Today, I'd like to talk about estate planning. It's not something that I write about very often, because, frankly I don't know much about it. Not only that, but it seems like the rules are different in every state. With a child on the way next month, I really can't put off estate planning any longer.
It's with this in mind that I pulled out the book: Living Trusts for Everyone: Why a Will is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates. The author (or more likely the publicist) sent it to me a couple of years ago and it joined my ginormous mountain of personal finance books. Most off the time the mountain isn't very helpful, but this time it's got just what I needed.
The book is short, only 140 pages, but it is dense. As dense as you might expect a book on the domain of lawyers such as wills and trusts would be. However, the author, Ronald Farrington Sharp, does a decent job of explaining the issues as simply as possible. The biggest problem is that there are a million different scenarios... and each scenario has a million sub scenarios.
The biggest point the author makes is that lawyers typically make a lot of money when you die. The courts need to figure out where stuff goes and even if you have a will, things need to go through probate, a costly and lengthy procedure. How costly? I think he quotes it as typically around 5% of the estate. How lengthy? The author puts as simply "months."
So we are doomed right? (Well, yes, that's part of the estate planning thing.) No, we are not doomed. Enter trusts.
Trusts are like a corporation for your assets. (Don't quote me on that, it is how I think of them, not an official definition.) You create a trust and put your assets in there. You don't give up control of the assets, because you are a trustee, the person in charge of the trust. If you have a spouse, you can set up a co-trustee relationship. Upon death of the trustee a new successor trustee or trustees take over as defined by the trust documentation. It's kind of like how most people imagine wills work without that nasty probate stuff in the middle.
Rather than just rely on the author of this book, I did a little further reading. It doesn't hurt to get a second opinion on this stuff. A Google search or two brought me to Nolo.com, a website that has a lot of free legal information. Clark Howard has mentioned it on his show in the past, so I feel it's pretty legit. The two articles that back up what Sharp writes is: why avoid probate? and how living trusts avoid probate.
So I'm firmly of the opinion that I need to get a trust. I've been asking some friends and person finance writers what they have and you know how many have a trust? One. That's of a dozen or so people. They didn't even get it to avoid probate, but to make sure a family member with special needs was taken care of. Almost all of the people I talked to just assumed that a will was the way to go or haven't done any estate planning yet. And most of them have kids. Yikes!
Readers it is your turn. Have you done any estate planning? If yes, did you do a will or a trust? Why?
14 Responses to “Ask the Readers: Do You Have a Will or a Trust? Why?”
Next: What’s Better than a Double Rainbow? A Double HARP!