A last will is one of the most well-known estate planning documents, and one that everyone should have. But if a 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 because everything will be much easier for you. (Not sure what the difference is between wills and trusts? See Wills vs. Trusts in Plain English.)
Below are five ways that trusts benefit both you and your parents.
1: You can avoid probate court.
Many people think that having a will will keep their beneficiaries out of probate court. This is not true. Whether someone passes away without a will or has a will but no trust, the process is the same. A loved one will have to hire an attorney, open probate in the court system, and then be subject to the court’s deadlines and oversight every step of the way.
We have never had a client personally tell us that probate was easy or enjoyable. By the end of the process, they are always ready to incorporate a living trust into their own estate plans so that their loved ones can avoid the court system.
When your parents incorporate a living trust into their estate plan and properly fund it, you will not have to go to court. The assets are available immediately to the successor trustee to start the process.
Not sure if your parents have a trust? There’s no time like the present to talk to them about their estate plan and encourage them to create a trust if they haven’t. Wills & Wellness can audit their current plan and advise them on any needed adjustments, including creating trusts.
2: More of the inheritance goes to the heirs instead of to attorneys, the court, appraisers, conservators, and bond premiums.
Just like any legal process, fees add up quickly when an estate goes through probate court:
- Attorney Fees: Attorneys spend a great deal of time preparing and filing documents, and performing research.
- Court Fees: The court charges a fee for each filing.
- Appraiser Fees: Appraisers are called in for assessing real estate or businesses.
- Conservators: Conservators will need to be paid to manage assets for a minor.
- Potential Bond Fees: In some cases, the executor and conservator could be responsible for posting bond.
By contrast, a living trust avoids the bulk of these fees and keeps you out of court and free from posting bond (unless required by the trust itself). If an attorney is involved, their time spent is significantly lower than what navigating the court system would require.
For your parents, there’s greater peace of mind in knowing that the vast majority of the assets and wealth they worked hard to build will go directly to you.
3: Everything is private.
When a will undergoes probate, it also becomes public record. Have you ever wondered how it is that we know who inherited from Chadwick Boseman, Shelley Duvall and Bob Saget? 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. For you, this provides protection from a flurry of donation solicitations or harassment from bad actors looking to cash in on your inheritance through scams or high-risk investments. Your inheritance remains off the public record and out of the public eye.
4: Your inheritance goes where it’s intended – not into 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 you. 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. Your parents worked hard to leave a legacy behind. A living trust will give them certainty, knowing their full wishes will be honored.
5: 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.
A will, on the other hand, could leave the estate to the surviving step-parent, who may or may not make sure you are provided for. That surviving spouse could simply redo their estate plan and leave everything to their side of the family, effectively disinheriting you and your side.
This is why it’s extremely important to talk with your parents and make sure they fully understand how their current estate plan could result in unintended consequences if they rely on a simple will.
A living trust provides flexibility to meet the wishes of both spouses and ultimately both sides of the family.
Talk to your parents, then talk to us.
Wills & Wellness can advise you and your parents on their existing plan and make the necessary changes to ensure that it fully meets their wishes and expectations. They’ll have the comfort of knowing their estate will be handled on their terms, and you’ll have the comfort of knowing you’ll avoid probate hassles when the time comes.