Unobstructed Thoughts


Will vs. Trust: Which One is Right for My Family?

Pipe

As I write this blog on Super Bowl Sunday, nothing could be more opposite of the Rams vs. the Pats than Wills vs. Trusts. At least on the big day someone is going to be happy and, with any luck, we will get to watch a good game and, more importantly, some funny commercials.

But who wins with a Will or Trust … well you do. No matter which one you choose you win and your family wins. For the big decision let’s think about the players and the teams.

First there is your team – you and your spouse are the head coaches, your children are the players, and the grandkids, if you have any, are on the practice squad.

The opposing team – the Probate court in your locality.  The Judge is the head coach and his/her players are the aides and assistants in the court.  And you can also consider the IRS as part of the opposing team.

And the referee, well that is your Attorney.  They’re there to make sure you play by the rules and write a good document that is up to date with all the latest rules and laws that govern estates in both the federal and state arenas.

We begin our game with the coin toss … heads is Will, tails is a Revocable Trust. Either way you win, but let me explain both:

A Last Will and Testament:

In this document you state who gets your assets when you pass away. Your quarterback in your Will is your Executor or Executrix – the person you place in charge of the estate and your assets. His or her job is to first asses and gather all your assets, be it property, securities, collectibles or other, and then come up with fair values for each and eventually distribute per your wishes stated in your Will. They must file an estate tax return with the IRS, which is generally due nine months after death, and periodically will have to report to the probate court to prove they are following the law and dictates of your Will. Once the tax return has been accepted and the court signs off, your Executor can then distribute the assets. For the majority of people, this process is not a big deal but delays in court can extend the time it takes to make all of this happen. Also keep in mind, as this is a public court, the proceedings, assets, and distributions are pubic record.

A Revocable Trust:

This accomplishes much of the same as above although some of the terms are a little different. The Executor is replaced by a Trustee – but the roles are very much the same. When you first draft your Trust, you can be your own Trustee to govern your assets as you see fit, and when you pass away, you name a Successor Trustee who will become the new head coach. One thing that a Revocable Trust has over a Will is that should you become incapacitated, either temporarily or permanently, your Successor Trustee can step into the role of Trustee to make sure everything goes per your dictates that you stated in the Trust. As long as you are alive and of sound mind, you can change and amend your Trust. When you pass away, your Revocable Trust now becomes Irrevocable, as in you can no longer make changes.

Now the Trustee has the same job as above, gather your assets, report to the IRS through the estate tax filing, and then once the return has been accepted they can distribute your assets. One key difference is there is no court process involved. Why is that important?  Well, because the courts are not involved, the proceedings are kept private.

The most important part after drafting your Revocable Trust is to place all of your assets in the Trust. That means retitling bank and brokerage accounts, houses, cars, property and other items you may own. This might take a little time but without this key step the Trust could be considered not funded and then your estate will end up in probate court. Think of this as practice before the big game … it’s tough to win if you don’t practice.

So just like the big game, you must show up, have a strategy, make some decisions and, by doing so, you win and your family wins. Everyone loses if you don’t have a Will or Trust.

I am not sure of my next blog topic but I will try to work on my baseball analogies … pitchers and catchers report soon.

Peter Lang – Managing Director – HighTower Westchester

914-825-8631 – plang@hightoweradvisors.com

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