A financial planner has recommended that we put our assets into a <mumble> Trust to avoid the hassle of probate.
My spouse and my wills are pretty simple: The other gets everything from the one that dies first. If we both die, it gets distributed among other relatives. (We have no children, and don’t really care if it takes some time to distribute after we’re both dead.)
My question is how much trouble IS probate for a situation like ours? How costly / time consuming / irritating is it?
Conversely, how much of a hassle is a Trust? It seems like we’d have to put our property and other assets in the Trust, then every time we wanted to do something major, we’d have the hassle of dealing with the Trust. (I really know nothing about Trusts. How much hassle is it?)
Is having most of our accounts and deeds in both of our names enough?
Where do you live? In California probate is a real pain, and anyone with any money has a trust. When we lived in NJ no one seemed to have one. As far as the pain, except for visiting the lawyer to set it up, not a pain at all. You put your house and your car into it, and you make it the beneficiary of insurance etc. Aside from having to remember the name, no problem.
I’m trustee for my father’s trust, both before and after he passed away. It stays in existence until my step-mother dies. It is very small. I don’t even have to file a tax return for it, but I do anyway.
I suspect bigger trusts are more complicated, but also better to have.
I’m not sure what the difference is between “FBO” and joint ownership. Our property deed is in both of our names. Our bank account is in both of our names, as well as a lot of our investments accounts. She’s also the beneficiary on my IRA’s and 401k’s.
Probate is a big pain. My dad passed away at the end of last year; he had a will (a very old one), and no trust. Even as the sole heir, it’s been a pain for me to deal with all the legal stuff connected with it, and my dad’s estate is by no means large. I’m going to end up having to pay the lawyer around $12-13,000 out of the inheritance money and wait around nine months to a year before the probate will be over.
So yeah, I’d suggest getting a trust, if for no other reason than to save your heirs from having to pay big legal fees (and this is especially true if there are multiple heirs).
In California, probate is a huge pain. My parents felt the same way you do, everything would go to my sister and me 50/50. They didn’t even bother with a will. Well, in California, even if there is a will, if the estate is worth more than $100,000, probate is mandatory unless there’s a trust. In California, if you own a house, it’s worth over $100K even if it’s a dump in the middle of nowhere.
My sister and I coughed up about $20000 in legal fees and had to sit around for a year for every thing to clear.
So unless you hate your potential heirs, set up a trust, or hope you don’t die before you get to Arizona.
For a general person with a small estate ( below $250K), a trust would not be worth it. My mother’s estate was her house, retirement savings, and life insurance. Probate was a snap, and all the hard work (waiting for the claims) occured within the first 60 days.
Our only sticky point was we weren’t diligent on closing out the probate, and had a mild threat of contempt of court to push along closure.
That said, a trust makes sense if you have a farm or business, or a lot of assets to consider.
Someone mentioned to me today, though, that passing your estate to your spouse after you die does not go through probate (in California). Does anyone know if this is true?
Yes, this is true. California is a community property state. When my mom passed away two years ago, my dad got everything with no probate. It’s only when you move outside the spousal relationship and there’s no trust (as far as I know–I’m a little more fuzzy on that aspect) that probate becomes an issue.
Is it possible the financial planner was thinking of issues aside from or in addition to the hassle of probate? For example, should you or your wife require long-term nursing home care, it is possible to shield assets from having to be exhausted by that care before the need for care has concluded.
My mother and father put all their assets in a trust quite some time ago - which turned out to be sound planning, since my farther has since been diagnosed with Alzheimer’s and if all of their collective retirement assets weren’t part of the trust already, the cost of the long-term nursing home care he will eventually require is several orders of magnitude larger than my mother would be able to afford. This would mean that, for instance, she would be required to, in essence, liquidate her retirement assets (including, potentially, selling her home) in order to pay for the care that my dad will one day require. As it stands, when the time comes, my dad’s retirement income (the direct payments by his pension system) will be essentially entirely re-routed to cover the payment of the costs, but all of their other assets (including their tangible assets) will be protected and my mother’s retirement income will also be protected. My dad’s retirement income alone will amount to only a smallish portion of the costs of long-term in-patient Alzheimer’s care. About 30% of it, the last time my mother checked into it. The remainder will be picked up by his health insurance (including, probably, Medicare).
In other words, the trust serves to protect my mom’s assets, income, and retirement picture in the event my dad’s care requirements reach a point (and they will) that very expensive and permanent professional care-giving plan has to be implemented. It makes sure that my mother won’t be rendered effectively destitute by my dad’s medical needs. (Not that my siblings and I would let that happen, but still - it makes my mother feel better that she doesn’t have to have that worry in addition).
I’m editing to add that the assets I’m thinking of include such things as IRAs, 401(k) plan assets, directly-owned stocks/bonds/annuities, real estate and the like. A certain amount of real estate would be protected anyway, but if your real estate is worth more than whatever the bankruptcy exemption is in your state (which is the most-common statutory scheme for this sort of situation), then you could be required to sell the house and only retain an amount from the sale that is equal to the exemption. Any assets that wouldn’t be exempt from a bankruptcy can generally be seized (for lack of a better term) to cover the costs. Including any JOINT assets if only one spouse requires care.
Exactly why everyone has a trust.
The other advantage is that the trust continues after your death, so you could put instructions in it you can’t put in a will. For instance our kids were still relatively small when we did our trust, so we had instructions on how much they got at which ages.
Let me add just one thing- after you put your assets in the trust, DO NOT lose or misplace the original trust documents. That is what happened to my in-laws. I discovered this after MIL died but before FIL died a little over a year later. The attorney who had originally drawn up the trust had not kept a copy of the original documents, and in fact was no longer practicing. We did have a copy of the latest amendments to the trust, which essentially replaced the original trust instructions, so our new attorney was able to go to court and get the trust re-established. What a mess, and we spent a lot in attorney’s fees. Please, give a copy to the person you choose as successor trustee, put a copy in your safe deposit box or home safe, don’t just trust that your attorney will have a copy in case you lose yours.
I’ve been pondering a will, since I don’t have any kids, but I have some specific bequests, primarily that one niece gets my paid-off farm in return for her promise to look after my animals for the rest of their lives. But that doesn’t mean she gets everything. I want her to get the farm and enough cash to cover food and routine vet /farrier care for the animals. The rest of the monetary assets would more or less be divided up amongst my other nieces and nephews.
Everyone knows the niece is supposed to get the farm, but if I die intestate, who’s to say that she actually does get it? Mostly I want to make sure my animals are taken care of.
I’m in Tennessee, and I suppose I ought to find a lawyer to draw up the documents.
I knew a woman who died intestate while she was in the middle of a divorce. Her husband was entitled to her estate because the divorce wasn’t final yet. I know she wouldn’t have wanted that. So the lesson is, drawing up a will and keeping it current is absolutely essential. You can always give part or all of your estate to charity. Better that you choose what happens instead of letting the state decide for you.
