When you begin to plan for the future disposition of your estate and assets, the first thing to decide is if you want to set up a will or a trust to guide that process.
Compare Benefits of Will-Based vs. Trust-Based Plans
There are benefits to both a will-based estate plan and a trust-based plan:
- From a cost standpoint, usually a trust-based plan in which the assets are truly coordinated with the trust is less expensive, but both kinds of plans do have expenses after death.
- Usually, a will-based trust is twice as expensive to settle as a living trust, but a living trust is more expensive to set-up.
- A living trust has more provisions for care and disability, and should be more difficult to challenge, because a trust is a contract.
- If potential heirs challenge a trust at death to undermine it as documented, they would have to show undue influence or duress in the contract formation or terms.
- In a will-based plan, many other rules exist by which heirs or potential interlopers could challenge the will under the terms of the probate code in the state with jurisdiction.
- A plan is typically more secure with a living trust-based plan that is funded than with a will-based plan in which the terms of the will can be challenged.
- Wills are only effective at death. The probate code does cut off creditor rights in a way that a trust cannot, so there are benefits of having a will-based plan, or having a blend of a will-based plan and a living trust-based plan for purposes of cutting off creditor rights in an instance, for example, in which someone is an active business entrepreneur and has potential liabilities and/or has the kind of business where liabilities could pop up unexpectedly.
- The primary benefit of a trust-based plan for a single person is the ability to include specific instructions for care and disability. An example would be a widow(er) whose children are not close and do not really know how she/he wants to be cared for if disability were to unexpectedly occur. After any trusts are funded after death, the trusts would thereafter be equally managed and distributed regardless of whether the terms originated in the trust or the will.
- A testamentary trust is exempt from a Medicaid spend-down of a future beneficiary.
Will vs. Trust: Consider Cost, Privacy, and Quality of CareSome estate planners believe that if a person has assets of less than $200,000, then the expense of a living trust-based plan might be balanced against the liquid assets that might be needed and helpful going forward. The instructions for care and disability, for many people, is a strong argument for having a living trust-based plan, as long as there is the disposable cash to provide for it.
After death, the level of privacy afforded varies between a will compared to a living trust-based plan. Many times, a will’s code will call for an inventory of assets to be delivered, which means anyone can access local public records to see a person’s inventory and determine what it is worth. One can avoid that public disclosure with a living trust-based plan. Some statutory methods have been developed to avoid having to disclose all of an estate’s assets, but privacy remains a strong benefit of a living trust compared to a will-based estate plan.
Expenses of Setting Up A Trust
Her is a bit of guidance for someone who might be in that borderline area for justifying the expense to set-up a trust.
The cost to set up a living trust — for someone who has about $250,000 in assets, wants privacy, is willing to spend cash assets to set-up a trust, and wants primarily to establish instructions for their own care in case of disability — could be in the neighborhood of around $1,200 – $1,500.
This fee should include having an attorney create the proper documentation, which would typically also establish a power of attorney for healthcare and for business, as well as documentation to cover health records and privacy. All of those documents would typically be included in a coordinated trust-based plan. Of course, the cost can vary depending on your location, assets, and choice of lawyer and specific services.
Do-It-Yourself Estate Planning Could Cost You More than an Attorney
While all of those documents are available online, most laypeople would not know whether or not they are answering all the questions properly within the construction of those documents. So, when you are considering the governance of your life and your life’s work, it is usually well-worth the additional expense to have a qualified expert provide sound advice in relation to your specific circumstances. The primary additional cost of setting-up a trust compared to writing a will is in both the preparation of the documents and the advice that ensures your documents are aligned with your goals for the trust.
There is usually no advantage to printing out the documents and filling them out prior to meeting with an attorney, unless the attorney has some kind of coordinated online entry process where they know how those documents are being created. If you bring documents that you have created to your attorney, he or she would probably need to start from scratch to figure out if the documents have all the elements that they would want to see addressed.
Unless the trust documents are laid out consistent with a process the law office has already set-up online, the attorney really cannot know if you have entered everything that needs to be addressed by the documents. The cost to determine that would usually be greater than the cost to start from scratch.
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