should i get a will or a trust?
There are varying schools of thought when it comes to the trust v. will debate.
If you do your own research you’ll find a superabundance of puff pieces, dreck, and gobbledygook written by non-lawyers, journalists, and AARP columnists.
Ultimately, it’s probably wise to consult an attorney because everyone’s situation is different.
Decide What You Want First
The first and most important step in deciding if you need a will or a trust is to identify your own needs FIRST.
Don’t spin your wheels trying to wrap your head around fancy legal jargon or keeping up with the Jones’s who recommended an “Irrevocable life insurance domestic asset protection trust with QTIP provisions and a Trust protector”
Trusts are like Kombucha, or hot yoga. They’re trendy. And trendy people love to drop big words to try and impress you. “Ah yes, we have a spendthrift charitable remainder trust for our son little Johnny.” Screw the Jones’s.
A lot of those words are designed to create the illusion that lawyers are achieving something mysterious and important.
Your first step should be mapping out a framework of what you want to happen when you die and then present it to your lawyer.
From there, your lawyer can help you effectuate that framework with a legal mechanism operating within the bounds of the law.
Trust V. Will
A will is a document that says who your stuff goes to when you die. It can only make distributions, it cannot put conditions or restrictions on how the money you leave is spent.
A trust is a document where you put a list of provisions or instructions on where you want your money to go, and then you appoint a “trustee” to enforce those provisions. The people who benefit from the provisions in the trust are called the “beneficiaries”
There are several big ticket reasons why people get trusts.
Off the bat, many of these considerations don’t apply to most people. In fact, for most regular, non-wealthy people with adequate insurance, the need for elaborate trusts is simply a waste of money.
The popularity of trusts was brought into the spotlight by Norman Dacey, a non-lawyer whose best selling book from the 1960’s “How To Avoid Probate,” convinced the nation that trusts are necessary.
Prior to the media storm that Dacey unleashed, trusts were passe.
Many lawyers went along for the ride realizing they could capitalize on this newfangled sensationalism and charge higher rates for fancy 50 page trusts instead of the simple 5 page will.
Today, echoes of Dacey’s sensationalism still persist and lawyers utilize the same tried and true propoganda that hooked the nation on trusts 60 years ago.
That’s why you see lawyers host free meals, wine and cheese seminars, beach-side presentations with bottomless mimosas, etc.
Why do you think lawyers are giving you free mimosas? As a charity? No. They’re trying to sell you on their $10,000 products.
Now, don’t get me wrong… That isn’t to say trusts are never useful. But trusts certainly should not be a universal prescription for every client.
Reasons To Get A Trust
To me, there are two questions you should ask yourself when considering a trust. 1. Will it save you money? And 2. Do you need something done that a will can’t accomplish?
For most people, a trust won’t save them money. In fact, irrevocable trusts are taxed at a higher income rate, so it may actually lose you money depending which trust you have.
The most immediate cost saving benefit that comes to mind is the A-B trust that helps families avoid an estate tax. Now, you might’ve read that last sentence and thought “Hey, I want to avoid the estate tax right?” Well first you need to hear what the estate tax is.
In CT if you’re worth under $12.9 million dollars… there is no tax. There’s no “inheritance” tax, there’s no “estate” tax, and there’s no “gift” tax.
So ask yourself. Am I worth over $12.9 million dollars?
If not, then a tax efficient trust won’t help you because you’re not going to have to pay taxes anyway!
In MA, if you’re worth under $2 million dollars then you don’t get taxed. In MA there are a lot more people who need an A-B trust because more people are worth over $2m in MA than people worth over $12.9m in CT. If that makes sense.
Jump to the next question.
Do I need something that a will can’t accomplish?
If you want to divy out funds for the support of your kids or family members long after your death, then you may need a trust because a will cannot accomplish this. If your kids are minors you can put a simple clause in your will that says their share will be held in trust until they’re 21… or 18. That’s called a “testamentary” trust, it’s a trust that your will creates, and those are standard in most wills for minor children it’s not added as an additional fee because it’s a simple clause.
However, if you want a stand-alone document that dictates what your money will be spent on, then yes. You need a trust.
Reasons To Get A Will
If you have a simple asset structure – house, money in the bank, etc…
And you have a simple list of beneficiaries – kids, friends, spouse…
And you want them to have your stuff outright when you die…
A will is a great way to do that. A will appoints an executor, it waives the bond requirement in probate, and it carries out your wishes in a legally binding way.
A will is very hard to contest, it is one of the strongest (if not, the strongest) legal documents out there.
When you probate a simple will, with a simple estate and clear instructions, the probate process will not be costly.
There are costs associated with probate, but the typical probate in Connecticut will run you about $3,000 average, but a lot of the time less. The typical probate in Massachusetts can be a bit pricier, but by keeping costs low you can definitely probate a simple estate within that same ballpark.
There is time associated with probate, but people don’t realize that if you appoint an executor in a validly executed will, that executor can make advance distributions. And some things just take time anyway and aren’t attributable to probate. For example, selling a house takes months and months. That was going to happen whether you went to probate or not. So putting your house in a trust to avoid probate doesn’t really avoid any specific time drain.
And in light of how expensive trusts have become, the costs of probate are likely either equal to or less than the costs of getting a trust.
So with a simple will and a simple probate, you’ll save money compared to if you had gone the $10,000 spousal trusts route.
Like I said before though, everyone is different. If you have any questions, you really should consult an attorney.