Trusts v. Wills

As life gets more complicated the legal trends are pushing people to explore trusts…

We are recommending trusts for more of our clients these days for some pretty important reasons. While people may not believe that their net worth warrants a trust, there are many other important factors in the estate planning process that need to be considered. For example, if a married couple wants a simple will and they have young children, let’s say ages two and four, what happens in the event of the unthinkable (and statistically unlikely event) that both husband and wife die leaving minor children behind.

First, because it is a will it requires a filing in the probate court, which will oversee the estate administration process. A guardian would be appointed which would have been designated in the will. An attorney is hired to ensure that the guardian is properly appointed, and that there is no objection to the appointment or issues raised by the court or other family member that may want to object. In short, there is no guarantee that the guardian you nominate will be the best option or be appointed.

Second, once appointed an inventory of the estate assets would need to be filed. This requires the executor to assess and gather all the assets in the estate (IRAs, bank accounts, life insurance policies, real estate, personal property) and create a list for filing with the court. If it is a full administration, an annual accounting would be necessary and of course tax returns will need to be filed.

Third, the guardian must distribute to each child whatever is left in the guardianship account when they turn 18. Do you remember being 18? It’s rare to find a person that young that is able to maturely manage any newfound wealth that comes their way.

So, those are all the reasons why we generally recommend considering a trust to persons in situations that are similar to our example scenario. A public filing, an appointment of a guardian by a court, and then the unrestricted assets coming to a child way too early in life are all considerable factors that are usually best managed by having your assets transferred into a trust while you are alive. Plus, the cost of creating the trust and other related documents is cheaper in the long run than the cost associated with the probate process. While it requires you as the grantor to manage the situation while you are alive, it eliminates several considerable issues that would be faced by your heirs.

October 20, 2020