Trusts, wills and probate court are tricky topics that often don’t come up until a family is at its most fragile: following the loss of a loved one. Getting a sense of the basics of these financial terms can help prevent familial discord.
Q: What exactly is a trust, and why should I have one?
A: A trust is a document that you (as trustees of the trust) organize, usually with the help of a trust attorney, who outlines what you want done with assets contained in the trust for its beneficiaries.
Typically, you are the beneficiaries of the trust and you also name the beneficiaries of the trust after you pass. Absent a trust document, when someone passes, the estate may need to go through probate court, which can be a slow, public and expensive process.
Having a trust document can be very helpful to your surviving family. A good trust combined with a will very clearly spells out what your wishes are for most of your worldly possessions. All too often, I see the surviving children fighting over the family’s assets. If your wishes are not clearly spelled out, it can (and very often does) tear a family apart. The clearer you can make your wishes known, the easier it will be on everyone.
Q: What goes into my trust?
A: Usually large-ticket items that don’t have beneficiaries built into them go into a trust. Houses, condos, land and investment properties are usually the big ones. Bank or savings accounts are common. Large-value items like vehicles also may be included. Life insurance policies, annuities and other financial vehicles with beneficiaries do not need to be included.
Q: How is a trust different from a will?
A: A trust goes into effect immediately after it is created; a will only goes into effect when the person named passes away. A will only covers property held in the name of the deceased, whereas a trust may contain property held in the name of the trust.
After a death, a will goes through probate court, which oversees the administration of the will. Property held in a trust does not go through probate court. Wills allow you to name guardians for your children and set aside plans for funeral arrangements. Most people develop both a trust and a will.
Q: How much does a trust cost, and how long does it take to prepare?
A: The trust document itself does not take that long to prepare; what takes time is making all the decisions that will be contained in the trust. Typically, you arrange an initial meeting with your trust attorney, who will walk you through all the questions that need answering. Follow-up meetings will be scheduled to actually develop the document for approval. A few weeks to a few months is typical.
Depending on how complex the trust, will or estate is, plan on a few thousand dollars.
If you have questions about what is best for you, contact a trust attorney for specifics. Email me if you need a few referrals.