It will probably cost more, initially, to set up a well-drafted living trust than to have a will prepared. A true cost comparison reveals more important facts,. You need to include in the comparison not only the expense to establish the will or trust, but also what it will cost, in terms of time, ease of use, control and privacy should you become incapacitated and after you die.
The Key Takeaways:
o A living trust document has more provisions than a will because it deals with issues while you are living and after you die, a will only deals with issues that occur after your death.
o A properly prepared and funded living trust will avoid court proceedings at incapacity and death. A will provides no such protection and can, in fact, ensure court intervention at both events, which can be very costly (in time, privacy and dollars) to your family.
Instructions at Death and Incapacity
Both a will and a living trust contain instructions for distributing your assets after you die. But a living trust also contains your instructions for managing your assets and your care should you become incapacitated. The instructions in the will must always be approved by a court in a public proceeding. As a result the instructions in your will are really just suggestions to the probate judge.
A Living Trust Avoids the Costs of Court Interference at Incapacity and Death
A properly prepared and funded living trust (one that holds all of your assets) will avoid the need for a court guardianship and/or conservatorship if you become incapacitated. The person(s) you select will be able to manage your care and your assets privately, with no court interference. Many people, including attorneys say that a durable power of attorney can do the same thing. The problem is that often times banks and financial institutions view durable powers of attorney as “stale” if they are more than a couple years old. The bank cannot get into a bind by failing to honor the durable power of attorney. The durable power of attorney simply sets up an agency relationship. A properly drafted and funded revocable living trust sets up an ownership relationship. The trustee becomes the owner of the property. The financial institution must follow the wishes of the owner of the property.
A will can only go into effect at your death, so it can provide no instructions regarding incapacity. In that case, your family would almost certainly have to ask the court to establish a guardianship and/or conservatorship for your care and your assets–a process that is public, time consuming, expensive and difficult to end.
What You Need to Know. The same living trust document that can keep you out of a court guardianship at incapacity can also keep your family out of probate court when you die. But a will must go through probate. Depending on where you live, this can be costly and time consuming. Many people say that the probate cost is South Dakota is low and probate is not terribly difficult; that is true. This line of reasoning fails to take into account that a judge still has to approve your suggestions as to disposition of your assets; court approval comes only after a public inventory of all your assets is filed; your will with all your instructions becomes public; and the whole world gets to know what assets you owned, where the assets go, when the assets get transferred; and all your personal last wishes become public. Imagine telling the whole world why you treat one child a little differently than another.
Costs to Transfer Assets…Pay Now or Later
There may be some minor costs to transfer assets into your living trust when you set it up, and then from your trust to your beneficiaries after you die. But these will be minimal if you and your successor trustee do much of the work yourselves. With a will, the probate court (with its costs and attorney fees) is the only way to transfer your assets to your heirs after you die. So you can pay now to set up your trust and transfer titles, or you can pay the courts and attorneys to do this for you after you die.
Actions to Consider
o Find out what probate costs are where you live. If your state has a fee schedule based on the value of probate assets, this will be fairly easy. If it has ‘reasonable’ fees, ask an attorney to estimate what these fees would be if you die tomorrow and, if you are married, if your spouse dies the next day.
* Similarly, ask your attorney to estimate what the costs would be if you become incapacitated tomorrow and, if you are married, if your spouse becomes incapacitated the next day. (Practically speaking, this will be impossible to estimate because no one will be able to predict how long the incapacity will last or what complications might arise. The mere uncertainty of these costs should give you pause–and propel you to plan for incapacity.)
* Add these estimates to the cost of having a will prepared–and compare that to the cost of a living trust. When you make a true comparison, you may conclude that having a living trust actually costs less than a will.