One of the first questions we are usually asked is if someone really needs a trust or a will. In answering that, we need to explore what a Will does, how a Trust differs from a Will, and why they are important in an estate plan.
Everyone should have a either a Will or Trust (Estate Plan) because without one, the courts rely on statutes within the state to determine what happens to your estate. Even if there is no individual that you wish to leave your property to, it is often preferred to leave it to charity rather than the possibility of the government taking all or some of your estate.
There are three main reasons people choose to have a Revocable Living Trust over a will. A Trust tends to save money, save time, and protect privacy, although it tends to have a higher upfront cost than a will, it will tend to be cheaper than a will upon death. In this part, I will briefly discuss what a will does and explore the costs to the estate going through probate.
A testamentary will is a document that tells the court what you want to happen with your property after you pass away, and you can amend (change) the will at any time in the future.
When someone dies with a will, the estate will be handled through probate (court) and your Executor (or Personal Representative) that you named in your will would represent you in the probate process. Typically the Executor would hire an attorney to help with the probate process. Some states, like Missouri, simply state that fees must be “Just and Reasonable”. Some states, like California, Montana, and Wyoming provide specific fees for the attorney and specific fees for the executor of the estate. These listed states are not the only states, however I am using them as examples to show some various fee structures.
Probate fees are fees that are charged by the executor (or Personal Representative) and the attorney for managing an estate. These fees are paid for from the estate assets and reduce the inheritance to your named beneficiaries.
The statutory fees for probate do not look at debts or liens, so if you owned a home valued at one million dollars ($1,000,000), and owed eight hundred thousand dollars on the mortgage, the estate fees would be determined based on the one million dollar ($1,000,000) value of the home and ignore the mortgage.
In Part 2, we will explore a Revocable Living Trust, and start to explore the benefits of a Revocable Living Trust.