Is it better to leave my property by will or living trust?
I own my home, have several CDs, checking accounts, and savings -- also some annuities, and several stocks. The only insurance is my husband's, which isn't that much. I have a small IRA account; my husband's is a bit larger. Which is better for me: a will or a trust?
The first step for you to take is to look closely at the documents specifying how the title is held to the property you mentioned. Generally, property that you own with another person -- in joint tenancy, tenancy by the entirety, or community property with right of survivorship -- passes directly to the other owner or owners at your death, and you needn't provide for its passing in either a will or trust.
The same is true with property that has a designated beneficiary to take the property at death -- as is often the case with insurance, for example. That, too, will pass automatically to the named taker, outside a will or trust.
You can make either a will or trust or both to designate the person or organizations you want to take any remaining property. But you should be guided by a number of concerns.
A living trust, which passes property free from probate, rather than a will may not be a good choice if you:
- Expect to owe estate taxes when either you or both you and your spouse die -- which is most likely if you own property worth $2 million or more.
- Want to have some control over what happens to your property after your death, such as specifying that a house goes first to a relative, then to your children.
- Have any child who has a special need or disability, and you want to provide management for property that goes to him or her.
- Have children from one or more prior marriages who are likely to conflict with a current spouse.
A will alone may do, however, if you:
- Have set up most property ownership in joint tenancy or pay-on-death transfers.
- Own very little valuable property.
- Don't know someone you trust to oversee your property.
- Are involved in divorce proceedings, as some state laws bar creating such trusts once a divorce is filed.
I tell clients in my 'Emergency Estate Planning System' that a Will is a guaranteed ticket to probate court. I had a client (66 yrs old and Mom had a Will - the evil sister stole more than $476,899 from the estate )
The Trust is the only vehicle to bypass probate and have control over who your assets will be distributed to. Also, if you have younger beneficiary's, (ie. children) I ask my client's if it's ok to that 50% of that child's inheritance can go to the inlaw? Or worse yet, 100% to a creditor!! Yikes, don't leave this to chance.
Also, what many practicitioner's fail to clarify to clients is that you are 8 x more likely to become disabled than you are to die at work. The Trust has incapacity provisions to control your assets if you are disabled. The Will does not, the only way to do this is to go to probate court (and hire an attorney, pay thousands of dollars plus court costs)
Plus, NEVER place your IRA/Retirement Plan into your standard trust (if the plan is large enough) you should have an IRA Trust created for special asset protection, and stretch out options based on IRS guidelines.
Lastly, a Trust can not hold annuity's. they are created and transferred with whoever the beneficiary is (ie. usually spouses or kids), they are great financial tool with their 'guarantee's' but no asset protection when you die.
To your Life and Wealth,
Joseph J. Dadich, CPA, Esq. LLM FREE REPORT ' 15 Critical Mistakes your estate planning attorney makes and how to avoid them'tm email@example.com