Jackson death illustrates will vs. trust issue

With a trust, your assets are simply transferred to the designated trustee (or trustees) upon your death. A brief "pour-over will" usually declares that any remaining assets be transferred into the trust upon your death. This was what happened in Jackson's case.

You can also set up a "trust within a trust" or a trust within a will, usually for a single beneficiary.

Q: Who's responsible for overseeing my will or trust?

A: An executor you name carries out the contents of a will. A trustee plays a similar role, but usually for a much longer time — typically until all assets are distributed to the beneficiaries. A bank or financial institution might be named to act as a co-executor or co-trustee.

A trustee is also usually given some discretionary authority over if and when distributions should be made to beneficiaries.

While the titles sound simple, the responsibilities of executors and trustees are considerable. They include paying or negotiating with creditors, notifying and paying beneficiaries and creditors, filing the final income tax return and managing any investments.

As such, an executor or trustee might need to hire an accountant or attorney to help carry out your financial wishes. As such, you might want to spell out a fee for the executor or trustee, said Alan Rothschild, an attorney specializing in estate planning at Hatcher, Stubbs, Land, Hollis & Rothschild LLP in Columbus, Ga. Or you might sign a separate payment agreement with the executor or trustee. A family member or close friend might agree to do it for free.

In the absence of a prior agreement, many states allow executors to be paid a one-time fee of between 2 percent and 3 percent of the estate, said Rothschild. With trusts, the fee is usually 1 percent of the assets a year.

For larger estates, the fee will likely be a smaller percentage.

Q: What happens to the debt I leave behind?

A: Whether you have a will or a trust, any debt you have at the time of your death will need to be settled. If your assets aren't liquid, creditors could force the sale of your property to get paid.

Of course, a trustee or an executor could negotiate with creditors to repay debts over time.

Q: Are there other benefits to setting up a trust?

A: Another reason some people prefer trusts is that it makes it easier to handle your care if you become medically incapacitated. You could stipulate in your trust that your assets be used to pay for your care, and the trustee would be able to disburse money from your estate without going to court.

Without a trust, the person who became your guardian could run into complications getting power to tap your assets.

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