Personal Planner

Jacqueline Kennedy Onassis was diagnosed with cancer in January 1994. She signed a will in the New York offices of a large law firm on March 22, 1994. She passed away just two months later on May 19 at the age of 64.

Because a will is a public document, her will is available on the internet. In the will she remembered family members and several friends and planned to make a substantial transfer to a charitable lead trust. However, because her two children received the family personal property and promptly sold the items for the unexpectedly large sum of $35,000,000, the residue of the estate was used to pay the estate taxes on this large transfer of value to children and the charitable trust was not funded.

Bing Crosby passed away on October 14, 1977, with a trust. When his first wife Dixie Lee passed away from cancer in 1952, she had a will that transferred her separate and community property. Bing Crosby was very upset that his financial circumstances were disclosed to the public through the probate process. After marrying his second wife Kathryn, Crosby created several trusts for the children from his first marriage, for Kathryn and for children from his second marriage. He greatly appreciated the privacy benefit of creating a living trust.

You may not have the fame of Jacqueline Onassis or the assets of Bing Crosby (along with Lawrence Welk and Bob Hope, he was one of the wealthiest actors at the time of his death), but you can learn from both of them in deciding whether or not to create a will or a living trust.

When Wills are a Good Choice

There are a number of reasons why a person frequently starts the estate planning process with a will. These include youth, cost, the estate size, the ability to transfer assets outside of probate and a hesitation to select a trustee.

Young and Healthy

If you are in your 30s or 40s and have good health, a will is a common starting point for estate planning. A will is much simpler than a living trust. The property subject to a will goes through probate, but that could be many decades in the future.

As you acquire other property, it can be covered by your will. You can modify your will at any time, and you save the effort necessary to retitle and track property inside a living trust.

For a young person, the cost savings are significant. Wills frequently cost from $400 to $800, while a living trust may involve costs of $1,000 to $3,500. A young person may be reluctant to spend the funds necessary to create a living trust, but can start his or her estate plan quite reasonably with a will.

Modest or Moderate Estate

A second characteristic of people who choose a will is that they have a modest or moderate estate. As the estate becomes larger and more complicated, a trust is more important. For individuals who have more moderate assets, the will is a good starting point. As the estate grows, they can use some of the increase in resources to add a living trust to their plan.

Using Transfer Methods that Avoid Probate

Another option is to create a will, but transfer most assets without probate. Your IRA, qualified pension plan, financial accounts (with a pay-on-death form), life insurance and property held in joint tenancy with right of survivorship all avoid the probate process. For individuals who have a modest or moderate estate and are willing to transfer most assets through contract or property law methods that avoid probate, a will is a good solution.

Do Not Want to Select a Trustee

With a living trust, it is necessary to select a trustee to manage your property. This trustee frequently will end up managing your assets during the senior years of your life and after you pass away.

Some people do not like the concept of a trustee managing their property. They would rather own the property themselves outright during life and transfer the property outright to family members. For this person, a will is often a preferred planning method.

When a Living Trust is a Good Choice

For those individuals who can afford a living trust, it is a good choice. The living trust facilitates management of property during life, protection of the grantor, transfer of assets and income to family members and management of real estate.

Senior Care

What if I become too ill to manage property? One of the concerns you may have is that you may eventually become a senior person with a major illness. For medical reasons, you may be unable to manage your property. A major benefit of a living trust is that you select a successor trustee. If you are no longer able to serve as trustee and manage the property, your successor trustee can manage your property. He or she can make certain that the expenses of your medical care or long-term care needs are covered through trust payments.

Larger Estate or Real Estate

If you have a more substantial estate, a living trust can have multiple benefits. The living trust may include various provisions for handling the management of real estate or personal business interests. Particularly if you have real estate in multiple states, it is advantageous to transfer that property to a living trust. This property can then be managed for the benefit of both you and your heirs.

If you have property in multiple states and pass away with a will, it is necessary to conduct a probate administration in each state where you own property. This entails hiring professionals to manage the probate in each state and considerably increases the total cost. With a living trust holding real estate in different states, there is no need for multiple and expensive probate proceedings.

Bypassing Probate

One of the major benefits of a living trust is that the trust assets bypass the probate process. In most states, this may mean savings in probate costs up to many thousands of dollars.

Not only are there savings in probate costs, but your estate may also avoid the delays that frequently occur in the probate process. If there are claims against the estate, the probate process can take from two to ten years. While some large estates have been tied up in probate for many years, other similarly sized estates with a living trust can continue to manage the property and pay income and principal to beneficiaries.

Privacy

As Bing Crosby discovered, a living trust is generally a private document. While wills are public documents (the wills of Jacqueline Kennedy Onassis and many other famous individuals are readily available through internet search sites), a living trust is a private document. Even if a financial institution requests the trust in order to invest property owned by the trust, generally only a small portion of the trust is required to be disclosed to the institution. For most purposes the living trust is private.

Reduced Risk of Estate Contest

Larger estates are understandably more vulnerable to a probate contest. When the document and a large estate are public, as is the case with the will, the target is very tempting. Distant relatives come out of the woodwork to determine whether they have a potential claim against the estate.

One of the most disheartening aspects of a will contest is that there frequently are lifelong hard feelings among family members. In many cases, the bitterness from a will contest is carried by children, grandchildren, cousins, nephews and nieces to their graves.

A living trust is a private document. Because it is a private document and does not have to meet the specific standards for signature and witnesses that are applicable to a will, it is less likely to be attacked.

With a large estate, the living trust is generally safer. In addition, if a senior person needs someone to manage the estate, the successor trustee has been previously designated. The successor trustee frequently protects the senior person from potential undue influence of heirs or caregivers. Therefore, the living trust reduces the probability of an estate contest.