United Bank & Trust Blog

By now, most people have at least heard the word “trust” in conjunction with estate planning. However, many people do not fully understand the role a trust can play and why it may be a critical document to have in their estate plan.

The difference between a trust and a will.
In many cases, the confusion relates to how a trust differs from a will and why many estate planning attorneys recommend that you have both a will and a trust. A will disposes of your property when you die. A trust does the same thing and in fact, many estate planning professionals call a trust a “will-substitute.”

Advantages of a trust over a will.
The answer relates to two primary advantages a trust has over a will. Yes, a trust disposes of your property when you die just like a will. However, a will only becomes effective when you die. Its primary function is to contain the dispositive provisions regarding the distribution of your assets at death.

A trust, on the other hand, is effective immediately. That is, from the date you sign the trust, it can hold title to your assets. This process is called funding. As a result, in the event of your incapacity during lifetime, the successor trustee (the person or financial institution you have named to serve on your behalf in the trust in the event you no longer desire to or are able to serve on your own) can act on your behalf to manage the assets held in the trust.

Many planners call this the “management assistance” advantage to having a trust in place. Because a will is only effective at death, this benefit does not exist with a will. With a trust, however, there is a mechanism in place that will offer assistance upon your incapacity during lifetime.

The second advantage of a trust is that any assets held in the name of a trust at death are not considered to be “probate assets.” That is, there is no probate required to transfer title to your beneficiaries if they are in the name of your trust when you die. A probate proceeding is a court process whereby a probate judge oversees the handling of your final affairs. In Michigan, a probate is a public proceeding and in some instances may be costly and delay the distribution of your assets to your loved ones. Again, this advantage is not available with a will. A will covers assets held in your name alone when you die. These types of assets must go through a probate proceeding.

Do you need both a trust and a will?
Because of the two advantages of management assistance and probate avoidance, many people are well served to have a trust document be a part of their basic estate planning documents. Please note, that a will is just as critical a tool. For example, it is the document wherein you name a guardian and conservator for your minor children. In addition, it is a very common occurrence for someone to die without funding all of his/her assets in the name of the trust and thus, a will is necessary to deal with the distribution of those assets that may be held in your individual name at death.

In the end, consultation with your estate planning professional, who is familiar with your particular situation, is necessary to know what documents best suit your needs. However, when going through the estate planning process, it is important to be aware of the differences between wills and trusts and the roles each play.

Kathy McCrate

With more of our financial activities occurring over the Internet, it is important to be aware of risks these activities entail and steps you can take to reduce the risk that someone will illegally gain access to your private information or financial accounts.

Common Internet Scams

• Auction fraud – This may take many forms including emails saying you have a second chance to buy an auction item, non-delivery of an item purchased in an auction, defective merchandise or receiving cheaper merchandise.
• Advance payment frauds – Emails asking for help in getting money out of a country or advising you that you won a lottery lead to requests for money to cover legal fees, taxes, bribes, processing costs and taxes.
• Phishing – Emails notifying you that an institution or store need confirmation of account information lead to a fake (or spoofed) website that looks legitimate but is just a place to disclose personal information to fraudsters.
• Hot stock promotions – Emails, online newsletters and bulletin boards may be nothing more than a scam artist’s attempt to have you drive up the price of a stock so they can sell their shares.  This is often used with cheap and thinly traded stocks.

Protecting Your Online Activities

• Be careful using public computers. Using a computer at a cyber café or a free computer at a trade show can be dangerous. If you do use this type of computer make sure no one is looking over your shoulder to memorize your personal data and be sure to sign off when you are done.
• If you are using the Internet for financial transactions, be sure the sites you visit are secure. Most secure sites have URLs that start with “https://” instead of the normal “http://.”  Some websites may display a logo indicating it is secure, but make sure you know the site is one you trust.
• Wireless Internet networks have become common and convenient. Be careful using wireless networks that are free and not secure. Wireless home networks deserve attention as well. It may be time consuming or more expensive to have a secure network at home, but that is better than having a fraudster sitting in a car on your street monitoring your activities and gaining access to your files and information.
• It is important to install anti-virus software on your computer and keep it up to date.  The same holds true for firewalls and security patches for your operating system.

Passwords

Many websites you visit require a user name and password.  Having a strong password will make your online activities safer.  Unfortunately, many passwords are chosen to be easily remembered rather than to protect the user.  Some common passwords that hackers could easily guess are password, user name, your real name, your address, 123456, abcdef, or just a number. With just a four digit number, there are only 9,999 combinations and a sophisticated hacker could probably figure that out in seconds.

• Strong passwords are at least six characters long and preferably eight.  They should contain a mixture of upper and lower case letters, numbers and special characters (#, $, ^, &,!,?, {, >, etc).  They should not be based on personal information and not be based on words found in a dictionary.
• The difficulty of long and mixed passwords is that they can be hard to remember.  One suggestion is to create a password from a sentence that you are likely to remember.  For example, start with the sentence “My children John and Mary are 12 and 16 years old.”  Then use the first letters of the words, characters and the numbers to create the “McJ&Ma12&16yo” password.

Changing passwords often and using different at different websites also increases protection.  Keep any written record of your passwords in a safe location.

To learn more about protecting yourself against identity theft and account fraud, join us for a FREE webinar on April 21. Register today.