Q Dear Rick:
My husband and I are in our 50s. We have three grown daughters. One still lives at home. We own our own home and two vehicles. Other than that, we don’t have any other property. My husband has a 401(k) and an annuity. So those have beneficiaries on them. I was wondering if you thought a will or a trust would be better for us.
A Dear Kathy:
I think in your situation a will would be sufficient. After all, it appears from your situation that everything you own could avoid probate; therefore, why go through the expense of doing a trust when you can just have a will. In fact, the Michigan Statutory Will may fit your needs. The Michigan Statutory Will is a free fill-in-the-blank will that fits many peoples’ situation. In this will you can name beneficiaries as well as personal representatives. You can download a free copy of the Michigan Statutory Will on my website, www.bloomassetmanagement.com.
In reviewing the situation at hand, one thing you want to verify is that on your husband’s 401(k) and the annuity, you name primary and secondary beneficiaries. In addition, you should consider doing something with the deed on your home so that upon your and your husband’s passing, the property can go to your daughters without having to go through probate. A type of deed that you should consider is what is known as a Lady Bird Deed.
Trusts are not for everyone, but for many people they are an invaluable estate planning tool. Trusts can be used to control property past your death; for example, if you’re in a situation where your beneficiary will not be able to handle their inheritance. As an example it could be an adult child that is irresponsible with money. In those situations, a trust can be used to divvy up the property over time as opposed to a beneficiary receiving their inheritance in one lump sum. In addition, trusts are an effective estate planning tool to reduce or to minimize estate taxes. Particularly, for someone who has an estate over $10 million, a living trust can result in a significant tax savings. Lastly, a trust is a very good estate planning tool to pass property such as artwork and collectibles that do not have a beneficiary designation attached to them. By having a living trust, this property can avoid probate.
One last thing, even though I feel that in this particular case a will would be sufficient, don’t forget you need other estate planning documents as well. I’m a believer that every adult today needs to have a durable power of attorney so someone can take over their affairs in case of an emergency, and a medical durable power of attorney which allows you to state what your medical wishes are and who should be in charge if you cannot do it.
Don’t think estate planning is only for people with substantial needs; nothing can be further from the truth. Estate planning, in some form or the other, is important to all adults. Remember, a good estate plan doesn’t just deal with death but rather, also encompasses how to deal with a family emergency.