I was having a discussion with the folks the other day, when the subject of wills came up. I have heard that Trusts are better because they aren’t as easily disbuted and lawyers do not have to get involved (or something like that), when I realized I do not know which is better or much about either.
So can someone help clarify the two?
Any legal dopers out there??
Well, I only just took the bar and I’m not a lawyer yet, but I’ll give it a stab until one of the more experienced legal dopers comes along. I should stress that this is not legal advice and shouldn’t be relied on in any way, may be partially or wholly inaccurate, no attorney-client relationship is established here, and if this is for any real life situation you should instead consult a lawyer licensed to practice in your state.
A will is an instrument to dispose of somebody’s assets in accordance with their wishes at the time of their death. A trust, on the other hand, is a situation where a trustee holds “legal title” to specific property under a fiduciary duty to manage, invest, safeguard, and administer the trust assets and income for the benefit of designated beneficiaries, who hold “equitable title” (note to legal dopers: yes, I copied that straight out of barbri). That’s a little hard to follow, so let me give an example:
Let’s say you want to give your kid the family farm. However, you don’t want to give it to him outright because you’re afraid he’s not mature enough to run it. Instead, you deliver title to the farm to a “trustee” under a trust relationship with certain terms. The kid is the beneficiary of the trust, and gets all the benefits the trust property (like income), while the trustee bears all the hassles of the trust property (like running the farm, taking care of the property, etc). If you want the kid to eventually recieve the property outright, you can include provisions for that, like say the trust terminates on his 30th birthday and title passes to the kid. This is just one example; there are many types of trusts and they tend to be very flexible.
Sometimes you’ll hear someone say that transferring property by trust is preferable to willing it to someone for whatever reason, usually because the title to the property “transfers outside of probate” and isn’t taxed as much, or because it does away with the need to have a lawyer admit the will to probate and undergo lengthy court proceedings. Here in Texas I don’t think this is too much of an issue, because we have very flexible laws allowing for “independent administration” of wills that keeps court involvement to a minimum.
Ultimately, whether to transfer property by will or by trust depends on a lot of different factors. The biggest, probably, is the law of your state. You also have to consider what type of property you are transferring, how much it’s worth, who it’s going to, and what purposes you are trying to accomplish by the transfer. Wills and trusts (or a combination of both) can be personalized to a great degree by the testator/settlor (person making the will/trust) for many different purposes.
If I lapsed into legalese at any point, let me know and I’ll try to translate into english.
OK, I’m not a lawyer, never studied law, and rarely watch Law and Order. However, last month, I attended a retirement planning seminar, and there was a chapter on estate planning. It didn’t go into great detail, but it gave some quick and dirty explanations which I found helpful.
Because wills pass thru probate, they have these advantages:
[ul]1. Will proven by probate
2. Allows orderly transfer of title/assets
3. Implements testators objectives (I have no idea what this means)
4. Protects creditors.[/ul]
Disadvantages:[ul]1. Can be costly and complex
2. Delay
3. Publicity
4. Ancillary probate (??)[/ul]
Trusts were given as an alternative to probate, so you could:[ul]Avoid probate
Avoid or reduce taxes
Manage assets for grantor/beneficiary who may become incapacitated
Manage assets for beneficiaries who are minors or financially unsophisticated
Charitable distributions[/ul]Further, it says that Revocable Living Trusts are the most common, avoiding probate, publicity, expense, and delay, includes assets in the estate, and involves no gift tax because it’s not a completed gift.
Some if this seems pretty clear, some confuses me. However, I thought it was a pretty good starting point. The woman who ran the seminar also highly recommended consulting an estate planner or a lawyer who specializes in estate planning.
Hope this helped.
I suggest getting one of the books on this from Nolo.com they are pretty easy to read.
Stuff from PBS (may or may not be accurate, so this isnt advice):
wills pass thru probate= 2 years
probate costs $10,000 ? or more-you must pay this or they just sell the property to pay it.
Trusts:
transfer takes two weeks
lawyer charges to set it up=$5,500
Anyway, get a book from Nolo or your library might have some of their books, ours does.
There is also something new I saw, called a Reverse Mortgage, thats for people 62 or older who own the home & are living in it, the bank pays them money instead of them paying the bank money. Interesting concept.
I am a lawyer but I’m not giving anyone any specific legal advice. Everyone should have a will, as a safety net to govern the passing on death of items that are not otherwised transferred. Trusts are only really needed if a person has enough money that he or she would have to pay estate taxes without a trust, other than that, nowadays in most US states one can title his or her properties - bank accounts, securities accounts, pensions, IRAs and real estate - so that they transfer on death or on payable on death without either a will or trust.
Well there is another issue that I didn’t mention. My brother-who has been estranged from the family for 4 years is the type of guy who would challenge a will and would try every trick in the book to get something. He’s an evil sort and my parents are concerned because they don’t want to leave him anything and they don’t want the possibility of a long court case between the two of us.
Meatros, given the facts you’ve described, you should speak to a lawyer, rather than trying to get info for free from this board.