Funeral Estate Planning
The Differences Between a Last Will and Living Trust?
Which One is Best For You?
Who Should Have a Last Will?
The sad truth is that most financial advisors and estate planning attorney’s will tell you that approximately 70% of Americans die without and End of Life Plan or Last Will, also known as a Last Will and Testament. In my opinion, this is totally unacceptable! Why? Because I am fully confident that most of us:
• Truly love our family and loved ones
• Would prefer not to place any unnecessary or additional burden on our loved ones during a time of terrible emotional loss
Please allow me to explain why funeral estate planning is so important. Should you pass without so much as a Last Will, the unfortunate reality is that state law will determine how your property is distributed, as well as take control of your estate if you should you become disabled or incompetent.
The Statute Called “The Law of Intestate”
The best way I have found to describe intestate is simply; “having a lawsuit with your state of domicile over the management of your estate”. Put another way, it will not be you or your family who ultimately decides what happens to your assets, your children, and your financial legacy – but rather your state, the government, and your least favorite uncle – Uncle Sam.
I think it is safe to say that your personal wishes for the disposition of your money, children, estate, well-being, and how you want to be remembered would not be exactly the same as that of your state or local government. Therefore, dying without a Last Will is going to put your family through an extremely difficult, time-consuming, and expensive ordeal…at a time when they should be focusing on celebrating your life and the wonderful memories you’ve left behind.
So I think you can reasonably conclude that I firmly believe that everyone, regardless of your net worth, marital status, or age, should have a fully completed and executed Last Will!
Why? Creating a Last Will accomplishes two extremely important things for both you and your family. First, it helps protect you against scenarios in the event something happens unexpectedly such as a disability, incapacity, severe accident, coma, amnesia, etc. Second, as I mentioned above, it becomes one of the greatest gifts we can give our loved ones by making this difficult period easier, less emotional, time-consuming, expensive, and uncertainty.
Why Would Someone Choose a Living Trust?
Most Estate Planning Attorneys will agree that a better and more useful funeral estate planning tool is using a Living Trust, also known as a Revocable Living Trust.
One of the most common questions most families ask is “What are the advantages of creating a Living Trust versus a Last Will”? Well, although a properly structured Last Will is a “must-have”, one of the biggest disadvantages with having a simple Last Will is that it must go through probate.
What is Probate?
Probate is a court supervised procedure by which the court ensures that the assets governed by your Last Will are valued properly, the debts of your estate are paid off, and the remaining assets are properly distributed to the persons named in your Last Will.
The probate process is typically a negative experience, to say the least. Here’s why:
• It is expensive. Legal and executor fees and other costs must be paid from your estate before anything can go to your heirs. The costs are usually estimated at 1-5% of the gross value of an estate (before debts are paid).
• It takes time. Often 1-2 years or longer, depending on your state. During this time, assets are usually frozen and nothing can be distributed or sold without the courts approval. If your family needs money to live, they may have to ask the court for a living allowance, which the court may or may not approve.
• Your family has no privacy. Probate files are open to the public, so anyone (including a business competitor) can see what you owned and whom you owed. This knowledge can also invite disgruntled heirs to contest your Last Will.
• Your family has no control. The probate process controls, and it can be very frustrating for your family to have to pay for the court to tell them who gets what money and when. This frustration very often leads to family feuds, disputes, and family members may even choose to contest the Will.
So as you can see, probate can be a very emotional and difficult process. If you ask anyone who has been through the probate process (like my father), they will very likely tell you it is something you want to avoid at all costs if possible.
That is why many families choose a Living Trust, also called a Revocable Living Trust. A Trust, if drafted by a seasoned Estate Planning Attorney, can be a comprehensive document that will allow you to avoid many of the challenges when handling a deceased estate, such as:
- Avoid the probate process
- It is extremely hard to contest
- Can potentially reduce or eliminate estate taxes
- Will preserve your privacy
- Expedite the distribution of your estate
- Allows parents of small children (like myself) to give specific instructions to the Trustee or Guardians as to when to make distributions to the children, what they can use the money for, and at what ages to begin letting the children have control over some (or all) of the monies
- Many other challenges such as special needs, special instructions, multiple marriage situations, etc.
So Which Is Better…A Last Will or a Living Trust?
The reality is there is no exact answer to this question, simply because either a Last Will or a Living Trust can be deemed as most effective, but largely depends on each families personal situation is unique. Therefore, as with any decision that is extremely important to your financial future, the best way to make the right choice is to seek the help of qualified and credible Estate Planning Attorney who can help you determine whether a Last Will or a Living Trust makes the most sense.
One last suggestion that is very important is making sure you work closely together with both your Financial Advisor and Estate Planning Attorney when determining your most appropriate wealth transfer strategy. The reason why this is so important is because you need to ensure that, whether you create a Last Will or a Living Trust, this document is not only established correctly, but also that it is properly coordinated and integrated with the rest of your comprehensive financial plan.
I cannot encourage you strongly enough to be proactive, and take the first steps towards completing this necessary part of your financial and funeral estate planning.
Personally, I am proud to say that my family and I have completed our Funeral Estate Planning, as well as coordinated it with our comprehensive financial plan. This helps me sleep better at night knowing I have created this all-important gift for my family…and I truly wish the same for you!
Christopher P. Hill, Founder