Question: What are the pros and cons of choosing a Will versus a Living Trust for estate planning? Which option is generally considered the best for ensuring a smooth transfer of assets to my beneficiaries?
If I choose a Living Trust, what are the steps involved with setting it up and the typical fees associated with it?
Loraine’s Answer: Morgan & DiSalvo has prepared a lot of information about Wills vs. Revocable Trusts (RLTs, as we often call them, for Revocable Living Trusts), how to choose which one is best for you, and the pros and cons of each. To give a very short summary, reasons that you may wish to use an RLT as part of your estate planning, instead of using a plan that does not include a Revocable Trust, include reasons such as: having real estate located in more than one state, which can require multiple probate court processes; wishing to disinherit a potential heir or wishing to provide unequal shares to similarly situated potential beneficiaries (e.g., giving one child a larger share than another child), which can lead to a Will challenge; having a situation where the probate process may be difficult, expensive, or time-consuming for another reason, such as a situation where your potential heirs may be distant relatives who you don’t know and who may not be easy to locate and notify; wishing to be able to easily make and change specific bequests of money without having to re-do your entire Will or execute a codicil; and wanting to have another tool that may make it easier for someone to help you handle your financial affairs if you become incapacitated during your lifetime.
Steps for Setting up a Living Trust
The steps involved in setting up a Revocable Trust or RLT should generally include:
- Finding an experienced estate planning attorney for an estate planning consultation. The attorney should be able to help answer further questions you will have, help you learn about the various issues and options you have for putting your estate planning wishes and needs together in a plan you are comfortable and happy with, and then give you a proposal including the costs.
- Preparing comprehensive estate planning documents. Ideally, you should have, at a minimum, a Will (even with a Revocable Trust, you still need a Will; the Will used with a Revocable Trust typically just serves to scoop any assets that end up outside the trust into it), a Power of Attorney, an Advance Directive for Health Care, and, if you decide to use one, the Revocable Trust itself.
- Preparing Trust-specific documents. We usually provide a document that transfers non-titled tangible personal property into the Trust and a document that summarizes the terms of the trust in a manner that financial institutions and other third parties sometimes find helpful. If you want to fully fund the trust, you will also need other documents, such as deeds for real estate, beneficiary designation forms for tax-deferred accounts, and account transfer documents for non-tax-deferred accounts. The attorney can help you figure out what you need to do.
General Fees for Living Trusts
In general, you’ll pay for the initial set-up process, and there may be some additional costs associated with funding the trust (such as deed preparation and filing fees). An RLT-based estate plan can be more costly to initially set up than a Will-based estate plan since there are more documents needed, and so part of making the decision to use an RLT-based plan or a Will-based plan will involve knowing the cost difference and weighing whether the potential extra benefits outweigh the increased up-front costs. However, once a trust-based estate plan is set up, however, there should not be ongoing costs unless you have a third party act as your Trustee (normally, you wouldn’t do so, at least not at first).
If you decide to make changes to an RLT-based plan, you will pay to make those changes. Of course, while you will also pay to make changes to a Will-based estate plan, it can cost somewhat more to make changes to an RLT-based plan than to a Will-based plan, simply because there are more documents involved and more changes may be needed. But a lot depends on how your trust is set up and the type of change desired. Some kinds of changes can be made more easily and more cheaply if you’ve used a Revocable Trust-based plan instead of a Will-based plan.
Key Estate Planning Takeaways: An experienced estate planning attorney can help a person decide if they need or want a Revocable Trust-based estate plan or just a Will-based estate plan. The cost-benefit analysis is important and weighing all of the factors can be tricky.
This “Q&A with Loraine” blog series is inspired by answers from Morgan + DiSalvo Partner Loraine DiSalvo to actual user questions posted by individuals on www.avvo.com. This blog is a more in-depth response than can be given on their site under their character limits for answers. To view the original question and Loraine’s original response, click here.
