A last will is one of the most well-known estate planning documents, and yes, everyone should have one. But if a last will is the only document in your parents’ estate plan, you’ll be in for a (not so great) surprise when they pass.
If your parents leave a living trust instead, count yourself lucky—everything will be much easier for you. Here are the six reasons to be thankful for your parents’ trust.
- You don’t have to go to the probate court.
The biggest myth about a last will is that it avoids probate—not true. Whether someone passes away without a last will at all, or with a last will but no trust, the process is the same. A loved one has to hire an attorney, open probate in the court system, and be subject to the court’s deadlines and oversight each step of the way.
I’ve never had a client personally tell me that probate was easy or enjoyable. By the end of the process, they are always ready to do their own estate planning with a living trust to avoid the court system.
When your parents incorporate a living trust in their estate plan—and properly fund it—you don’t have to go to court whatsoever. Assets are available immediately to the successor trustee to start the process.
- More of the inheritance goes to the heirs instead of attorneys, the court, appraisers, conservators, and bond premiums.
When anyone’s estate goes through the probate court, fees start to rack up quickly.
Attorneys need to be paid to prepare documents and file things with the court; the court needs to be paid for each filing; appraisers need to be paid for assessing real estate or businesses; conservators need to be paid to manage assets for a minor; and the executor and conservator potentially have to post bond.
By contrast, with a living trust, you don’t have to go to court or post bond (unless required by the trust itself). If an attorney is involved, the involvement tends to be much less than when you have to navigate the court system.
- Everything is private.
When a last will undergoes probate, it becomes public record. Have you ever wondered how it is that we know who inherited from Anna Nicole Smith, Michael Jackson, and Heath Ledger? It’s because they didn’t properly use a trust to keep their personal information private.
A living trust is private. It doesn’t need to be recorded anywhere or filed with any court. This means that no one can scour the public records, find out you’ve inherited from your parents, and solicit you whether for donations or for high risk investments.
- Your inheritance doesn’t end up in the hands of someone your parents never met before.
When you inherit via a trust, your inheritance is protected from any ups and downs in life.
If you go through a divorce, your inheritance isn’t subject to be split 50-50. Or if you’re sued, whether due to a complete accident or to something like a bad business deal, your inheritance is protected from a plaintiff’s lawsuit against your. Or if you go through bankruptcy, your inheritance is protected from creditors who would otherwise be able to take it all.
Without a living trust, your inheritance could potentially end up outside of your hands.
- Blended families are protected.
If your parents divorced and you have step-siblings, a living trust gives your parents the flexibility to make sure that both sides of the family are provided for regardless of who passes away first.
With only a last will, your parent might be leaving their estate directly to the surviving step-parent, counting on him or her to make sure you’re provided for. But a surviving spouse could simply redo their estate plan and leave everything to their own side of the family—effectively disinheriting your side of the family. Unfortunately it rarely turns out that way without a living trust (that’s a hard conversation I’ve had with clients when their parents have passed leaving a surviving step-parent).
A living trust allows for the flexibility to provide both for the surviving step-parent and ultimately both sides of the family.
Note from the author: Probate doesn’t have to complicate things for your family and make everything public. A trust is superior to a will in many ways and may be the right choice for your family. If you want to have an estate planning chat or attend one of our free estate planning talks, check out Wills & Wellness – we’re parents and estate planning attorneys who focus on educating families and giving you PEACE OF MIND.