Wills vs. Trusts Revisited

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For too long now, I've been living up to name and procrastinating in estate planning. With our first child on the way any day now, it is time to make sure that all the "t"s are crossed and the "i"s are dotted. That's why about a month ago, I asked readers do you have a will or a trust?

I had been reading the book Living Trusts for Everyone: Why a Will is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates, which makes a strong argument for a trust. It does a great job of putting the fear of probate into you as if it is the financial boogeyman that should keep you up at night. Maybe it actually is with your assets being tied up for months and the legal fees around it.

With that in mind, I went to see Janet Brewer an estate planning attorney in Palo Alto. She was kind of enough to offer a free hour consultation. What I found out was that we probably don't need a trust. I was concerned about our real estate in multiple states. It appears that if my wife and I put them in a joint tenancy we can avoid probate. If I die first she'll just get 100% of the assets and vice versa for me. We avoid probate unless we both die at the same time, which is statistically rare. In looking at our other financial assets (brokerage accounts, 401Ks, Roth IRAs, etc.) as long as we designate each other as beneficiaries it avoids the evil probate monster. Although when one of us dies, the other would be wise to get that trust set up.

So why not set up a trust now and just be done with it? Well, there are a couple of reasons. One is cost. Trusts are generally more expensive to set up. The bigger one for us is that we tend to move around a bit. We don't plan to be in California forever and setting up a trust here would require a major reworking if we were to move back to New England as we hope. (In case you didn't know, California tends to do a few things "differently" than the rest of the nation, and trusts are an example of that.) One thing she did mention is that we might be wise to set up a corporation for the properties. That's something that I've looked briefly for Lazy Man and Money, but not the real estate. I'll have to put looking into that on the to-do list.

At the end of the meeting with Janet Brewer, we all mutually agreed that her services weren't exactly in our best interest, and we walked away without giving her any business. I love when people turn away business when it isn't in the best interest of their clients. It gives me confidence that if there are others in Silicon Valley looking for estate planning services, her office would be a great place to start.

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... and focuses on:

Estate Planning

Posted on September 26, 2012.

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?

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... and focuses on:

Estate Planning

Posted on August 22, 2012.

Estate Planning: Are You Ready When Your Time Comes?

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My close call with death last week instantly had me thinking... is my family ready in case I bite the big one? (By the way, I never understood that expression - what are you biting exactly?) I have a small family just my wife and Jake, our dog. My wife earns a great income as a pharmacist, so financially the show could go on without me. Still, I didn't work this hard at being Lazy to leave nothing behind. Unfortunately, as it stands, a lot would be left behind due to poor planning on my part. Here's how I'm going to try to fix that (hmm... maybe I should rewrite this post for my How To Fix site.)

Prepare a Death Folder

What's a death folder? It's a folder with a set of instructions for those left behind. It typically include all your banking, brokerage, retirement, insurance (etc.) account information. My wife has one of these... I don't. It's a shame too because she has all her accounts with USAA... one stop and I could get everything. I keep my financial accounts like my sea shell collection - scattered liberally around the world. I never intended to do it that way, it's just that I get Lazy when it comes to closing accounts and transferring money (it never seems as easy as it should be with all those pesky security issues).

I do have an Excel Spreadsheet of most of them, but good luck to my wife actually finding that. I should just work with that and e-mail it to her. She'll have a copy in her e-mail when the day comes. Of course it can't hurt to print a copy and put it in our safety deposit box... oh that's another thing on the list... get a safety deposit box.

Get a Estate Planning Lawyer

This should arguably be my first step. However, I can prepare a death folder by myself in just a few hours. Getting a lawyer and drawing up documents takes a couple of days. Fortunately, I know a great lawyer back home in Massachusetts (contact me if you are interested and I'll pass his information along). It would make things so much easier on my wife to have things in line legally.

This is another case where she's ahead of me. She's seen a sticky situation first-hand. When things aren't set up it can be a big problem.

Don't Forget Hidden Assets

I probably have more hidden assets than tangible ones. The website that you reading is one example. How do I give my wife instructions how to run it if I'm gone? She has no interest in learning it now (and rightly so, since it's really not her thing). What about my other websites like the aforementioned How To Fix? There are so many levels to handing a blog off without a hiccup. As much as I try to get ahead with my writing, I never really do... Can I expect my wife to learn HTML... much less PHP and how to optimize ads while writing personal finance content? No, I can't. I think the best option is to give my wife the access to those assets and introduce her to a couple of trusted people who can help manage things without me.

I think I put myself in a unique situation with this one... yet it's one that I have to account for.


I really am sorry for all the morbid posts this week. I'll try to hit a happy topic for Friday. On the bright side I didn't title this, "You're Gonna Die!" in tribute to my friends' old Nintendo Contra battle cry.

This post deals with: ... and focuses on:

Estate Planning

Posted on July 30, 2009.

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