Do I need a Will or a Trust?
Happy holidays, dear readers. It has been several months since I have posted anything, which is further evidence that it has been a busy second half of the year. Approximately half of my practice continues to be meeting with folks to plan for what will, or what would, happen if they were to pass away. This is a heavy subject, and when appropriate I try to keep it as light as possible. It is also one of my favorite areas of practice, because I get to meet so many different kinds of people in all different walks and phases of life.
One of the standard responses I get when I say I practice estate planning is "well, I don't have an estate." I understand the tone of the response, and rest assured, I'm not sure I have an "estate" either, in that context. But the fact is, if you have two nickels to rub together, you have an estate.
There are default rules in the Kansas statutes that provide for what will happen to your estate (all of your stuff and doodads) should you pass away. Sometimes, the default rules fit the circumstance perfectly. Most of the time, they do not. Having served dozens of clients over the past several years, I can verify that, so far, I have yet to run into two situations that are exactly alike. Even people who have similar values have different situations and families.
Just to make sure, let's take a look at the default statutory rules. First, the court will choose your executor (the person who represents your estate), and it may or may not be who you would choose in your will. Second, that person will have to post bond, which costs money and can be waived in a will. Third, minor children (under 18) without surviving natural guardians will have their assets managed through a guardianship or conservatorship until they reach 18. Have you ever been 18? I have, and I'm not sure I was ready for that much responsibility. This age can be extended through a trust or a will creating a testamentary trust. Fourth, if you are divorced, the possibility exists that the ex-spouse will manage your property for your children. Sound ideal? Well, maybe, but then again, usually not. Fifth, your estate will go through the probate courts, and this will cost about $5,000 (hopefully) and tie up assets for at least 7 months, and possibly much longer. Probate can be avoided completely or at least minimized through good planning. And sixth (last but not least), a well planned estate can minimize the risk of litigation by family members. This actually happens all the time, and it causes grief. Unfortunately, the risk of litigation can never be completely removed, but through good planning the risk can be controlled to a certain extent. As a final point, which deserves its own post in the future, if you have a child who is receiving social security disability benefits or is on Medicaid, a supplemental needs trust (aka special needs trust) is very important to avoid their losing benefits or funds in the future due to an inheritance. Ah, and of course Medicaid planning if a care home is used..., well you see, there are a lot of different considerations.
Whether a plan based on a will or a trust is right for you is difficult to predict before we sit down and chat for an hour. Generally, I default to a will based plan for younger folks, because their risk of dying is lower and the lower cost plan fits their budget. Once a person hits about 50 years old, I start leaning towards the trust. The trust has some powerful tools that can simplify the process and reduce the risk of having to go through probate. The slightly increased cost of the trust is easily outweighed by the cost of even a standard probate proceeding. But again, everyone's situation is different, and plenty of younger folks opt for the trust now, and several older folks opt to use a will based plan, which is perfectly fine in some situations (e.g., you know exactly what you have, you have few accounts, they are all designated pay on death, and you do not expect to receive an inheritance or other amount of money in the future).
Apart from cost, estate planning is easy to put off for at least two other reasons. First, you have to think about this stuff. I get it, and that's why we keep things as light as possible. Second, time is a scarce and precious resource. I have good news for you in this regard. Most estates can be resolved with about 2-3 hours of client time. Typically, I meet with the client for about 60-90 minutes, then I draft the documents over the next few weeks, email drafts back and forth with the client, and then have a signing and question answering session that usually takes another 60 minutes. I do understand that it is one of those things that is easy to put off, and I'm here for you when you are ready. But you should understand that I will be doing the heavy lifting, so try not to put it off too long.
I know that I have not hit all of the reasons that estate planning is important, but there is something to be said for avoiding a tl;dr (too long; didn't read). Hopefully I have hit enough of the points so that it should become abundantly clear that the advice of a good attorney is irreplaceable in this area. Happy holidays, and when the dust settles in January, give me a call so we can finally get this checked off the "to do" list.
Lane