While shopping for work supplies recently at Office Depot, I noticed that the latest version of Quicken WillMaker Plus 2019 with a digital Living Trust (the terms Living Trust and Revocable Trust are often used interchangeably but refer to same instrument) included for free was only $78.99! It made me question why I chose to go to law school in the first place when the obvious replacement for a portion of the work that I do on a daily basis can be done from the convenience of your own home at a fraction of what most of us attorneys charge for a comprehensive plan. But is purchasing “do it yourself” software to entrust your family’s financial wellbeing really such a wise decision?
Let’s start by answering a level setting question; What’s the difference between a Will and a Living Trust? A Will is a legal document that allows you to specify how your assets and personal belongings will be distributed upon your death. The “upon your death” aspect is important in that a Will does not become active until you pass away. The reason that is important is because there are no legal protections in place should you become incapacitated, in any way, to make financial decisions. The person that would make the financial decisions on your behalf is a court appointed conservator.
What happens to the administration of your Will when you pass away? The probate court within the county that you reside in oversees the disbursement of your assets according to the provisions laid out within your Will while also ensuring that your debts have been paid off. A Will is taken through the probate process in that it’s overseen by the appropriate court during a very public process. If privacy for you and your family is a concern, a Will may not be the way to solely go. Finally, another note of concern is that the administration of a Will is also expensive in that your executor and the probate attorney will get a percentage of your assets for the administration of it.
A Living Trust is the foundation of your estate plan. It allows you to keep your instructions and financial affairs private and ensures that your instructions are carried out efficiently without unnecessary judicial involvement. It allows you to transfer assets such as your property into the trust while you are alive which can have tax benefits for your surviving designees. A Living Trust is sometimes described as being similar to a purse; you own the purse and all of the belongings within it so the purse is really just the vessel to hold all of your specified belongings in one safe place. While you’re alive, you can add and remove your items from that purse as much as you’d like. The purse only gets sealed up upon your death.
For the best of both worlds, a complete estate plan will contain both a Living Trust and a Will so anything that you don’t transfer directly to your trust during the course of your life will be transferred into it upon your death. It also includes a Power of Attorney to enable someone that you assign authority to (known as your “agent”) to make financial decisions for matters outside of your trust on your behalf if you become physically unable to do so yourself (filing taxes, dealing with social security concerns, or even caring for your pets are just a few examples), a health care directive that gives persons that you designate to gain access to your protected health information as well as to make medical decisions on your behalf, memorial instructions that honor your wishes on how to handle your memorial or cremation services, and nomination of guardianship for minor children (guardianship concerns should be addressed in both your Will for when you pass away and within the Power of Attorney in case you become incapacitated and need others to care for your children.
Looking at all of the information provided so far, it seems obvious that a Living Trust is the optimal solution for your family’s security, would you still hop into the car and drive down to Office Depot? Not just yet…
Here are a few items that are often not addressed with a conventional do it yourself program that a qualified attorney can help guide and navigate you through:
1. Recording deeds – With a Living Trust, you will place title of your property into the trust. This is an area where an incorrectly recorded deed will not only cloud the property title but can have tax ramifications in the future and can be overlooked by the recorder’s office as well. I spend a fair amount of time in and out of court cleaning up do it yourself deeds.
2. The “Potato Salad clause” – When you pass away, your assets go to those you designate. In this case let’s say it’s your son Fred. What about if you and Fred pass away at the same time from eating a bad batch of potato salad while at a family picnic? Who’s going to be next in line for you? An attorney can make this level of succession planning as simple or complex as you see fit to meet your needs.
3. Blended families – Let’s face it, more and more families that finally get around to the estate planning stage in life might be on their second or more marriages with children from previous relationships entering the equation. This can lead to creative division of assets upon the passing of either one or both spouses. Add the aforementioned potato salad to the mix and now estate planning becomes quite fun for me but not so much for others. A side note on this item is that a qualified attorney can offer up different solutions to various family contingency scenarios based upon experience gained from development of previous plans.
4. Incentive clauses – Worried that your 20 year old son John is going to go out and buy that new Corvette ZR-1 he’s been eyeing immediately after receiving his inheritance check? The good news for you is that your Trust can contain incentive provisions that will provide little Johnny with portions of his inheritance when he hits certain age brackets (such as a portion at 25 years old and the rest at 40 for example), graduates from college, or desires to use the money to purchase a new home. The point being is that you get to set the distribution parameters.
These are just a few simple examples. Your attorney will more than likely have many more items for you to address that may not be done with an off the shelf plan.
It should be noted that there are times when a Will is sufficient for estate distribution due to asset size or family situation. However, a Will alone is never a solid plan. A consultation with a qualified estate planning specialist will help determine the appropriate plan for you.
Last and most importantly: An error or oversight in your Will or Living Trust will likely not get caught at the time of completion which means it’ll lie in wait for your loved ones until it’s potentially too late to correct. This is not the type of gift that keeps on giving (or doesn’t keep on giving) that you’d like for them to have to deal with. The number one reason why you should go to an attorney for this level of planning is the peace of mind that comes from knowing that it was done right by a professional that specializes in these types of things.