Is a trust better than a will?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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LearningAlot
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Joined: Thu Aug 02, 2018 8:43 am

Is a trust better than a will?

Post by LearningAlot »

I am in the process of updating my estate plan, recently retired and current plan needs to be tweaked. Always been single, no
spouse or children.

My assets are in the following buckets:
Vanguard traditional IRA & 401K: Primary & contingent beneficiaries updated, good to go
Life insurance policies: Primary & contingent beneficiaries updated, good to go

Now, how to handle everything else, which is a house (debt free) and a Charles Schwab Taxable account, with small amounts in
a bank account and household assets and my car.

I am aware of some options( will & probate, trust, and POD) and need to determine which one, or combination, makes most sense.
Would appreciate any advice, tips/traps, pros and cons, from those who have been through this.

I will be working with any attorney, but would like to acquire more knowledge, before we meet.

Thanks in advance!
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RickBoglehead
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Re: Is a trust better than a will?

Post by RickBoglehead »

It depends. Size of estate, who is getting the assets, state laws. Some states allow you to leave your home to heirs with a type of deed called Ladybird. That's why you hire a lawyer.
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Luckywon
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Re: Is a trust better than a will?

Post by Luckywon »

Who is in your picture in the event of your incapacity? Do you have family/friends you would feel comfortable naming as successor trustees and/or power of attorney?
Last edited by Luckywon on Tue Apr 30, 2019 9:21 am, edited 1 time in total.
stan1
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Joined: Mon Oct 08, 2007 4:35 pm

Re: Is a trust better than a will?

Post by stan1 »

LearningAlot wrote: Tue Apr 30, 2019 6:10 am I am in the process of updating my estate plan, recently retired and current plan needs to be tweaked. Always been single, no
spouse or children.

My assets are in the following buckets:
Vanguard traditional IRA & 401K: Primary & contingent beneficiaries updated, good to go
Life insurance policies: Primary & contingent beneficiaries updated, good to go

Now, how to handle everything else, which is a house (debt free) and a Charles Schwab Taxable account, with small amounts in
a bank account and household assets and my car.

I am aware of some options( will & probate, trust, and POD) and need to determine which one, or combination, makes most sense.
Would appreciate any advice, tips/traps, pros and cons, from those who have been through this.
1. Who do you want to be a power of attorney if you are not able to make financial or health decisions yourself? Since you aren't married that's an important part of your estate plan. It may be your executor or someone else. Are your heirs all responsible adults? If any are minors or there are reasons you wouldn't want them to have immediate access to their bequest you'll need a more complex approach.
2. It doesn't sound like you need life insurance (and maybe never did). Is there a cash value and are you still paying premiums?
3. POD for the taxable account and bank account [fine for most people especially if the amounts aren't in the millions]
4. House: In my state a house needs to be in a trust to avoid the time and expense of probate. It makes things easier on your heirs.
5. Trusts have a pour over will that takes items like your household goods and car and moves them into your trust at the time of death. Probate laws are at the state level. The dollar amount for a simplified probate in my state is low.
bsteiner
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Location: NYC/NJ/FL

Re: Is a trust better than a will?

Post by bsteiner »

It depends on what state you're in. Probating a Will is easy in most states but difficult in some states.

Depending on the state, it may also depend on whether you know who your closest relatives (the persons who would inherit your estate if you didn't have a Will) are and where they are.
Gill
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Re: Is a trust better than a will?

Post by Gill »

bsteiner wrote: Tue Apr 30, 2019 8:14 am It depends on what state you're in. Probating a Will is easy in most states but difficult in some states.

Depending on the state, it may also depend on whether you know who your closest relatives (the persons who would inherit your estate if you didn't have a Will) are and where they are.
Bruce, what is your feeling about the advantage of a trust to protect the grantor if becoming unable to manage his affairs versus simply having a durable power of attorney? I don’t believe I’ve seen you mention the lifetime advantages of a RLT.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
bsteiner
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Re: Is a trust better than a will?

Post by bsteiner »

Gill wrote: Tue Apr 30, 2019 8:21 am
bsteiner wrote: Tue Apr 30, 2019 8:14 am It depends on what state you're in. Probating a Will is easy in most states but difficult in some states.

Depending on the state, it may also depend on whether you know who your closest relatives (the persons who would inherit your estate if you didn't have a Will) are and where they are.
Bruce, what is your feeling about the advantage of a trust to protect the grantor if becoming unable to manage his affairs versus simply having a durable power of attorney? I don’t believe I’ve seen you mention the lifetime advantages of a RLT.
Gill
Powers of attorney generally work pretty well, despite the anecdotal stories to the contrary.

However, if you want a bank or trust company as your agent, they usually insist on being a trustee of a trust rather than an agent under a power of attorney. That's not an issue for most people, but it's more likely to be the case for someone like the initial poster who doesn't have a spouse or issue.

Also, if the person you pick signs the trust agreement as a trustee (a current trustee, not merely a named or designated successor trustee), you know that he/she will act (subject to his/her resigning), whereas if you name the person as an agent under a power of attorney he/she might not be willing to act when the time comes that he/she is needed.
michaeljc70
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Re: Is a trust better than a will?

Post by michaeljc70 »

bsteiner wrote: Tue Apr 30, 2019 8:14 am It depends on what state you're in. Probating a Will is easy in most states but difficult in some states.
This. In my state probate on estates that are not tiny (>$100k) can be expensive. Avoiding probate can save a lot of time and money.

Since I am not that old (40s) and have no kids, rather than setting up a trust at this point I have designated beneficiaries and POD to cover things until I get around to setting up a trust.
lazydavid
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Re: Is a trust better than a will?

Post by lazydavid »

My lawyer recommended--and we proceeded with--a Trust containing all assets that were relatively straightforward to put into it (the house being the big one), along with a pourover will to handle everything else. Bank/brokerage accounts are all handled via beneficiaries configured at each institution.
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