Wills vs trusts vs neither

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Do financial assets (Bank accts, brokerage accts, etc.) currently in the name of an individual with named beneficiaries avoid going through probate?
If not, will those same assets in the name of a revocable trust avoid probate?

Yes, but it is recommended that you do not use beneficiaries for most accounts other than retirement accounts so as not to inadvertently defeat the purpose of your will.

Oh god. Where did you hear this atrocious advice? I’m an attorney with an extensive background in finance. This might literally be one of the very worst pieces of financial advice that I’ve ever heard.

🙄 For a decedent with a testamentary trust and bequests and/or debts this is reasonable advice. I think it’s probably a good idea to have both— some accounts the heirs can immediately have access to and some accounts to pay bills or bequests of the decedent.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Wouldn't the will need to go through probate before the testamentary trust kicks in? Doesn't that negate the idea of a trust to avoid probate?

Yes but the point is that for this size estate in this area probate isn’t a big deal. You will spend more avoiding probate than going thru it.

Lawyers say this because it means more money for them.

I set up a trust just a few years ago and the cost was nowhere near what op quoted. With young kids and covid around I wanted things spelled out more clearly. Also trusts are private. Wills are not.

That's what I suspect as well. In our case, we setup a Trust, pour over will, etc. and all the other documents about 20 years ago when DC2 was born. Very straightforward Trust, names a trustee and who they will distribute assets to (my kids). I didn't even have an insurance policy them and my assets were under $1m + a house with about $400K equity. Cost us next to zero since the lawyer came through a legal plan that we paid for through benefits. All my accounts (incuding insurance policy) are joint, titled in the name of the trust or have the Trust as the beneficiary, except for retirement accounts of course.

Since then, I've seen more and know more. My BIL didn't have a will and passed away suddenly at 50. While it was a royal PIA to deal with document requests from various institutions, I don't think she went through probate (only house and vehicles did not have a named beneficiary). My SIL has since setup these documents through a company deal but had to pay about $1K to set up something a bit more complex.. Limits on withdrawal per year, setup a fund for healthcare for her kids (one of them has health issues), full payout after a certain age, etc.

I would absolutely recommend everyone setup a Trust and title their assets to the trust or at least name it as the primary beneficiary.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Must have:
Will
POA
Medical directive
Beneficiaries on retirement accounts, insurance policies. TOD/POD on brokerage accounts, bank accounts etc.
Also, DO NOT put children on any of your real estate titles. They will lose stepped up basis and it will be an expensive mistake.

Also, organize your accounts, policies etc. Handling an estate is a alot of work and it is really hard when it is sh&t show in terms of organization.

Optional
Trust. This is for people who want privacy and "control" from the grave. Most people do not need.

"Control" from the grave. Funny. I would be concerned about not have a trust for young kids. I could see a lawyer taking advantage of young 20 somethings dealing with probate.

PP is correct. If you’re concerned about heirs being taken advantage of, the probate of a will has much more oversight than the transfer of trust assets. This board is full of stories of people being ripped off by trustees. If you think your kids can’t handle the money and need a trust long term, you can set up a testamentary trust in the will.

I am a lawyer, and I’ve had several excellent estate specialists tell me I do not need a trust. Lawyers sell them to people because they like them — it makes them feel “rich” to refer to “the trust.”

[Anonymous]

Trusts can be helpful if you have young children but aren't really necessary unless you have a lot of assets that will actually go through probate. I only know VA, but here you can change the title on your house/vehicles to simply pass to your spouse or other beneficiary on your death. Bank accounts and 529s also let you setup survivorship options to avoid probate. Some things won't pass on to minor children like your 401k so would require at least a testamentary trust and guardianship

I learned all of this from using the MetLife legal plan which provided a lawyer that recommended we use a living trust, probably for reimbursement reasons. Just fyi, with a living trust you have to retitle a whole lot of things into the trust and ensure future accounts are run through the trust. It's sometimes a pain.

[Anonymous]

Anonymous wrote:Trusts can be helpful if you have young children but aren't really necessary unless you have a lot of assets that will actually go through probate. I only know VA, but here you can change the title on your house/vehicles to simply pass to your spouse or other beneficiary on your death. Bank accounts and 529s also let you setup survivorship options to avoid probate. Some things won't pass on to minor children like your 401k so would require at least a testamentary trust and guardianship

I learned all of this from using the MetLife legal plan which provided a lawyer that recommended we use a living trust, probably for reimbursement reasons. Just fyi, with a living trust you have to retitle a whole lot of things into the trust and ensure future accounts are run through the trust. It's sometimes a pain.

Or you could just make the Trust the primary beneficiary on those accounts.

[Anonymous]

Keep in mind that the beneficiary has to pay income tax on the trust distributions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Must have:
Will
POA
Medical directive
Beneficiaries on retirement accounts, insurance policies. TOD/POD on brokerage accounts, bank accounts etc.
Also, DO NOT put children on any of your real estate titles. They will lose stepped up basis and it will be an expensive mistake.

Also, organize your accounts, policies etc. Handling an estate is a alot of work and it is really hard when it is sh&t show in terms of organization.

Optional
Trust. This is for people who want privacy and "control" from the grave. Most people do not need.

"Control" from the grave. Funny. I would be concerned about not have a trust for young kids. I could see a lawyer taking advantage of young 20 somethings dealing with probate.

PP is correct. If you’re concerned about heirs being taken advantage of, the probate of a will has much more oversight than the transfer of trust assets. This board is full of stories of people being ripped off by trustees. If you think your kids can’t handle the money and need a trust long term, you can set up a testamentary trust in the will.

I am a lawyer, and I’ve had several excellent estate specialists tell me I do not need a trust. Lawyers sell them to people because they like them — it makes them feel “rich” to refer to “the trust.”

This 💯. My mother-in-law fell for it hook, line, & sinker. She has no shame and loves telling anyone who’ll listen how well she’s doing as she’s now a millionaire ($500k house with $500k in a savings account, lol). At a neighborhood party, her “rich” friends convinced her that she needed a trust ASAP to protect all her hard-earned wealth. Quite conveniently, their son was a lawyer and could make it happen. $5k later and she’s the proud owner of her very own “trust”. (I hope he tipped his parents $1k for the easiest lead ever.)

Mind you, my wife is an only child and gets everything, so it was completely pointless but the ridic things MIL says now almost makes it worth it. *Imagine Lucille Bluth saying these lines, lolol* When visiting mother-in-law’s house, “Daughter, you have nothing to worry about, this is ALL IN THE TRUST.” While chatting with a relative who likely lives 100% off of Social Security, “Cuz, how could you possibly leave your family unprotected WITHOUT A TRUST?” And when showing me who’s boss, “Son-in-law, whatever may happen to you, daughter can always rely on THE TRUST.”

Gee, thanks, MIL. We did gross $600k last year, I think we’ll be fine. And my wife maybe receiving a million bucks sometime in the future would be wonderful and we’d be very thankful, but it wouldn’t exactly be life-changing. After doing my own research, trusts definitely seem to be a product that’s sold, not bought…quite similar to unnecessary and often bad life insurance policies.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We have more but under $5m, and I have a will with a straightforward testamentary trust. Everything but the house would avoid probate because we have beneficiaries/successors listed. The house has a mortgage with a due-on-sale clause, so it's not going into a trust any time soon. Until someone can convince me otherwise, I see no need for a trust.

We have similar (slightly higher) NW, 3 ski condos, and a primary home with a tiny mortgage. We set up a trust to avoid probate on the ski condos - one for each kid. Our investments other than our 401ks and Roths are in our trust account. So one family trust and small trusts for each kid.

Why don’t you transfer the condos to you and each individual child as joint tenants. The condos then go to each child named as joint owner.

[Anonymous]

Anonymous wrote:You don’t need a trust with only $2m.

You need a trust with any real property you intend to keep in the family

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Must have:
Will
POA
Medical directive
Beneficiaries on retirement accounts, insurance policies. TOD/POD on brokerage accounts, bank accounts etc.
Also, DO NOT put children on any of your real estate titles. They will lose stepped up basis and it will be an expensive mistake.

Also, organize your accounts, policies etc. Handling an estate is a alot of work and it is really hard when it is sh&t show in terms of organization.

Optional
Trust. This is for people who want privacy and "control" from the grave. Most people do not need.

"Control" from the grave. Funny. I would be concerned about not have a trust for young kids. I could see a lawyer taking advantage of young 20 somethings dealing with probate.

PP is correct. If you’re concerned about heirs being taken advantage of, the probate of a will has much more oversight than the transfer of trust assets. This board is full of stories of people being ripped off by trustees. If you think your kids can’t handle the money and need a trust long term, you can set up a testamentary trust in the will.

I am a lawyer, and I’ve had several excellent estate specialists tell me I do not need a trust. Lawyers sell them to people because they like them — it makes them feel “rich” to refer to “the trust.”

There is zero accountability with probate and executors.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You don’t need a trust with only $2m.

You need a trust with any real property you intend to keep in the family

This just isn’t true

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Must have:
Will
POA
Medical directive
Beneficiaries on retirement accounts, insurance policies. TOD/POD on brokerage accounts, bank accounts etc.
Also, DO NOT put children on any of your real estate titles. They will lose stepped up basis and it will be an expensive mistake.

Also, organize your accounts, policies etc. Handling an estate is a alot of work and it is really hard when it is sh&t show in terms of organization.

Optional
Trust. This is for people who want privacy and "control" from the grave. Most people do not need.

"Control" from the grave. Funny. I would be concerned about not have a trust for young kids. I could see a lawyer taking advantage of young 20 somethings dealing with probate.

PP is correct. If you’re concerned about heirs being taken advantage of, the probate of a will has much more oversight than the transfer of trust assets. This board is full of stories of people being ripped off by trustees. If you think your kids can’t handle the money and need a trust long term, you can set up a testamentary trust in the will.

I am a lawyer, and I’ve had several excellent estate specialists tell me I do not need a trust. Lawyers sell them to people because they like them — it makes them feel “rich” to refer to “the trust.”

This 💯. My mother-in-law fell for it hook, line, & sinker. She has no shame and loves telling anyone who’ll listen how well she’s doing as she’s now a millionaire ($500k house with $500k in a savings account, lol). At a neighborhood party, her “rich” friends convinced her that she needed a trust ASAP to protect all her hard-earned wealth. Quite conveniently, their son was a lawyer and could make it happen. $5k later and she’s the proud owner of her very own “trust”. (I hope he tipped his parents $1k for the easiest lead ever.)

Mind you, my wife is an only child and gets everything, so it was completely pointless but the ridic things MIL says now almost makes it worth it. *Imagine Lucille Bluth saying these lines, lolol* When visiting mother-in-law’s house, “Daughter, you have nothing to worry about, this is ALL IN THE TRUST.” While chatting with a relative who likely lives 100% off of Social Security, “Cuz, how could you possibly leave your family unprotected WITHOUT A TRUST?” And when showing me who’s boss, “Son-in-law, whatever may happen to you, daughter can always rely on THE TRUST.”

Gee, thanks, MIL. We did gross $600k last year, I think we’ll be fine. And my wife maybe receiving a million bucks sometime in the future would be wonderful and we’d be very thankful, but it wouldn’t exactly be life-changing. After doing my own research, trusts definitely seem to be a product that’s sold, not bought…quite similar to unnecessary and often bad life insurance policies.

You sound like a huge a hole.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You don’t need a trust with only $2m.

You need a trust with any real property you intend to keep in the family

You have no idea what you are talking about.

[Anonymous]

Everyone should have a will.

I know trusts are recommended and I guess it somehow makes things easier for your heirs but I don’t have one now. Maybe if I have more money later I’ll do it but I’m not in a rush.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We have more but under $5m, and I have a will with a straightforward testamentary trust. Everything but the house would avoid probate because we have beneficiaries/successors listed. The house has a mortgage with a due-on-sale clause, so it's not going into a trust any time soon. Until someone can convince me otherwise, I see no need for a trust.

We have similar (slightly higher) NW, 3 ski condos, and a primary home with a tiny mortgage. We set up a trust to avoid probate on the ski condos - one for each kid. Our investments other than our 401ks and Roths are in our trust account. So one family trust and small trusts for each kid.

Why don’t you transfer the condos to you and each individual child as joint tenants. The condos then go to each child named as joint owner.

Because that would be a incredibly dumb idea. Not least because they won’t get a stepped up basis on death.