Anyone do a will instead of a trust?

82 Replies

@John Teachout sounds like you have a trust that is satisfying to you. That pour over will makes sense so you don't have to sweat everything being signed correctly. So I take it the pour over will doesn't need to be probated.

Thanks @Justin Sullivan will have to get that book. Was thinking heirs get a stepped up basis. If the estate is huge then certain kinds of trusts apply. I am not dealing with anything that big so don't think taxes is an issue.

@Gary L Wallman agree need quality work and it is all relative. If $50k is 1% and you get tremendous advice and you are happy then at the end of the day it is all good.

My problem is with older people who are trusting that are overcharged and given something so complicated they can't understand it and end up dependent on a high priced attorney to answer questions.

Originally posted by @Jeff S. :

@David Dachtera the only reason I can imagine that one is $6k is that they have 6 kids and all kinds of grandkids. They are in their 80's.

I would expect the expense to be related to the nature / complexity of the estate and not the number of heirs. 

I know giving an 18 year old a bunch of cash is a bad idea @Chris Thomas . In any case whoever oversees things is the deciding factor in how things are run after everything is said and done.

Life insurance is another story.

@Marco Martinetti sounds like you now have a will. All this has me doing a lot of thinking too. Simple if you have one wife in your life and kids. Everything goes to wife then kids end of story. The good old days.

We have done a will but are considering a trust or changing some holdings to a multimember LLC. If you have multi-state holdings my understanding is that they probate in the state they are in and we are in 3 states. Estate taxes start much lower in MA and RI then federal estate tax so that is one of the reasons I was looking into changes. States With Estate Tax or Inheritance Tax, 2021 | Tax Foundation  If we spend everything of course that won't be an issue. 

My parents left a will but it was just their home and it was sold.  My husbands father left a trust which comes in handy to manage a small family farm supported by funds in the trust. If you intend to leave that lake house or farm funding a trust for them can make it easier if you are looking to have things stay in the family.  



The other issue is inheritance laws differ by state so in most states everything will go to your surviving spouse without a will but I was surprized to find it was not true in RI. One of the reasons I was glad to get a will in place.



The other issue is inheritance laws differ by state so in most states everything will go to your surviving spouse without a will but I was surprized to find it was not true in RI. One of the reasons I was glad to get a will in place.

Originally posted by @Jeff S. :

@Gary L Wallman agree need quality work and it is all relative. If $50k is 1% and you get tremendous advice and you are happy then at the end of the day it is all good.

My problem is with older people who are trusting that are overcharged and given something so complicated they can't understand it and end up dependent on a high priced attorney to answer questions.

 Jeff,

Absolutely true. There are some lawyers and non lawyer fraudsters who sell pre packaged revocable trusts for thousands of dollars that are boilerplate to our most vulnerable citizens. Makes me sick.

Most folks that need a simple trust that should be paying maybe 1-2k if it is customized for them.

My situation is far more complex and requires special expertise from lawyers and CPA's as I own multiple businesses and a bunch of real estate.

Though I know it will help my family tremendously, it's still tough to spend big money for things that will happen after you're dead. LOL.

Respectfully,

Gary

@Colleen F. there is a lot going on there. Multistate investing takes on a whole new set of issues as you well point out. I like the part of a trust funding something which is interesting when you consider rental properties.

Legal zoomed the trust it for now, and wrote a will on there as well for a back up in case something went wrong. Once I can afford it later in my journey I’ll hire an attorney. 

You need a will, always.  Even if your bank accounts and brokerage accounts have a beneficiary and your real estate is in a trust or has a transfer on death deed and your vehicles are titled jointly with someone else, you need a will.  Otherwise there is not a way to distribute your socks, underwear, well your computer and other material things.  Without a will no one is obligated to bury you or cremate you, so your ashes may be tossed on the potter's field.  If you die in an accidental death situation your estate may get a settlement on your behalf.  There is not a way to transfer that to who you want to get it.  A will wraps up the loose ends.

You can avoid probate by having a small estate without real estate and no one to fight and challenge anything.  Or have the real estate titled to allow transfer without probate--joint tenant, transfer on death.  I will warn you to be wary of using a transfer on death deed unless you specifically determine how the title companies regard that form of transfer in the state where the property is located.  I received property in CA under a transfer on death deed and many of the title companies were a royal pain.  They wanted to go through a mini-title company directed probate.  So I had to 'prove' that all medical bills were paid (impossible as how do I know when 'all' have been submitted to the insurance and processed?  NOONE would talk to me about a dead person's medical bills.  How do you know who the patient saw in the hospital, there were many, many doctors and others billing from the hospital.)  I had to show all credit card, utility bills, etc. were paid.  Same issue with these entities talking with me, even when given a death certificate.  So I really recommend you talk to a title company about what your heir would need to do to sell the property with title insurance after your death if you use a transfer on death deed.  

The cost of a simple Trust should not be that high. I paid $3500 for me--one person. They also did the quit claims to transfer all property into the Trust and set it up to include a special needs Trust within the main Trust for a special needs kid I adopted. The next Trust I got cost $550, yep less than $1000 and holds other properties with similar structure, but more investment focused. It would be more if you were married. And my prices also included a medical POA and will.

Even though the cost is similar to what one would pay for a simple probate, a Trust has other advantages.  Your heirs do not have to go through probate.  Probate can take months to years, which in some cases, leaves property subject to vandalism and rentals mismanaged.  It can cost a lot with a complex estate such as several properties in different locations.  Others can not challenge a Trust as easily as probate.  Trusts are private.  Probate is public.  It allows you to control how the assets are distributed, like some at death, but some at age XX, or some for education, or some for medical bills.  It can prohibit the money from being used for other things such as can not be used to pay for court ordered fines or lawsuit settlements or divorce proceedings, including attorneys.  It can have restrictions such as has to be drug free to get a distribution or should the beneficiary decease prior to the assets being fully distributed the beneficiary's share passes on to the beneficiary's blood or legally adopted children.  The beneficiary's share can not be passed to a spouse or step child.   Trusts keep beneficiaries from co-mingling the assets as some beneficiaries do not understand that co-mingling an inheritance makes it community property in many locations.

So shop around for prices, get a trust and a will!

@Colleen F. there is a lot going on there. Multistate investing takes on a whole new set of issues as you well point out. I like the part of a trust funding something which is interesting when you consider rental properties.

@Lynnette E. fantastic post. That pretty much covers everything. I have a will but have not figured out how to handle all the details. Hard to run things when you are gone. The simple way would be to liquidate everything and split the cash. A nice little fire sale. 

I knew an older person who had US Bank as her trustee who paid her bills. She was in a nursing home for many years and one day the bank said not much cash left here is a check for $60k.

One way would be to slowly liquidate properties as we age out say one unit every so many years planning to live to a 100. The plan can stay in place after gone maybe. I kind of just did that selling a duplex for $650k and 1031 into a 450k property paying some tax and taking some cash to spend. 

I have more research to do about trusts. Thanks for this post.

Originally posted by @David Dachtera :
Originally posted by @Jeff S.:

@David Dachtera the only reason I can imagine that one is $6k is that they have 6 kids and all kinds of grandkids. They are in their 80's.

I would expect the expense to be related to the nature / complexity of the estate and not the number of heirs. 

When you are interviewing the attorney, they are also sizing up their client.  It could be that the attorney thought that because of their age and understanding of wills, trusts they may take a lot of time to educate on how to run/manage a Trust.  A Trust is not just for end of life planning, but also about how the property is managed and used during the life of the Trustor.  

It may that the attorney thought that it may take a lot of time to get the basic answers in order to write a Trust because the estate plan is not well thought out or the people may not be in agreement.  

Things that the attorney needs to know that may be hard to figure out if there was not a lot of thought and discussions prior to the meeting with the attorney:  Can the Trustor sell the assets of the Trust, if so, how are the funds then used?  Can the Trustor spend the assets for his/her life expenses at will or are they to be reinvested into new Trust assets?  Or do the funds get distributed to the beneficiaries?  How long is the Trust to last before it expires?  Does it end after the death of the Trustors and the assets get distributed then, or does it end at a specific date, or at an age of a beneficiary or when?  What if a beneficiary passed away, is that share redistributed to other beneficiaries or passed on to a specific heir of the beneficiary  (e.g. eldest son).   Once the Trustors pass who will be the Trustee?  A bank, attorney, CPA, financial planner will charge and may consume more of the Trust than the beneficiaries get and it can be hard for beneficiaries to fight large companies with attorneys in their office...and some can be corrupt and self serving.  Most will also sell rentals and invest in stocks or something that is easier for them to manage and that they get a commission on each buy and sell.  If you use a family member or friend that person may self serve or be untrustworthy and may be honest, but hated by the beneficiaries in the end because they follow the Trust and the beneficiaries want more now.  Can the Trustee sell assets and reinvest or only distribute? What can the Trustee do if an asset is going downhill, in need of repairs or just no longer a good investment?   How does the Trust hold and manage money for things like insurance and taxes?  Can Trust assets be sold to fund other asset's day to day costs?  How much cash / income generated should the Trust be allowed to hold?  What is to be done with the funds if they are higher--distribute, buy another asset?  Does the Trustee get paid, how much, based on what?  Does the Trustee need to be bonded or insured?   Can the Trustee take out loans on Trust assets?  You get the idea.  

The attorney may have felt that the elderly couple would be in over their head in a Trust without a lot of time spent explaining it and discussing each issue.  

Originally posted by @Jeff S. :

@Lynnette E. fantastic post. That pretty much covers everything. I have a will but have not figured out how to handle all the details. Hard to run things when you are gone. The simple way would be to liquidate everything and split the cash. A nice little fire sale. 

I knew an older person who had US Bank as her trustee who paid her bills. She was in a nursing home for many years and one day the bank said not much cash left here is a check for $60k.

One way would be to slowly liquidate properties as we age out say one unit every so many years planning to live to a 100. The plan can stay in place after gone maybe. I kind of just did that selling a duplex for $650k and 1031 into a 450k property paying some tax and taking some cash to spend. 

I have more research to do about trusts. Thanks for this post.

 There is a big disadvantage for selling the property as you age.  Unfortunately capitol gains taxes will gobble up your profit, plus recapture on depreciation.  Right now, if you pass your heirs get a major tax advantage the value of the property is what an appraisal shows it is on the day you die, and there is no depreciation recapture.

So its something to think about.  Personally, I will likely make my kids sell the properties and I will save the tax money, unless the law changes in the years to come.  But my daughter likes doing the rental stuff, so she may just manage them and take a 10% PM fee and distribute the income to the heirs.

@Jeff S. I'm just now getting my estate planning organized and put together. My situation (in Illinois) seems to be going towards 2 series LLCS with operating agreements pertaining to each of my daughters. If my wife and are both gone, these ever changing (as I buy and sell while alive) holding companies can be tailored for the exact properties that I want each girl to have. Everything else is handled in a will (with percentages rather than fixed amounts for all my heirs). This way, no matter what my situation is while I'm alive, when I die, everything is already in the right spot without any updating. Doing several deals a year could make things messy. My girls being over 18 and having a traditional family unit make this possible. Obviously, not for everyone.