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Ask the Readers: Do You Have a Will or a Trust? Why?

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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?

Posted on August 22, 2012.

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Estate Planning

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14 Responses to “Ask the Readers: Do You Have a Will or a Trust? Why?”

  1. Find a trustworthy lawyer in your state and get advice on this one. A couple of hundred dollars in fees now will get you advice far more relevant than any book.

    I don’t believe a trust is needed, in general. Whether it’s advantageous from a tax perspective, I don’t know. I think it’s complicated.

    • Lazy Man says:

      Isn’t “trustworthy lawyer” an oxymoron? Ha!

      Seriously though, that’s the plan. I’m asking friends in the area for their people and I am consulting Yelp as well.

      The book gives some advice on which kind of lawyers may be trustworthy. I highly suggest you read it. It’s written by a lawyer who knows that is where they make the big money.

  2. Michelle says:

    I work in the estate planning field (partially, it’s hard to explain), and trusts are DEFINITELY the way to go.

  3. MJS says:

    LazyMan,

    I am going through the will process right now with a mutual friend of ours. I took estate planning classes in law school which means personally, I know enough to be dangerous. I can’t say for sure in your state, but a general rule of thumb is that if something has an actual beneficiary, it will automatically avoid probate (think life insurance, 401k, annuity, etc).

    My family uses an an estate planning attorney that runs about $600 an hour. She uses a combination of trust and LLCs to maximize the ability to avoid probate. It is why I can create a basic will which just dictates what happens to kids and stuff.

    It is near impossible to avoid probate for everything. Let’s say I have a prized piece of memorabilia I want going to a specific relative. If it is worth 1000s of dollars, putting it in a trust may make sense. What if it is just sentimental? Trust may not make financial sense. Better to let it go through probate where unless there extenuating circumstances, my wishes will be honored. In my family’s situation, insurance policies, securities, homes, etc are all in trusts and LLCs. Less significant items are just in a will. If you want to talk more offline, would be happy to get even more specific.

    MJS

  4. Evan says:

    I am NOT a huge fan of Revocable Living Trusts mainly because no one uses them the way you should:

    http://www.myjourneytomillions.com/articles/why-i-am-not-big-proponent-of-revocable-living-trusts/

    Unless you are about to start retitling property, investment accounts, etc. you probably don’t need an RLT. Notwithstanding the tool is more popular in some States vs others driven mainly by how much of a pain in the ass probate is. New York is not a terrible state for probate while Florida is terrible.

    As a side note, the ancillary docs you get when preparing your testamentary docs (HCP, PofA and Living Will) are just as important at our/your age.

    • Lazy Man says:

      Yep, this would be about retitling property, investment accounts, all that stuff. Your article points out a couple of reasons why it would be a particularly good fit in my situation. We have multiple out-of-state properties. I also have an increased desire for privacy since my posts exposing MLM companies and distributors for defrauding others has drawn some attention from them.

      I’ve also read that California is a terrible state for probate. Along those lines, is there some kind of master chart that points out what specific factors make each state good or bad?

      Good point on the ancillary docs. They are on the plan too. I don’t have as many questions about them now though.

  5. Weston says:

    This is such a “state specific” topic it is impossible to discuss cogently without referring to the specific state the person lives in. I only know about in Florida. In Florida it is often entirely possible to avoid probate without any trust. Also most probates in Florida are done under a summary procedure that tends to be faster, and far less expensive than setting up a trust.

    It’s a silly topic without talking about a specific state. You would (and should) get at least 50 different opinions depending upon the state in question.

    • Lazy Man says:

      I would be okay with 50 different responses with the explanation of, “In my state…” The commenter before you is pretty knowledgeable on the subject and said that Florida is a terrible state to go through probate. This seems to be conflicting information even for that state.

      How about this as another example? We are military and I think we’ll probably live in at least 3 more states in our lifetime. Some people will live in a lot more. How is a person supposed to do estate planning under such circumstances if everything is so vastly different?

  6. Weston says:

    Evan – How many probates have you been involved with in Florida? I’ve been practicing down here for 31 years and have handled hundreds of them. The vast majority of them were extremely quick and very inexpensive for the heirs, so I’m not sure what you are basing your ‘Florida is Terrible” comment upon.

    Lazy Man – Have you spoken to a JAG attorney regarding whether you can elect a particular domicile while on active duty that would control for probate purposes no matter what post you may be assigned to? I know that your average JAG lawyer probably wouldn’t be equipped to do sophisticated estate planning, but they should know what you would need to do select declare a particular domicile for probate purposes while on active duty.

  7. Evan says:

    Weston,

    Zero. I am not licensed to practice in Florida. I am basing it purely on hearsay and unknown sources. But LazyMan is in neither NY or Fl…which is why I think it is great he saw an attorney in his jurisdiction.

    • Lazy Man says:

      Weston,

      I would have responded to you differently if you had disclosed that you have 31 years of experience and handled hundreds of trusts in Florida. I have to assume that everyone leaving a comment has average experience (when it comes to trusts, that is close to zero) unless they disclose otherwise. Since Evan has published his experience, I gave it more credit.

      That said, I haven’t spoken with JAG attorney yet. That’s actually something that we haven’t thought of. I presumed our situation will be more complex (as you pointed out) and the military component would be a minor aspect. That said, we live in one state, my wife has her home of record in another state, and we own property in two other states. I would guess that the home of record is the same as electing a particular domicile.

      Evan, I haven’t seen an attorney yet. I’m hoping to schedule it next week. Past and present tense is really not important to the discussion though ;-).

  8. Tawny says:

    As a newly minted paralegal with a passion for probate… I can’t give advice d’oh! That being said there are a lot of different trusts depending on your state. With a licensed attorney, look into pot trusts if they are available in your state and if any additional children may be in your plans. Some states like Oh, will not let you fiduciary reside in a different state unless they are family ( by blood or marriage) and even so they may have to put up a bond equal to your estate , so if applicable talk to your lawyer about waving bond and having a sucessor fiduciary in case , heaven forbid , you and your spouse would die at the same time. Also look in to guardianships/conservatorships ( different states) to appoint a caregiver and trustee for your minor child(ren).

  9. John says:

    Creating a will isn’t something that I haven’t done yet, but it’s on my to do list! I know, I know, it’s super important!

  10. […] Man @ Lazy Man and Money writes Ask the Readers: Do You Have a Will or Trust? Why? – So I’m firmly of the opinion that I need to get a trust. I’ve been asking some […]

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