is it better to have a will or a trust?

Dear Len & Rosie,

My husband and I are retired. We have three adult children and seven grandchildren. We still have a mortgage on our home and have no major assets other than our home. My husband will inherit upon his mothers death close to a million dollars. We are not anticipating her death or looking forward to it but wonder if we should have a trust set up. We currently have no will or trust.

Betty

Dear Betty,

At the very least, you and your husband ought to create durable general powers of attorney and advance health care directives. These are basic estate planning documents that everyone ought to have, both the rich and the poor. Without them, your family members or loved ones may not be able to make financial and medical decisions on your behalf if either of you should become incapacitated without having to file for conservatorship in the courts.

You and your husband ought to think about who should inherit your assets upon your deaths, and the manner in which they would do so. There are three basic options. The first is to do nothing. The surviving spouse would inherit everything if you hold all of your assets in joint tenancy, including your husband’s inheritance once he gets it. Then upon the surviving spouse’s death, your children will inherit everything equally through probate, with the share of a deceased child passing to his or her surviving descendants.

Or you may make wills. This is much better than intestate succession, especially because the default inheritance laws provide that a minor beneficiary’s inheritance shall pass outright to him or her when the minor turns eighteen. Can you imagine what an eighteen year old would do with several hundred thousand dollars in his or her pocket? Usually that’s a bad idea.

But what you should really create is a revocable trust. You can do anything with a will that you can do with a trust. Trusts avoid probate, and probate is expensive. If, for example, your estate is worth $1,500,000, the lawyer will earn $28,000 in statutory attorney fees. Probate also takes anywhere between nine and fifteen months to complete, and even longer under some circumstances.

We are not saying that a trust would magically transfer everything to your family after you both pass on. The successor trustee of a trust has do to more or less all of the same work as the executor of a probate estate and should retain the services of an attorney to make sure the job is done right. But since the court isn’t involved and there are no built in time delays, the work required to administer a trust is in almost all cases less costly and much quicker to complete than probate.

Len & Rosie