We know that 100% of people aren’t getting out of here alive. Even with that Universal Law, there is so much anxiety around planning for our inevitable exit. And there doesn’t have to be!
One question that always comes up around estate planning is “Do I need a Will or a Trust?”
It’s a good question – and as any good lawyer will tell you, “It depends.” Although the misconception is usually that you only need a Trust if your assets are over a certain dollar amount. What that amount IS, however, is never mentioned. And truly, surprising as it may be, it’s not always about the dollars!
A Will tells the Probate Courts what to do with your assets – property and dollars – after you die. But that implies that your assets will be stuck in the Probate Court system for a time. And if you’re leaving assets to minor children, that length of time could be until they reach age 18, or even longer depending upon your wishes.
In Massachusetts, Probate lasts a minimum of 12-18 months and will cost your family between $3,000 and $9,000. (The average is about $4,500.) And another $1,000 for each additional year that it has to stay open.
Not to mention, the records are entirely public so any Tom, Dick, or Harry can see who is going to inherit how much and when. That’s a recipe for sleazy people to do sleazy things – and trust me, they do.
Many people would prefer to avoid that burden on their family.
Trusts make more sense if:
- You’re leaving an inheritance to young children or grandchildren.
- You’d like to control how or when the inheritance is given to that person.
- You want to pay the lowest estate tax legally possible. (Hint: if you count up all your assets, including retirement accounts and life insurance, and it’s more than $1 million dollars, you have a Massachusetts estate tax issue.)
For example, let’s say you want to leave an inheritance to a currently 23-year-old kid. But you don’t want young Amy to have control of it until she turns 35. (And no, you don’t have to have a reason!)
A Will says, “Amy must be 35 to receive this inheritance” and then the Probate on your estate will stay open for the next 12 years, until Amy turns 35. That means that your heirs and estate will pay an additional $1-$2k PER YEAR for the court process until they can close the Probate – when Amy turns 35.
In a Trust, this estate will never go to Probate court. Instead, someone is in charge of making sure that your wishes, i.e. the terms of the Trust, are carried out – the Trustee. The Trustee can also be tasked with making sure that Amy can make good financial decisions when the funds are released. And the Trustee can make sure the assets are used for Amy’s best interests until she reaches age 35.
Remember, the difference if you want a Will or a Trust isn’t about a dollar amount. It’s about the goals you want for your family and for your assets after you die.
Want to find out which is best for your family? We’re hosting an in-person session in our office on March 20th that will help you get clear on the five most common planning goals, and exactly how to accomplish them. We’d love to have you come visit, and get your questions answered, once and for all.
Stay tuned for an article about using a Trust to support your spouse – and have the Trust protect your heirs from paying excess inheritance taxes.