Living Trust vs Will
June 21, 2011 8:40 PM Subscribe
Living trust versus a will for a married couple with minor children and moderate assets?
My wife and I met with a lawyer today to establish a will and power of attorney/advanced directive for both of us. While there, he suggested that we establish a living trust in addition to the will. Based on his explanation of the benefits and drawbacks, I'm thinking I agree that a living trust is the way to go. But, adding the living trust would cost an additional $650, so I want to make sure I'm making the right choice. (We would be in charge of making sure the trust gets funded properly.)
Our details: My wife and I are ~30-year-olds expecting our first child in a few months with hopefully more to come in the future. Our current net worth stands at slightly over $500,000 and will hopefully continue to grow over time. Our assets are a mixture of bank and investment accounts (including 401ks and IRAs). We live in Illinois and own a home. I have an insurance policy through my work. We plan to name one of my siblings as both the guardian of our children and executor of the estate.
Benefits of a living trust (as I understand them):
Avoiding probate.
Easier management of assets for our minor children in the event we both die (such as not having to establish a testamentary trust via probate.)
Easier ability to manage assets in the event of our disability.
Provides more privacy.
Drawbacks of the living trust:
Higher upfront cost.
Hassle of moving our asset into the trust.
So am I missing anything?
My wife and I met with a lawyer today to establish a will and power of attorney/advanced directive for both of us. While there, he suggested that we establish a living trust in addition to the will. Based on his explanation of the benefits and drawbacks, I'm thinking I agree that a living trust is the way to go. But, adding the living trust would cost an additional $650, so I want to make sure I'm making the right choice. (We would be in charge of making sure the trust gets funded properly.)
Our details: My wife and I are ~30-year-olds expecting our first child in a few months with hopefully more to come in the future. Our current net worth stands at slightly over $500,000 and will hopefully continue to grow over time. Our assets are a mixture of bank and investment accounts (including 401ks and IRAs). We live in Illinois and own a home. I have an insurance policy through my work. We plan to name one of my siblings as both the guardian of our children and executor of the estate.
Benefits of a living trust (as I understand them):
Avoiding probate.
Easier management of assets for our minor children in the event we both die (such as not having to establish a testamentary trust via probate.)
Easier ability to manage assets in the event of our disability.
Provides more privacy.
Drawbacks of the living trust:
Higher upfront cost.
Hassle of moving our asset into the trust.
So am I missing anything?
Talking to someone who has administered an estate through the probate process is probably the best way to understand how drawn-out and painful it can be.
What do you think an hour of your sibling's time doing emotionally difficult tasks is worth? Multiply that by the number of extra hours they'd spend shepherding the estate through probate. Is it more than $650?
Many people with trusts wind up with a bit of probate work because the trusts are improperly or incompletely funded.
IANYL.
posted by QuantumMeruit at 9:28 PM on June 21, 2011 [1 favorite]
What do you think an hour of your sibling's time doing emotionally difficult tasks is worth? Multiply that by the number of extra hours they'd spend shepherding the estate through probate. Is it more than $650?
Many people with trusts wind up with a bit of probate work because the trusts are improperly or incompletely funded.
IANYL.
posted by QuantumMeruit at 9:28 PM on June 21, 2011 [1 favorite]
Full disclosure: I live in California and work in local government as a technician in a recorder's office. I am not a lawyer, and I have no basis for making legal recommendations.
That said: create a trust. It's expensive if you go through the attorney, but he or she should (ostensibly) see to it that all applicable assets are properly transferred into the trust. If $650 seems exorbitant, there is family law software available for a lesser price, but going that route means that you will need to effect the involved transfers yourself. I don't know Illinois law regarding recording requirements, and I don't know what would be required in order to establish the transfer of your assets into the trust, but I'd imagine that such answers are readily discoverable through the agencies charged with maintaining said assets. A trust may cost more to prepare, but in the long run saves time and is overall cheaper than a will.
Your assessment of the situation is solid and well-reasoned. The course of action you pursue depends on your comfort with determining and tailoring paperwork to various government agency requirements. Quite simply, anything beats involving the courts and requiring an order to distribute your assets. Given that you've posted this to the green, you're intelligent and inquisitive enough to indicate a level of care sufficient to do this on your own. I'd say try it on your own first, and pony up the $650 if you fail in your efforts and can't figure out why.
posted by Graygorey at 11:38 PM on June 21, 2011
That said: create a trust. It's expensive if you go through the attorney, but he or she should (ostensibly) see to it that all applicable assets are properly transferred into the trust. If $650 seems exorbitant, there is family law software available for a lesser price, but going that route means that you will need to effect the involved transfers yourself. I don't know Illinois law regarding recording requirements, and I don't know what would be required in order to establish the transfer of your assets into the trust, but I'd imagine that such answers are readily discoverable through the agencies charged with maintaining said assets. A trust may cost more to prepare, but in the long run saves time and is overall cheaper than a will.
Your assessment of the situation is solid and well-reasoned. The course of action you pursue depends on your comfort with determining and tailoring paperwork to various government agency requirements. Quite simply, anything beats involving the courts and requiring an order to distribute your assets. Given that you've posted this to the green, you're intelligent and inquisitive enough to indicate a level of care sufficient to do this on your own. I'd say try it on your own first, and pony up the $650 if you fail in your efforts and can't figure out why.
posted by Graygorey at 11:38 PM on June 21, 2011
Response by poster: Thanks, guys! I appreciate the feedback. It sounds like a trust is the way to go.
posted by John Frum at 12:08 PM on June 22, 2011
posted by John Frum at 12:08 PM on June 22, 2011
This thread is closed to new comments.
There was about $500,000 in assets when my wife's grandmother passed away, all of it in a living trust that specified where the assets went. Because it wasn't a "will", there was no probate involved, and because it was in a trust, there were no "claims", the funds belonged to the trust and would be distributed as it specified as per the judgement of the trustee.
When my wife's grandmother passed away, there was no contesting the distribution of funds, the trust made it clear what happened, where monies went.
The upfront cost will be will worth it in the long run. The key is naming a trustee that you have absolute faith in.
posted by tomswift at 9:22 PM on June 21, 2011