing inheritance advance options, it’s helpful to consider:

  • How much you can get from an advance
  • What percentage the advance company purchases
  • Any fees you might pay and when those are due
  • Funding speed

It’s also important to look at the company’s overall reputation. Reading customer testimonials and online reviews can give you a better idea of how easy an inheritance advance company is to work with and how satisfied its customers are.

Bottom Line

An inheritance advance can provide financial relief if you expect to inherit money. But time is of the essence. Taking an advance against inherited money does come at a cost, which is important to remember. Looking at all of the pros and cons, and considering other funding options, can help you decide whether an advance makes sense for you.

Estate Planning Tips

  • Planning out your entire estate can seem overwhelming and difficult. But a financial advisor who specializes in estate planning can help. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you have a sizable estate, estate taxes on either the state or federal level could be hefty. However, you can easily plan ahead for taxes to maximize your loved ones’ inheritances. For example, you can gift portions of your estate in advance to heirs, or even set up a trust.

Photo credit: ©iStock.com/shapecharge, ©iStock.com/PeopleImages, ©iStock.com/Drazen Zigic

Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

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What Is a Probate Loan and How Do You Get One?

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If you’re expecting an inheritance, you may be wondering how long it will take to receive it. You might consider a probate loan if you need funds sooner rather than later. A probate loan, also referred to as an estate loan, allows you to borrow money against a future inheritance. Probate loans can allow you to access money that may be coming to you following the death of a loved one sooner, but there are some potential disadvantages to keep in mind.

You can also talk to a financial advisor about how to handle an inheritance.

Probate Loans Basics

A probate loan is a loan against an inheritance that’s due to you. You’re borrowing money today against assets that you expect to inherit tomorrow. Like other loans, probate loans must be repaid to the lender with interest, and you’ll typically make payments while the estate is still in probate.

Why do probate loans exist? Simply because probate — the legal process by which someone’s estate is settled after death — can take months to complete. In some cases, probate can take years if the deceased person’s heirs bring challenges against the will or otherwise dispute the distribution of assets.

Probate loans allow heirs to benefit from an anticipated inheritance without the lengthy wait. That may be appealing to heirs who need money to pay for medical bills, unexpected expenses or day-to-day living costs.

How Does a Probate Loan Work?

A probate loan is similar in structure to other loans, in that you borrow a lump sum and repay the money in installments. The lender can charge interest on the loan, along with fees. In most cases, the lender will expect the loan to be repaid in full once the borrower receives their inheritance.

The difference between probate loans and other types of loans lies in what’s needed for approval. While a probate loan lender might check an applicant’s credit score or income, the primary concern is the inheritance itself.

Lenders need to be able to verify that the applicant will receive an inheritance and the amount. Once that’s established, the lender can shape the loan terms, including the loan amount, interest rate and repayment schedule.

Loan amounts are usually a percentage of the inheritance. For example, you might be able to borrow up to 75% of what you expect to inherit. The interest rate on a probate loan can vary by lender but it may be typical of what you’d get with a traditional personal loan.

Probate Loan Advantages

The main benefit or advantage of getting a probate loan is that it allows you to tap into any inherited funds you expect to receive early. You don’t have to spend months or even years waiting for probate to conclude to start putting your inheritance to work.

Probate loans can be used to cover virtually any expense you choose, which could make them a good option if you need to pay for things like:

  • Home repairs or improvements
  • Higher education expenses
  • Medical bills
  • Emergency expenses

You might prefer a probate loan to other loan options, such as a home equity loan or personal loan. While home equity loans can put a lot of cash in your hands, depending on how much equity you have, they require you to use your home as collateral. Personal loans also allow for flexibility, but you might not be able to borrow as much as you could with a probate loan.

Probate Loan Disadvantages

Probate loans can offer convenience, but they can also be problematic for certain borrowers. For instance, having to make monthly payments toward the loan while you’re waiting for probate to wrap up could place an additional strain on your budget.

A probate loan can be an expensive way to borrow if the lender charges a higher interest rate or tacks on steep fees. A general lack of regulation around these loan products means that borrowers must tread carefully and do thorough research in order to find a reputable lender.

Taking out a loan against your inheritance can also be less than ideal if the estate you’ll inherit from is in dispute. For instance, say your parents pass away, leaving everything to you and your two siblings. Your parents had a will that specified you should get 60% of their assets, since you acted as their caretaker in their final years, while your siblings should get 20% each.

Your siblings decide to contest the terms of the will because they believe that your share of the inheritance is unfair. In that case, attempting to take out a probate loan could stoke the fire if the will contest created conflict between the three of you. You can ask a financial advisor about whether they think a probate loan is a good idea.

Probate Loan vs. Probate Advance

When discussing probate loans, you might also hear the term “probate advance” or “probate cash advance”. While they might sound the same, they’re actually two very different ways to borrow against an inheritance.

With a probate loan, you get a lump sum of money from your inheritance. You then make payments back to the lender in installments with interest, with the remaining amount due paid in full once the inheritance is paid out to you. Any leftover inheritance proceeds remaining after the loan is paid are yours to keep.

A probate advance is an agreement in which the lender purchases part of your inheritance. For instance, say you stand to inherit $100,000 from your parents after probate fees and other expenses are paid. You might enter into an advance agreement that allows the lender to purchase 40% of the inheritance.

You get $30,000 now and when probate ends, the advance company collects the $40,000 it purchased, plus the original advance amount and its fee. Any remaining inheritance funds are paid to you. If your inheritance turns out to be less than expected, you wouldn’t have to pay anything back to the advance company.

How to Get a Probate Loan

If you’re interested in getting a probate loan, you can start by searching for lenders that offer them. You typically won’t find probate loans at a bank or credit union. These loans are usually offered by companies that specialize in inheritance financing.

As you’re shopping around for a lender, it’s important to consider:

  • Loan amounts and how much you might be able to borrow
  • Repayment terms
  • Loan interest rates and fees
  • The lender’s overall reputation

Once you find the right lender, you’ll need to provide them with some information about you and the inheritance. The lender will verify the inheritance amount in order to determine if they can help you. If so, you’ll need to fill out an application for the probate loan.

Assuming that you’re approved, you should have a chance to review the loan terms and details. If you agree to the loan terms, the lender will provide you with funding, which you can start using right away. In the meantime, you’ll need to make payments to the lender as specified by the loan agreement.

The Bottom Line

Probate loans can be an attractive way to borrow against an inheritance, but it’s important to consider the pros and cons. You may appreciate being able to get money today if you need it, but there may be trade-offs you’re making in the long term. If you’re considering a probate loan, it’s a good idea to compare lenders to see what kind of loan terms you might qualify for. It’s also wise to be clear on whether you’re getting a probate loan or a probate advance, as they don’t work the same way.

Estate Planning Tips

  • Inheriting money can raise questions about how to make the most of those assets. It can be helpful to talk to a financial advisor about the best ways to use an inheritance, which might include paying off debt, funding an early retirement or covering college expenses for your children. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Have you started planning your own estate yet? If not, there’s no time like the present. The most basic element of any estate plan is a last will and testament. If you don’t have a will, you can create one using an online will-making software program. You may want to talk to an estate planning attorney if you have a more complex financial situation or if you think you might need to create a trust along with a will.

Photo credit: ©iStock.com/stocknshares, ©iStock.com/kazuma seki, ©iStock.com/Kameleon007

Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

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Does a Will Override a Trust? | SmartAsset.com

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Wills are an essential part of estate planning, leaving instructions for how to distribute your assets and possessions after you die. Trusts are a common tool in estate planning as well, serving as a way to manage assets both before and after your death. If your will conflicts with a trust that you have set up, the trust will typically prevail. This is because, in most cases, the assets in a trust don’t technically belong to your estate any longer. They are legally owned by the trust itself, so the terms of your will don’t affect them. For help with estate planning, consider working with a financial advisor.

Will Definition

A last will and testament is a legal document that directs how to distribute your assets after your death. Among other issues, a will establishes:

  • Who will take possession of your cash, investments, belongings and other property
  • How to pay any remaining debts or obligations
  • Any long term or ongoing plans that you would like to make
  • The care and distribution of any real estate you own

Wills are an essential part of estate planning. When you die, everything that you own is collectively known as your estate, which then gets distributed among your heirs.

If you leave a will, your estate is distributed according to your wishes and that process is overseen by someone you select, known as the executor. If you die without a will, known as dying intestate, your estate is distributed according to the inheritance law of your jurisdiction. That process is overseen by someone appointed by the probate court, known as an administrator.

Under typical circumstances a will is managed through and by probate courts. Your executor will file your will with the court which in turn oversees the entire process of settling your affairs and distributing the estate’s assets. For most estates, the probate process is largely a formality. The court makes sure that your will is legal, that your estate pays its debts and that your executor has the access they need to distribute your assets.

The same process occurs if you die without a will. In that case, the probate court appoints an administrator and the court then ensures that the administrator distributes your assets according to the local inheritance laws.

Trust Definition

A trust is a legal entity created to hold, manage and oversee property. Every trust has four main components:

  • Contributor – The person who created the trust and contributed assets to it
  • Assets – The cash, property and other assets owned by the trust
  • Trustee – The individual or firm that manages the trust’s assets
  • Beneficiary – The person or persons who receive assets from the trust

When you create a trust, you put assets in its name. Once you do that the assets belong to the trust itself, not you. This is the same as with any other property transfer. The trust is a legal entity capable of owning assets, paying taxes and making distributions, so once you put something in its name that property legally belongs to the trust itself, not you.

In creating a trust, you also establish its terms. You name the trustees and the beneficiaries, and set out the terms for how the trustees should manage the trust and its assets. This includes instructions for what assets the beneficiaries will receive, along with how and when. For instance, you can leave instructions for your trustee to distribute your funds equally among your children after you die.

Can a Will Override a Trust?

There are two main circumstances in which a will can conflict with a trust. First, a will might give instructions that conflict with the terms of a trust that already exists. For example, your will might include language that leaves the family home to your children, while earlier in life you placed that house in a trust for tax purposes. Second, a will might give instructions that conflict with the terms of a trust that doesn’t exist yet, or which hasn’t yet received its assets. For example, your will might include language that distributes your investments among your children, while another section of the will might include language that places your investments in a family trust.

In the first case, the terms of the will have no authority. A will cannot override a trust that already exists, nor can it distribute or manage property already held in an existing trust. If a trust exists and holds its assets, those assets belong to the trust itself. They are not part of your estate and, as a result, are not subject to the terms of your will.

If your will gives instructions that conflict with the terms of a trust, your will’s terms will apply to the assets in your estate and the trust’s instructions will apply to the assets in the trust. The designated beneficiaries will receive their assets according to the terms of the trust.

In the second case, your will is not actually conflicting with any existing trust. Instead, it is internally contradictory and will be resolved according to local inheritance law. You can leave instructions in your will to put assets in trust. This can apply to a trust that already exists, where your will puts assets into a trust that you created earlier. It can also apply to a testamentary trust, where your will instructs the executor to create a new trust and put assets into it.

In both cases, these assets belong to your estate when you die. This means that the terms of your will govern how those assets are distributed. If one section of your will conflicts with the section of your will which creates or contributes to the trust, then the issue is that your will is internally contradictory. The trust itself is not in question, just the will.

In that case the probate court and your executor will have to determine the exact nature of the internal conflict in your will. They will then resolve that conflict according to state and local inheritance law.

Your will still cannot supersede how an existing trust manages its assets. But conflicts in your will can prevent new assets from being added to the trust. This is why, if you plan on making or managing a trust, it’s wise to have a lawyer help you write these documents.

When Should You Use a Will vs. a Trust?

Wills and trusts are, generally, the two most significant vehicles for estate planning. Broadly speaking, if you are looking to leave assets to your heirs, you will likely use one or both of these. While a full exploration of the subject is beyond the scope of this article, there are some good rules for when you should use a will vs. a trust. Wills and trusts are not mutually exclusive; their control over specific property is. Any given asset can either be put in trust or distributed by a will – but not both. However, you can manage your estate in general by putting some assets into a trust and distributing others through a will.

Wills – Good for mid-sized estates, simple transfers and instructions

In general, wills have the benefit of simplicity.

While wills do not have the tax and probate benefits of a trust, the truth is that these concerns are frequently overstated. The federal estate tax only applies to large estates, beginning at $12.92 million at time of writing. And the probate process can take some time, but it typically is only lengthy and complex for particularly large or contentious estates. If you have an ordinary scope of assets, the odds are good that neither taxes nor probate will be a burden for your heirs.

Yet, at the same time, wills are one-shot instruments. This makes good for making simple distributions and leaving direct instructions. But once the terms of the will have been carried out, the estate is closed.

The result is that wills are often a good choice when you want to leave someone an asset in its entirety, such as leaving an amount of cash or a home to one single heir. They are also good for small and mid-sized estates, as a trust would impose additional costs and complications in order to solve tax and probate issues that these estates likely will not have. Finally, wills are good for leaving instructions beyond the scope of assets, such as arranging for the care of minor children and pets.

Trusts – Good for larger estates, ongoing wishes and contestation

In general, trusts have the benefit of third-party management.

When you put money into a trust you legally hand it over to a third party. This creates costs and complications that a will does not have. The trust will require instructions and terms, and you will need to pay for a trustee to oversee the trust’s assets.

This same process, however, means that your estate moves out of your name. You can do this before death, through a living trust, after death, through a testamentary trust, or in totality, through what is known as a pour-over will. This last is a will which bequeaths all of your property to a trust, so there is no risk of accidentally leaving any assets to the probate process.

Moving assets out of your name makes trusts good for estates that are large enough to trigger tax and probate concerns, such as if your estate is worth more than $13 million at time of writing. They are also good for people who want to leave ongoing instructions after they die, for example, if you would like to ensure that a piece of property remains in the family without being sold. Finally, trusts are good for people who anticipate contested issues, as the trust will avoid the probate process that opens the door for heirs and debtors to challenge the estate.

When you’re trying to decide whether to leave assets in a will or a trust, a good rule of thumb is this:

Wills are a good choice when you have a simple transfer to make. If you want to leave someone money or property to own outright, and you are not a multimillionaire, a will may be your best option. Trusts are a good choice when you have a large or complex issue of inheritance. If your estate is worth several million dollars, or you want to ensure that your assets are transferred and managed in a specific way, a trust may be your best option.

Bottom Line

A will cannot override the terms of an existing trust. Once assets belong to a trust, they are not part of your estate and your will has no authority over them. However, if your will has terms to put assets into a trust, internal contradictions can prevent that transfer from taking place.

Estate Planning Tips

  • Depending on your estate and your wishes, writing your will can be a complicated process. Make sure you take the time to educate yourself about the intricacies of the process before you get started.
  • A financial advisor can help you with estate planning. Finding a financial advisor doesn’t need to be hard.  SmartAsset’s free tool matches you with up to three vetted financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/courtneyk, ©iStock.com/monkeybusinessimages, ©iStock.com/fizkes

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

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Does a Will Override a Trust? | SmartAsset.com

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Wills are an essential part of estate planning, leaving instructions for how to distribute your assets and possessions after you die. Trusts are a common tool in estate planning as well, serving as a way to manage assets both before and after your death. If your will conflicts with a trust that you have set up, the trust will typically prevail. This is because, in most cases, the assets in a trust don’t technically belong to your estate any longer. They are legally owned by the trust itself, so the terms of your will don’t affect them. For help with estate planning, consider working with a financial advisor.

Will Definition

A last will and testament is a legal document that directs how to distribute your assets after your death. Among other issues, a will establishes:

  • Who will take possession of your cash, investments, belongings and other property
  • How to pay any remaining debts or obligations
  • Any long term or ongoing plans that you would like to make
  • The care and distribution of any real estate you own

Wills are an essential part of estate planning. When you die, everything that you own is collectively known as your estate, which then gets distributed among your heirs.

If you leave a will, your estate is distributed according to your wishes and that process is overseen by someone you select, known as the executor. If you die without a will, known as dying intestate, your estate is distributed according to the inheritance law of your jurisdiction. That process is overseen by someone appointed by the probate court, known as an administrator.

Under typical circumstances a will is managed through and by probate courts. Your executor will file your will with the court which in turn oversees the entire process of settling your affairs and distributing the estate’s assets. For most estates, the probate process is largely a formality. The court makes sure that your will is legal, that your estate pays its debts and that your executor has the access they need to distribute your assets.

The same process occurs if you die without a will. In that case, the probate court appoints an administrator and the court then ensures that the administrator distributes your assets according to the local inheritance laws.

Trust Definition

A trust is a legal entity created to hold, manage and oversee property. Every trust has four main components:

  • Contributor – The person who created the trust and contributed assets to it
  • Assets – The cash, property and other assets owned by the trust
  • Trustee – The individual or firm that manages the trust’s assets
  • Beneficiary – The person or persons who receive assets from the trust

When you create a trust, you put assets in its name. Once you do that the assets belong to the trust itself, not you. This is the same as with any other property transfer. The trust is a legal entity capable of owning assets, paying taxes and making distributions, so once you put something in its name that property legally belongs to the trust itself, not you.

In creating a trust, you also establish its terms. You name the trustees and the beneficiaries, and set out the terms for how the trustees should manage the trust and its assets. This includes instructions for what assets the beneficiaries will receive, along with how and when. For instance, you can leave instructions for your trustee to distribute your funds equally among your children after you die.

Can a Will Override a Trust?

There are two main circumstances in which a will can conflict with a trust. First, a will might give instructions that conflict with the terms of a trust that already exists. For example, your will might include language that leaves the family home to your children, while earlier in life you placed that house in a trust for tax purposes. Second, a will might give instructions that conflict with the terms of a trust that doesn’t exist yet, or which hasn’t yet received its assets. For example, your will might include language that distributes your investments among your children, while another section of the will might include language that places your investments in a family trust.

In the first case, the terms of the will have no authority. A will cannot override a trust that already exists, nor can it distribute or manage property already held in an existing trust. If a trust exists and holds its assets, those assets belong to the trust itself. They are not part of your estate and, as a result, are not subject to the terms of your will.

If your will gives instructions that conflict with the terms of a trust, your will’s terms will apply to the assets in your estate and the trust’s instructions will apply to the assets in the trust. The designated beneficiaries will receive their assets according to the terms of the trust.

In the second case, your will is not actually conflicting with any existing trust. Instead, it is internally contradictory and will be resolved according to local inheritance law. You can leave instructions in your will to put assets in trust. This can apply to a trust that already exists, where your will puts assets into a trust that you created earlier. It can also apply to a testamentary trust, where your will instructs the executor to create a new trust and put assets into it.

In both cases, these assets belong to your estate when you die. This means that the terms of your will govern how those assets are distributed. If one section of your will conflicts with the section of your will which creates or contributes to the trust, then the issue is that your will is internally contradictory. The trust itself is not in question, just the will.

In that case the probate court and your executor will have to determine the exact nature of the internal conflict in your will. They will then resolve that conflict according to state and local inheritance law.

Your will still cannot supersede how an existing trust manages its assets. But conflicts in your will can prevent new assets from being added to the trust. This is why, if you plan on making or managing a trust, it’s wise to have a lawyer help you write these documents.

When Should You Use a Will vs. a Trust?

Wills and trusts are, generally, the two most significant vehicles for estate planning. Broadly speaking, if you are looking to leave assets to your heirs, you will likely use one or both of these. While a full exploration of the subject is beyond the scope of this article, there are some good rules for when you should use a will vs. a trust. Wills and trusts are not mutually exclusive; their control over specific property is. Any given asset can either be put in trust or distributed by a will – but not both. However, you can manage your estate in general by putting some assets into a trust and distributing others through a will.

Wills – Good for mid-sized estates, simple transfers and instructions

In general, wills have the benefit of simplicity.

While wills do not have the tax and probate benefits of a trust, the truth is that these concerns are frequently overstated. The federal estate tax only applies to large estates, beginning at $12.92 million at time of writing. And the probate process can take some time, but it typically is only lengthy and complex for particularly large or contentious estates. If you have an ordinary scope of assets, the odds are good that neither taxes nor probate will be a burden for your heirs.

Yet, at the same time, wills are one-shot instruments. This makes good for making simple distributions and leaving direct instructions. But once the terms of the will have been carried out, the estate is closed.

The result is that wills are often a good choice when you want to leave someone an asset in its entirety, such as leaving an amount of cash or a home to one single heir. They are also good for small and mid-sized estates, as a trust would impose additional costs and complications in order to solve tax and probate issues that these estates likely will not have. Finally, wills are good for leaving instructions beyond the scope of assets, such as arranging for the care of minor children and pets.

Trusts – Good for larger estates, ongoing wishes and contestation

In general, trusts have the benefit of third-party management.

When you put money into a trust you legally hand it over to a third party. This creates costs and complications that a will does not have. The trust will require instructions and terms, and you will need to pay for a trustee to oversee the trust’s assets.

This same process, however, means that your estate moves out of your name. You can do this before death, through a living trust, after death, through a testamentary trust, or in totality, through what is known as a pour-over will. This last is a will which bequeaths all of your property to a trust, so there is no risk of accidentally leaving any assets to the probate process.

Moving assets out of your name makes trusts good for estates that are large enough to trigger tax and probate concerns, such as if your estate is worth more than $13 million at time of writing. They are also good for people who want to leave ongoing instructions after they die, for example, if you would like to ensure that a piece of property remains in the family without being sold. Finally, trusts are good for people who anticipate contested issues, as the trust will avoid the probate process that opens the door for heirs and debtors to challenge the estate.

When you’re trying to decide whether to leave assets in a will or a trust, a good rule of thumb is this:

Wills are a good choice when you have a simple transfer to make. If you want to leave someone money or property to own outright, and you are not a multimillionaire, a will may be your best option. Trusts are a good choice when you have a large or complex issue of inheritance. If your estate is worth several million dollars, or you want to ensure that your assets are transferred and managed in a specific way, a trust may be your best option.

Bottom Line

A will cannot override the terms of an existing trust. Once assets belong to a trust, they are not part of your estate and your will has no authority over them. However, if your will has terms to put assets into a trust, internal contradictions can prevent that transfer from taking place.

Estate Planning Tips

  • Depending on your estate and your wishes, writing your will can be a complicated process. Make sure you take the time to educate yourself about the intricacies of the process before you get started.
  • A financial advisor can help you with estate planning. Finding a financial advisor doesn’t need to be hard.  SmartAsset’s free tool matches you with up to three vetted financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/courtneyk, ©iStock.com/monkeybusinessimages, ©iStock.com/fizkes

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

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Pros and Cons of an Irrevocable Funeral Trust

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An irrevocable funeral trust is a way of setting money aside to pay for your funeral and burial expenses. While an irrevocable funeral trust can help your loved ones pay for potentially expensive end-of-life costs, it locks up your money for good and cannot be amended.

A financial advisor with estate planning expertise can help guide you through the often complicated estate planning process.

What Is an Irrevocable Funeral Trust?

An irrevocable funeral trust is a legal entity that helps people save for their end-of-life costs, such as funeral and burial expenses. When you set up a funeral trust, you are establishing a formal trust fund, a separate legal entity that owns the money that you have contributed to it. The purpose of the trust is to hold your money until you die. It then releases the funds to pay for your funeral, burial and any other end-of-life expenses.

As with all trust funds, an irrevocable funeral trust has a trustee that manages its money. In this case, the trustee is determined by an insurance company or funeral services company through which you set up the trust. In most, if not all, cases the trust fund will hold as its single asset a life insurance policy that you have taken out. The trust fund owns this life insurance policy and is named as the sole beneficiary. When you die, the fund collects the policy’s payment and uses this money to pay for your end-of-life costs.

A funeral trust may also name a specific funeral home as the trust’s beneficiary. For example, a given funeral home may agree to a fixed price for a funeral and burial. When you die, the trust pays out its funds to the funeral home to cover the costs of your funeral, burial and any associated services.

As with most trusts, you can establish both revocable and irrevocable funeral trusts. With a revocable funeral trust, you maintain ownership and control of the money and can withdraw it at any time. With an irrevocable funeral trust, you no longer own the money so you can’t withdraw it.

Benefits of an Irrevocable Funeral Trust

A funeral trust does have several benefits. Funeral and burial services can cost a lot of money but with a funeral trust, you can mitigate this problem in two ways.

First, you cover the costs yourself. Even if your will leaves behind money to pay for your funeral, that has to go through the probate process. Your heirs may still have to pay for your funeral upfront and hope to collect reimbursement from your will. With a funeral trust, these payments are handled automatically.

Second, you (or at least your heirs) can pay less. The trust pays for your funeral using the proceeds of its life insurance policy or other investments. This means that you may pay less upfront than you would otherwise.

The details of those costs range based on the individual trust fund. Some funeral trusts only cover basic services, such as a casket, burial or cremation. Others will pay for a full funeral ceremony, with any associated officiants, transportation and other costs. This can also make the planning process easier for your loved ones. If you set up a funeral trust that comes with specific, pre-arranged costs and services, all of those details will already be arranged when you die. Your loved ones will not have to go through the process of finding a funeral home and making arrangements. Those plans will already exist and will automatically go into motion.

The other major benefit to an irrevocable funeral trust is Medicaid eligibility. Since you no longer own these assets, they don’t count against your net worth when calculating Medicaid coverage and any other government benefits. This is only true for irrevocable trusts. The money in a revocable trust is still legally yours, so it counts against eligibility tests. It’s also important to note that Medicaid is administered at the state level, so the details will differ for every jurisdiction.

Disadvantages of an Irrevocable Funeral Trust

There are some downsides to an irrevocable funeral trust though.

As with all irrevocable trusts, once this money is in the trust, it’s no longer under your control. This isn’t necessarily a bad thing, since unfortunately, we all must pay at least some burial costs. However, make certain that this is money you can comfortably part with. These can be expensive products, sometimes costing tens of thousands of dollars, so it’s important to make sure this won’t cause you any hardships.

In addition, if you set up a funeral trust with pre-arranged services, you should confirm these plans with your loved ones. Make sure that they will want the service and burial you have planned since this will be for their comfort. It can be a problem if they discover that you created a funeral plan that doesn’t allow them to properly mourn.

Finally, funeral trusts can have reliability issues. If you set up this trust with a funeral home that goes out of business or has financial issues, you can lose the money entirely. This can happen in a number of different ways, but the two most common are mismanagement (the funeral home makes bad investments with the trust) and business dissolution (you pre-purchased services from a funeral home that no longer exists). This is also a problem if you move later in life. In that case, you can find yourself stuck with funeral plans in a state or town on the other side of the country. These trusts aren’t always portable, which can also be a problem.

Bottom Line

An irrevocable funeral trust is a legal entity that lets you save for your end-of-life costs. It can be a good way to make arrangements for your burial, but make sure you have the flexibility that you need since irrevocable trusts cannot be changed once they go into effect.

Estate Planning Tips

  • A financial advisor with estate planning expertise can help you set up trusts and make a plan for your assets. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Giving away assets while you’re still alive to the people and causes you care about can lower your estate’s future tax liability. For example, the annual gift tax exemption allows you to gift up to $17,000 to one person tax-free, in any given year. Meanwhile, you’re permitted to give away up to $12.92 million over the course of your lifetime without it affecting your tax liability.

Photo credit: ©iStock.com/MagMos, ©iStock.com/shapecharge, ©iStock.com/shapecharge

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

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How to Protect Trust Assets From a Beneficiary’s Divorce

Trusts can be a useful estate planning tool for passing on wealth to heirs. When naming beneficiaries, it’s important to consider how their spouses may fit into the picture. Specifically, you may wonder how to protect trust assets from a … Continue reading →

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