Thinking about the benefits of setting up a revocable living trust compared to just having a will?
For a long time, my wife and I put off making a will, even though we knew it was something responsible adults and parents should do. Without a will, the court decides the fate of everything you leave behind—your kids, money, house, pets—everything.
Ask yourself this: If my spouse and I were in a car accident tonight, is there a plan to protect all our assets and family members? If the answer is “no,” it’s time to consider some estate planning.
I understand it’s hard. No one likes pondering life after they’re gone. It took battling cancer and a few other scary moments before we finally called a lawyer to get it done. Now it’s complete, and I’m relieved. Not just because we finally created a will, but because we discovered that true asset protection requires going a step further and setting up a trust.
Here’s the scoop on living trusts versus wills:
A will doesn’t offer as much protection as you might think. Yes, it outlines how your assets should be divided, but modern estate planning is more intricate than that. One major issue with wills is they must go through probate—a complex court process that evaluates your will and decides whether to follow your instructions. This can lead to significant problems.
So, if a will has these shortcomings, what should you do? Enter the trust.
A trust, specifically a revocable living trust, acts like a “super will.” When you create a trust, it becomes its own legal entity, similar to a business. This distinction is crucial for several reasons:
A trust can protect and pass on more than just your savings. For instance, if you want your home to be preserved for your children until they are old enough to decide what to do with it, a trust can ensure its care and prevent an immediate sale. The same goes for your business, vehicles, jewelry, vacation homes, and any other valuable possessions.
With a revocable trust, you maintain full control over your assets, and you can change or cancel the trust anytime. There are also irrevocable trusts where assets are no longer accessible, but these are typically used for specific purposes like protecting against Medicaid spend-down, which is another topic entirely.
From our research, setting up a trust can cost between $1,000 and $1,500, while a simple will might run around $300. Although pricy, consider the cost of a trust against the expense of probate, which can take 3-6 months and run at $250 an hour. A trust suddenly seems like the better deal.
So, there you have it. Estate planning goes beyond retirement planning. It might seem overwhelming, but with some education and action, it’s manageable. By planning ahead, you can save your loved ones a lot of hassle and ensure your assets are distributed as you wish. If you’re serious about your responsibilities as a spouse or parent, this is something you need to do.
