how important is a will or living trust?
Our financial planner advised us to create a will to designate a guardian for a child and a living trust for our home. I've contacted a couple lawyers and this is not cheap - about $2-3K and also includes arranging power of attorney and health care directive. I got some advice from a couple lawyers in my family on the East coast and they said these fees sound too high and they questioned whether you really need anything beyond a will. How much of this legal planning is really necessary to protect your family?
6 Answers
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The answer really depends on your situation and answers to the following types of questions. What do you own? What is the total value of your estate? How are these assets titled? Where do you want these assets to go upon your death? How do you want the assets to be distributed? Do you want the assets held in trust for your children until they are 25 or 30?
I could certainly describe a situation in which a will or trust would not be required or that helpful. But for most of us, a will and / or a trust is an important planning tool that can add value. A proper estate plan can allow our heirs to save money upon our death by heading off disputes, avoiding the court probate process and minimizing taxes. Although probate is generally not required when your assets go to a surviving spouse, this isn't always the best plan. For instance, if I have children from a previous marriage, I might prefer to leave these assets to my spouse in trust. In doing this, I can let my spouse have certain rights during her life but then I can ensure the assets eventually go to my children after the death of my spouse. Even if I don't care about controlling the assets after my death, based on past Federal Estate Tax rules, it would generally be better to keep my property out of my spouse's name by leaving the assets to my spouse in trust (often referred to as a Bypass Trust or Decedents Trust). Through this type of planning, I'm assured my assets will not increase the size of my spouse's estate and cause unnecessary estate tax yet she can still have access to them. The Federal Estate tax system, up until this year, 2010, has allowed each person to pass a certain amount of property tax free. Absent planning, a married couple would generally end up with only one exemption amount, the exemption amount of the last spouse to die. This Bypass Trust, when properly implemented, can ensure that both exemption amounts will be utilized, which can actually save millions in taxes.
Even when millions are not at stake, by going through the process of creating an estate plan with an experienced estate planning attorney, a person will be better able to identify their unique issues and make these issues are properly addressed. Although the cost to have a professional estate plan can cost about $1,500 for a single person and $2,100 for a married couple, it should more than pay for itself when the plan is needed. Perhaps in this process you will find a trusted attorney or law firm that can be there for your children and or your spouse when legal assistance is needed. The end result of creating an estate plan should not just be an estate plan binder full of various documents but rather a professional relationship that you can count on.
Stuart G. Schmidt
Attorney
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My place of work has a legal plan benefit, which was pretty reasonable (like $200 if I recall correctly) and one of the benefits was having a trust drawn up. I did that through a local lawyer who was good. He did try to upsell us a bit but I didn't see any reason to go beyond the basic one offered (which would normally cost about $1k). Is it possible that you have such a benefit?
I'm no lawyer but my understanding is that if you have a home with equity, than a living trust is useful to save taxes upon your passing.
And a will is absolutely necessary because if you and your partner die intestate, the state gets a huge portion of your estate.
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Check out Legal Zoom or NOLO. They've got do it yourself wills. After answering a bunch of questions, which include choosing guardians for your children, you print it out and have 2 friends (who are not named anywhere in the document as recipients of any kind) sign it as witnesses. I don't remember the exact cost but my husband found some online coupons that we were able to apply.
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That cost does sound a little high.....I think we spent 2K on ours. In terms of how useful it is, it saves you from having to go to probate to settle who gets what, in addition to cost savings. It can fully define what happens in different situations and can cover things like how money should be paid out to your kids should both parents die (we did some funky bonus payout for graduating college, etc).
Check out the wikipedia article for a little more info:
http://en.wikipedia.org/wiki/Living_trust
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My in-laws are both lawyers from the east coast and never had anything more than a will but the laws are different and more complex in CA. When they moved here, they set up a living trust and the associated documents (similar to what we ourselves have). This is not a particular lawyer trying to upsell you but a side effect of poor legistlation. Welcome to CA, this is one of the downsides.
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Slight tangent here, but on this topic. My parents have a living trust for me (before I was married) and then added my kids (after I was married) - is it customary to have my parents include my spouse's name on the living trust (right now if something happens to me, the executor is currently my god-sister). I'm Chinese and my husband is Caucasian, so I'm wondering if there is a cultural norm. Thanks!
