Do I Need A Will, A Trust, Or Both?

One of the first items I would address when I was working with individual clients was the issue of estate planning.  This area of financial planning is very intimidating to most people, but should not be.

We start with the premise that everyone needs a Last Will and Testament, properly prepared by an attorney in the state where you live.  I do not recommend using a Will kit or online substitute.  As I have said in my seminars, you can’t come back from the grave to correct mistakes you made in your Will.  A family with children needs a Will, most importantly to establish a successor guardian for the minor children.  If a tragedy were to happen, you want to be sure that your children are going to be raised by the individual you have selected and that shares your values.  A Will also directs who will receive your assets and in what amounts.  You can also share your final wishes for your funeral and burial in your Will.  By executing a Living Will (which is included for free by most attorneys), you can make your wishes known regarding being kept alive by artificial life support.

Although Wills can do a lot, they have one major problem; probate.  All wills go through probate.  Probate is the process by which a court validates the Will and makes sure that all creditors are paid first prior to any payments to beneficiaries.  There are also other final issues, such as the preparation of a last tax return, etc..  The probate process can take months or in more complex larger estates, years.  Thus the need for a living trust.

A living trust provides a mechanism by which upon your death a trustee takes over your financial affairs and the probate of your assets (that are placed inside the trust) is completely avoided.  This saves time, money, and a lot of headaches.  You select the trustee while you are still living (this would probably be the same person you would think of to be the executor of your Will).

So, to answer your question; you need both a Will and a Trust.  Every attorney I have interviewed on this suggests the combination of both documents.  The idea is that you place all of your assets in the Trust, and then those assets that happen to be outside the Trust upon your death would be addressed by the Will.  This would include the tricky issue of property that does not have a title (like the family Grandfather clock, the gun collection, etc…).  Items that are titled, such as real estate, cars, insurance policies, and bank accounts, are more likely candidates to be officially placed inside your Trust.

Also, keep in mind that of the two documents, a Will is the only one that can properly address the issue of a successor guardian for minor children.  The bottom line is that you should have both of these documents and they should be coordinated to cover all of your bases.  If you have a very large estate, a Trust can also be used strategically to lower your overall estate taxes.

What I would like you to take from today’s Q & A, is to at least get a basic Will in place.  If you don’t want to do the trust now, having a Will is at least a good starting point.  Another great benefit of using Pre Paid Legal, is the free preparation of a Will for you and your spouse and the ability to have a trust created at a very nominal cost.  The service which we have been recommending for years is only $26 per month and covers a wide array of legal benefits.  I have been using it for nearly 10 years now and they did prepare my Will and Trust.

Agree or disagree, click on comments below.

Send your questions to jim@ChristianMoney.com

My main website is www.ChristianMoney.com

James L. Paris