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

name changed will it affect my parents revocable living trust

Dear Len & Rosie,

My parents have a revocable living trust. My father has passed away. Since then I have gone through a divorce and have had my maiden name reinstated. I believe we are OK with my father’s passing but the trust was written in my married name. Do we need to have my name changed on the trust and if so what is the easiest, quickest and of course most economical way of doing this?

I also think it is time for me to do a trust. I am not married and have no children. Again is there a quick and easy (and cheap) way to do this?

Mary

Dear Mary,

Don’t worry so much about your parents’ trust, at least with respect to your name. There is no legal reason why your mother’s estate planning documents should be changed just because your name is different from what it used to be. It would be quite the racket if estate planning attorneys could charge parents up to a thousand dollars every time one of their daughters changes her name. If your mother decides to amend her trust for some other reason, then she may as well have your name changed while she’s doing it. Otherwise, she can save a few bucks and leave it alone.

However, if your mother did not review her trust with an attorney after your father’s death, she should now do so. It’s important to make sure that everything is in order before she passes. For example, your mother’s home and accounts may or may not actually be in the trust the way that they should be.

If she hasn’t done so, she should also review the beneficiary designations on any life insurance policies or retirement accounts. If she were to pass and had no designated beneficiaries, then it may be necessary to probate your mother’s estate in the courts, instead of collecting assets with a certificate of death and a form.

Do you need to create an estate plan now? Maybe not. Probate is required in California only when an estate is worth $150,000 or more - and the value of automobiles registered with the DMV, mobile homes registered with the Department of Housing and any accounts with designated beneficiaries.

After your mother’s death, you may very well need a trust. Until then, it’s probably sufficient to have a Durable Power of Attorney, an Advance Health Care Directive, and a simple will. If you do an Internet search for “California Statutory Will Form” a free form written by the California Legislature will pop right up.

Len & Rosie