Speakers: Maritess Bott and & Unidentified Off-camera Speaker
[Music]Off-camera Speaker:
Hey Maritess, I would love to know the benefits of having a trust over a will.
Maritess:
Yes, that is a great question — probably one of the most common questions we receive as estate planning attorneys. I’m Maritess Bott. Thank you for joining us, either on the video or by podcast. Today’s topic will be about the difference between wills and trusts, but I want to share it through a particular example. This was years back, and I want to explain why the trust was a better solution for this family.
We did the estate plan for a mom and dad years ago. They were a really nice couple with three adult sons and grandchildren. We set up their estate plan, and about five years after we created the trust, mom passed away. That was fairly straightforward, because most of the time when one spouse dies, the surviving spouse takes over and accesses all the money. Unless there’s an estate tax issue, we usually do a few things, but there’s not a lot to handle when it comes to trust administration at that stage.
Now dad is alive — the surviving spouse. I had some nice conversations with him, and we discussed any updates or changes. We made a few updates over time. Then one day, one of the sons called me and said, “Hey Maritess, I want you to call my dad and find out if he’s okay. He met someone at the grocery store.” Mind you, he’s in his late 80s, and he met a woman in her 50s who had children of her own. She wanted to befriend him, make dinners for him, and they became friends. The son was concerned, which I understood, but I also didn’t want to meddle too much in something so personal.
I did check in on him. He seemed to enjoy the attention of this younger woman. Fortunately, it lasted only a couple of months — they were friends, and nothing more came of it. I mention this because there are people out there who might look at someone like him and think, “I’m going to befriend him, then marry him, and then all of a sudden all his wealth goes to me.” The son suspected that could happen, and it easily could have, but in this case it didn’t. They had a friendship, and it ended.
Fast forward — he passed away at the end of December. He had a trust with us. The middle son, who was the successor trustee, came to us, and we discussed what to do with all the assets. The total assets were about $3 million. There was a house they had lived in for many years. We had a plan of action: clean out the house, sell it, and get all the other assets retitled among the three sons, who were all adults.
During trust administration, there are lots of conversations, phone calls to financial institutions, and some correspondence. The initial question was whether a trust is better than a will. In this situation — as in many others — the trust was far better than the will.
If we had only a will, I would have had to go to court, open a probate estate, and publish in a newspaper to notify creditors and others to file claims. Their information would have become public record. That means predators, neighbors, and anyone could see that each of the three sons was receiving about a million dollars in inheritance — and the court documents also list where they live. These are important details that should remain private.
Because they had a trust and I had been working with them for many years, everything was already in place. We didn’t have to open probate. We got everything secured, and by July everyone received their portion. The house was sold, and the proceeds were divided.
Then there was a sad twist. Dad had died in December, and we had been working all year to finalize and divide everything. In September, I spoke with the trustee son — my client — and said, “I think we’re ready to wrap up.” That was on a Friday. Sadly, on Sunday, I got a call from his brother telling me that my client, the middle son in his 50s, had passed away suddenly from an aneurysm. It was devastating and unexpected.
I went to the funeral and spoke with the other brothers. We had to continue finalizing the estate, and now I was speaking with the next successor trustee, one of the remaining sons. At that point, the trust provided for the grandchildren. Thankfully, long ago, when I was talking to mom and dad, I encouraged them to make provisions for their grandchildren, in case they eventually inherited the money.
Of course, you assume your children — in their 40s or 50s — will live a long time. You never think it will happen so soon. But this shows we never know our timetable. Dad dies in December, son dies in September — who would ever have thought that?
I’m grateful we took the time to include the grandchildren in the trust. They were in their early 20s, and receiving a large sum of money — half a million dollars each — could have turned their lives upside down, both positively and negatively. But grandma and grandpa had wisely decided that the grandchildren should earn their keep and receive the money over time. We included a provision for them to get their inheritance gradually, not all at once.
I’m glad we had that conversation — to think beyond just the first layer. People always tell me, “My kids will survive me, so it’s not a problem,” or “We’ll never have a situation like that.” Unfortunately, I’ve seen it all happen. That’s why I always want to plan for every circumstance, even those that seem unlikely.
In the end, this family — mom and dad — worked hard, accumulated a nice-sized estate, and planned properly. Mom died, dad inherited, then dad died, and the assets went to the right family members at the right time — privately and efficiently. Now the next generation will take over those assets and hopefully create their own estate plans to pass them on to the right people.
So, is a will better or is a trust better? This story clearly shows how important a trust is. I can’t emphasize enough how much better the trust is. Whether you have $300,000 or $3 million, it’s not about the amount — it’s about the hassle, expense, and time your family would face going through probate to receive their inheritance.
Don’t assume that just because you have a small estate you don’t need planning. Maybe you think you don’t need a trust, but most likely, a trust will be a better option for you. It really will.
Hopefully, this podcast and lesson have given you something to think about. If you have questions about your own estate and how to protect your wealth for your family, call us. It’s a consultation with a $500 fee. Patty will get to know you, figure out what’s best, and provide recommendations to help you move forward.
Again, I’m Maritess Bott. Thank you for watching, thank you for listening, and we’ll see you next time.
[Music]
