Deciding whether to use a will or a trust is often the most pivotal decision made during an initial planning meeting. The entire structure of the plan depends on this choice. Ultimately, the decision should made by the client only after an understanding of the pros and cons of these two planning tools is understood. A skilled estate planning attorney should be able to tailor the discussion based upon the level of knowledge the prospective client brings to the meeting. The balance of this article will address the process I use to help the client make the appropriate decision.
DETERMINING THE CLIENT’S LEVEL OF UNDERSTANDING
Often, a person will call my office requesting a consultation to “get a will” or “set-up a trust.” Before I assist by preparing those documents, I need to make sure the client understands what is being requested and whether it is appropriate for the specific situation. If the person scheduling the appointment stated a preference for either a will or trust when the appointment was made, I will inquire as to why. Early in the initial meeting, I like to determine whether the client has familiarity with the probate process or has ever been a beneficiary or trustee of a trust. If the client is updating an existing plan, the prior plan is reviewed. I have conducted dozens of meetings where the existing plan was still appropriate.
HOW IMPORTANT IS AVOIDING THE PROBATE PROCESS
When a will is used, a probate is usually necessary. Probate is a legal process overseen by an official in the county of the decedent’s residence. If disputes or unusual issues arise, a judge may need to become involved. Most people want their families to avoid governmental interference and trips to the courthouse. If a family member is likely to be upset about the distribution of the estate, the probate process provides them an invitation to bring their grievances forward. Most families will need the assistance of an attorney to navigate the probate process. Usually avoiding probate is a significant factor in selecting a trust over a will.
HOW FINANCIALLY RESPONSIBLE ARE THOSE YOU WANT TO LEAVE MONEY OR PROPERTY
A will might be appropriate for leaving property to fiscally responsible adults. If the beneficiary is less responsible or too young, a trust would likely be more appropriate. The size of the inheritance will also influence the choice. Trusts can be creatively designed so that beneficiaries grow into their inheritances. In the case of an individual with disabilities or behavioral issues, a trust may be the only reliable way to ensure the inheritance is properly administered. Even for the perfect money manager, a trust maybe appropriate if the beneficiary is involved in a risky business or an potentially unstable marriage.
HOW MUCH DO YOU WANT TO SPEND ON AN ESTATE PLAN
A trust-based estate plan will normally cost two to three times more than a will-base estate plan to establish. But often times the will-based plan will cost more to administer upon death and will cause stress during the probate process. A trust normally can be settled more quickly and in a more informal manner than a will. A value judgment needs to be made whether you want to save money now during the planning process at the ex financial and emotional expense of your family members upon your death.
HOW THE SIZE OF THE ESTATE IMPACTS THE CHOICE
The larger the estate, the more likely I will recommend a trust instead of a will. But that does not mean that large estate owners always need a trust. The opposite is also true. Individuals with a modest estate (under $300,000) may need trusts due to special circumstances. In addition to the size of the estate, an understanding of the components of the estate is important. If an individual owns real estate outside of Wisconsin, a trust usually will be the best approach. If most of the assets can be distributed with the use of beneficiary designations, a trust may not be necessary even for relatively large estates. The best way to determine is to spend adequate time with an estate planning attorney with the knowledge to ask the right questions. By getting to know the client’s financial and family situation, the path to the proper plan should become apparent.
DON’T HOLD BACK EMBARRASSING OR UNFLATTERING DETAILS
A son-in-law you don’t trust. A grandchild that makes a rock star look thrifty. If you have family members that have undergone divorce, bankruptcy, or had an encounter with the criminal justice system, these are all details that need to be shared with your estate planning attorney. If you have confronted some of these issues, a trust may again be more appropriate than a will.
THE BOTTOM LINE
A consultation with an experienced estate planning attorney will assist you to make the proper choice between a trust and a will. It is my experience that for first time estate plans about one-third select will-based plans and the remainder trusts. The most common factor for those selecting wills instead of trusts is the initial cost. Eliminating cost as an issue, I believe a trust would be the appropriate choice for about 90% of the people I see. As long as the client knows the pros and cons, I will prepare the plan of the client’s choice. In all cases, any plan is better than no plan!