When I use the word “trust” in a consultation, people often quickly tell me that they don’t have enough money or assets to require a trust. This is a common misconception, that a trust requires a vast estate. Perhaps we owe that to the word “trust” conjuring up visions of large philanthropic organizations that operate exclusively out of a trust, or “trust fund babies.”
In fact, a trust can often cost much less in administrative fees, on the back end, to set up and manage (and those monies are taken out of the trust, so that it funds itself), than probate court would cost your loved ones. Although every situation is different, a trust administration’s fees can start at $2,500. Probate fees range from $3,000 to $8,000; if litigation is involved, they can go over $100,000.
Probate is unavoidable and lengthy for your executor if you have a Will-Based plan, even if no one is contesting the Will, and even if the assets are relatively few. A revocable living trust or joint trust avoids probate, avoids problems with jointly titled assets, and your heirs get immediate control of the assets within, without having to go through probate court, or draining their savings account to unlock their inheritance. In my previous blog, I discussed a very big reason why those with out-of-state property need a trust – probate and its associated costs will be required in every state where property is owned.
So, if a trust can be more cost-effective, and easier on loved ones than probate, are there any situations in which a Will-based plan would be better for a family than a Trust-based plan?
Yes. Remember, it’s not about the assets, it’s about what makes sense. If we look at creating a trust, and due to any number of factors, the administrative fees will drain the funds before long, than perhaps a Will-based plan would make more sense. Even with the costs and headaches often involved in probate.
A Complex Will is an option somewhere in between a Will and a Trust, and it can be a perfect solution. It’s possible to distribute your assets out of probate court through a complex will, and distribute to a trust for your loved ones’ specific needs.
It is our task as estate planning attorneys to use our experience and creativity to come up with a plan that makes the most out of your assets and makes the most sense for your family. There are dozens of ways to construct an estate plan, and many of those solutions can be layered upon one another.