Even if you have children, a will may still be enough. "For young couples, a will is usually sufficient," says Ronald Morton, founder of the Morton Law Firm PLLC in Clinton, Miss. "Generally speaking, your assets aren't significant, and the primary item to address is guardianship of your minor children if both parents die."
2. Living trust
A living trust is a contract that holds title to and controls your assets. "You put in that document all your plans, wishes and desires," says Wade Vose, a partner at the Vose Law Firm in Winter Park, Fla., "of how you'd like those things controlled during your life, during disability and when you pass on."
One difference between a will and a living trust is when they take effect. "A will takes effect only when you die," says Kristi Mathisen, a CPA and estate planning attorney at the Seattle wealth management firm of Laird Norton Tyee. "A living trust takes effect when you execute it and begins to operate when you transfer assets to it. So if a person who makes a will becomes disabled, the will is of no value to the family in managing the person's assets. That's not true for a living trust, which can provide for a replacement trustee when the trustee becomes incapacitated."
Vose says trusts are just about always preferable to wills. "One common reason you'd like a living trust is that when done properly, it avoids the probate process, which is long, expensive and very public," he says. "With a living trust, your assets can pass to your beneficiaries privately without having to go to court, and it's generally a less expensive process."
Saying probate is expensive can be an understatement. "In California, the statutory fees can be 3 percent to 5 percent of an estate," says Alan Spiegelman, a wealth management adviser at Northwestern Mutual Wealth Management Co. in San Francisco, who recently shepherded a friend's estate through probate. "Handling my friend's estate took at least 200 hours because he had a will but no trust, and it cost nearly $200,000 in legal fees. If there had been a trust, the assets would have passed outside probate court."
In Ohio, probate costs are 4.5 percent of the first $100,000, 3.5 percent of the next $300,000, and 2.5 percent of everything over that amount, says Mark Clair, an attorney at The Clair Estate Planning and Elder Care Law Firm in Maumee, Ohio. Nonprobate costs are typically 1.5 percent.
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Even if you choose a trust, however, you should also opt for what's called a pour-over will. "It's a will that pours over into the revocable living trust any assets that aren't titled in the trust at the time of your death," says Steven Oshins, a partner at Oshins & Associates LLC in Las Vegas. "It's necessary because people often neglect to retitle all their assets in the name of their living trust, and a pour-over will act as a catchall to capture those assets. However, those assets will go through probate."
Whether you go with a will, a trust or both, go with something. "Anyone who has any assets that they care where they go after their death should have an estate plan," says Spiegelman. "If you say you don't have an estate plan, you actually do. It's just an intestate plan, in which your estate plan is by default decided by a judge according to your state's law."
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