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Do I Need A Will Or A Trust?

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By far, this is THE #1 Question I get from people in the public or at their first appointment.

My Answer may surprise you: “Maybe neither”. Whoa!!!!!

A note: If you read this through to the end, this one article may save you thousands of dollars in lawyer fees or you will know you really did need to spend the extra money for what you needed. Please keep reading.

Yep, I am an attorney, a very experienced Elder Law Attorney and I am telling you that there’s a really good chance you need neither and therefore not waste money on attorney fees for things you didn’t need. My mom obviously would have the perfect estate plan for her to get her estate to me as efficiently as possible (I’m an only child) and SHE DID NOT HAVE A TRUST NOR A WILL.

Do I have your attention? I thought so.

Let’s start with the basics. The issue here is getting your estate to your loved ones (people or charities) at the time of your death as efficiently as possible. Now, I am telling you in any state that Probate is a process that should be avoided.

What is Probate? Probate is the process of getting an asset that is stuck in your name at the time of your death. That’s it. When you pass away, if there is any asset that has only your name on it, your heirs are going to have to go through some form of probate to get it “unstuck”.

Probate is court. Someone has to open a court case with a court to have a judge declare you dead, and then decide what assets were “stuck” and then decide what to do with those assets. If you have a Last Will and Testament (Will) then it will be admitted to court and the Judge will then decide if it is legal and if so, will then carry out the commands of the Will.

Therefore, your Will is your roadmap through probate. Yep, your Will is what tells the judge what to do with your stuff at your death. Your Will does NOT avoid probate. If an attorney recommends a Will as the only estate planning tool for you, and you don’t have minor children, you need to seek the advice of another attorney. (Just sayin’)

Now, I hope by the time you finish this article you will understand that just having a Will does not mean you have to go through probate. The Will is there IF you have to go through Probate. I am going to show you how to avoid probate.

How do you avoid probate? There are two ways to avoid probate

  1. The Easy and cheap way (with some restrictions)
  2. The more expensive way (with more flexibility)

Remember, Probate is for those items that are stuck in your name at death. If we can fix the “stuck” issue or the “in your name” issue, you can avoid probate.

The first way, easy and cheap way, to avoid Probate is to make sure nothing is stuck in your name at the time of your death. You do this by making sure that every asset you have, that has a title or deed, has a beneficiary listed at the time of your death.

On bank accounts, you make sure the account is owned by you and/or your spouse but is then Payable on Death to the person or people you want to get it at your death. That is done at the bank or the investment company. You fill out a form with them and it is done. At your death, your heirs walk in with a death certificate to prove your death and they walk out with a check. Yep, that easy.

It’s a little more difficult on real estate but not much. On real estate, most States have at least one deed that allows you to continue to own the property but it then has a beneficiary to receive the property upon your death. In many States these are called Payable on Death Deeds, Ladybird Deeds, Beneficiary Deeds and Life Estate Deeds.

Now, there are SIGNIFICANT legal issues with which of these deeds is correct for you. You and your attorney must be aware of the Medicaid rules in your State in order to properly advise you on which of these deeds is the correct one. There are also tax consequences to some of these deeds. If is VERY rare for you to do a complete transfer deed, with no interest held by you while you are alive, if you are not looking at immediately nursing home placement. If you are not in a crisis situation looking at needing nursing home care immediately, I would be very reluctant to take the advice of an attorney that is recommending a complete transfer of your home without some retention of benefits for you as the owner.

Now, that seems simple right? You list a beneficiary on all of your stuff and you don’t have to worry about probate. True …. but. What if the following is true?

  • I’m afraid of what my child may do when they get the money when I die.
  • I don’t want my child’s spouse to have any access to my money
  • I want to leave money to my minor grandchildren.
  • What if my child gets sued after I leave them the money?
  • I want to make unequal distributions to my children.
  • I want a percentage of my entire estate to go to a charity, such as my church.

If these issues are a concern for you, the simple plan may not be right for you. That leads us to the other way to avoid probate and that is to make sure nothing is in your name at the time of your death which then allows us to protect from the things listed above. I’ll cover that in another post. Click here to get that post.

Do I need a Trust?

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