In Part 1, we explored what a Testamentary Will was and the typical costs associated with Probate of the Will. In Part 2, we explored what a Revocable Living Trust was and started exploring the benefits of a Revocable Living Trust. In Part 3, we will finish exploring the benefits of a Revocable Living Trust and the benefits of a Testamentary Will.
Probate takes time and is often dependent on court schedules. As an example, there was one case that we followed in 2012-2013 that had a trust, and had to go through probate because some of the assets were not included with the Revocable Living Trust. In that case, the probated items took approximately nine additional months to resolve and cost attorney and personal representative fees were an additional $17,000. I am using this example because it was a very simple estate with one beneficiary (widower), with no disputes, and no delays in the processing of documents. It is important when you establish your trust; you ensure all of your property is properly included with the trust.
There can also be a great disparity between states for how long probate takes where a few states can process a probate quickly (and relatively cheaply).
A Testamentary Will is a public record for anyone to be able to access. A trust is a private document that people can typically only see the portions of the trust that apply to them. For most people, this will provide potential protections from disputes and help the estate to be processed more efficiently for your loved ones, but for some, the privacy from public scrutiny could also be a benefit. An excellent article demonstrating public scrutiny will help illustrate potential situations. Often people do not want to publish their assets, and similarly, they also do not want the assets passed to their heirs to become a public record.
As with the public scrutiny example above, people often do not realize what can be obtained from public record searches.
Benefits of a Will
A will is a simple document that is typically cheaper to establish than a Revocable Living Trust. It essentially tells the court what a person would like to happen to your property after death.
The differences between a Will and Trust in establishment is typically related to costs and the complexity of documents. Which is right for you will depend on your specific situation. There are other methods for avoiding probate of some assets, but in most jurisdictions, certain property types (such as real estate) offer additional complexities that a Trust may be the best or easiest solution to avoid probate.
The bottom line on comparing a Trust compared to a will during your lifetime is that there is a little more paperwork and a little more costs for setting up the Trust compared to the will. Upon death, there may be tremendous differences between a trust and a will saving your beneficiaries a tremendous amount of time, money, and hassle.
Estate Planning 101 – Advice from an Attorney
As an Attorney, I love candid conversations with clients. I love to educate. I love to help people understand their options. I love to help people achieve their goals. When you speak to any attorney with the objective of potential representation, it is best to be candid about your thoughts, your fears, your concerns, and your dreams. It is the only way to really understand the situation and these conversations are protected by Attorney-Client Priviledge.
One of the most memorable (and candid) conversations I remember about setting up a trust, the objection to having a trust was “I don’t care what happens, I will be dead. My children are grown and they can handle it.” I assumed that the response was for two reasons: First, people do not enjoy planning for their death; Second, this person did not fully understand what would happen upon their death. The response was to ask a few questions that informed this person of the consequences of their decision.
Question 1: I know that one of your children (confidential), do you want this person to have immediate and uncontrolled access to all of the funds of the estate once probate is concluded?
Question 2: How will the children pay for the bills, the funeral, or any other obligations or needs during the probate period?
Question 3: Do you realize that going through probate with your current assets would likely result in over $50,000 in fees to the estate that can be avoided?
After these three simple questions, this person decided that it was time to get a trust.
Over the next couple of weeks we explore “Should I hire an attorney?” as comparison of hiring an attorney or using do-it-yourself services, such as LegalZoom and pre-printed forms.
We will also discuss more of the tax implications in Part 4 in the future.