Last week I posted about the basics of an estate plan. At the very least your plan will include a will giving you a say of who will inherit your property & who will provide care over your children. If nothing is done the courts will ultimately make the decisions and can be a long and drawn-out process. But the process can be long and drawn-out even if you do have a will because your estate will still need to go through probate. About a few years ago, right after my wife and I got married, we sat down and discussed our top priorities. Somewhere in there was a discussion about our estate plan and we decided to establish a trust for us and our family.
We made the executive decision to go for the full estate plan and it really boiled down to a couple of reasons. I will note this, we are not wealthy (at least not in a monetary sense!). I realize that most people think trusts are for the wealthy only. Not true.
- Avoid Probate – this is a slow process that can take time and money. It is said that it can take up to 3 years for courts to finalize an estate. At the prior firm I worked for a client had to wait 2 years for her mother’s estate to be finalized. I remember speaking to her about what a burden the probate process was for an executrix. She decided to do much of the accounting herself because she wouldn’t be able to afford her attorney to do it. When my wife and I pass we want to leave as little burden on our family as possible. Most of our assets will pass through our trust and avoid probate. Keep in mind, if you go down this route make sure that the firm you work with will not only create the trust but help you move your assets into it. Some firms will only create the trust leaving it up to you to do the transfer work.
- Our future children – we do not have children but we are planning to dabble with a family in the near future. If something were to happen to my wife & I and our children were young we would be able to appoint a guardian like a will. But we also wanted to control how their inheritance will be given to them. We have decent size life insurance policies and wouldn’t want a young child inheriting it right away. Let’s say we both had $1MM life insurance policies, had 2 kids ages 17 and 15. Each kid would receive $1MM at 15 and 17 if we only did a will. Now I hope to educate my children on the importance of saving but we felt that was too much money to be given all at once. We wrote in our trust that each child will receive a portion of their inheritance in 3 stages with the final stage being at age 35. My wife and I felt it was important to give our children their inheritance when they’ve already been established in their careers. Hopefully, installing some work ethic along the way!
I think the mere fact of avoiding probate is worth the cost of creating a trust but what do you think? Do you have a trust?