I received a phone call recently from someone inquiring about my services. She had purchased a self-help book on estate planning and had her needs figured out.
“We have beneficiary designations on our retirement plans and we’ve executed transfer on death deeds for our real estate,” she said. “All we need now is a simple Will.”
So I asked the caller to tell me a little bit about herself and her family.
She revealed that she and her husband had two children, one who just turned eighteen and another who was still a minor. They owned three homes: they lived in one and rented out the other two. They also owned a business that earned over a million dollars in annual revenue, had half a million dollars in inventory, and some intellectual property. Additionally, both she and her husband had significant retirement plans. Their estate was valued in the millions.
In other words, they needed more than a simple Will.
Based on her circumstances, a simple Will with an outright distribution to her children would not be a wise choice. Direct bequests to minor children of more than a nominal amount of money may require a probate court to appoint a guardian of the estate to oversee management of assets left to the minor. Guardianship is expensive and cumbersome and can be avoided by creating a trust. Furthermore, all assets subject to the guardianship would be distributed outright to the beneficiary at 18 years of age.
Creating a trust would allow the couple to appoint someone they trust to manage the significant assets their minor child would inherit, and dictate how and when it should be distributed. Even their young adult child would benefit from a trust when millions of dollars are at stake. Most people in their late teens or early twenties don’t have the wisdom or foresight to manage millions of dollars on their own and can easily fall prey to unscrupulous schemes.
Leaving the assets in trust for both their children would also provide the children with a level of asset protection they would not receive from an outright distribution and ensure the assets the couple worked so hard to accumulate would not be squandered. It would protect the assets from creditors, predators, and failed marriages. The trust could terminate after a certain number of years or continue indefinitely. In the case of a lifetime trust, the children could even elect to be co-trustees or sole trustees of their own trust at some point.
When an estate is valued in the millions and minor children are involved, a trust is essential. When an estate is valued in millions, even if none of the children are minors, trusts are a wise choice.
That’s why it’s important to seek out a qualified professional rather than attempting to engage in do-it-yourself estate planning. An attorney is not simply a document preparation service but a trained professional who can evaluate your individual life circumstances, advise you on the best way to accomplish your estate planning goals, and tailor your estate planning documents to carry out those goals.
A simple Will is appropriate in many situations, but can be disastrous in others. Talk to your attorney about what is right for you.