Several years ago, a Hollywood movie dominated theaters and raked in millions of dollars despite a serious but largely unnoticed flaw in the plot. Did you catch it? I didn’t, but Jason Morris, a very smart estate attorney and this week’s guest writer, did. Let me give you a hint: it has to do with having a trust for your estate. More about the flaw in a moment.
Should you have a living trust or not, and why does it matter? If you don’t care what your loved ones will have to go through when you start pushing up daisies, then it doesn’t matter. Over the last couple years, I have watched friends go through the pain of losing a parent, only to have to suffer the additional stress of managing the parent’s estate. It is not a pretty picture. I don’t think the parents intended it to be that way, but they were either naïve or in denial about the fact that one day they would not be here to take care of their own stuff.
When one’s estate is not properly set up to pass along to the next generation (or whatever the scenario may be), it can be a serious burden on the surviving family members. My friends have spent thousands of unnecessary dollars, not to mention heartache — plus time away from their jobs and families — to clean up their parents’ estates.
Having a living trust is essential for anyone with any assets. Otherwise, it will be off to probate hell, which, in the U.S. lasts for a year and a half on average. Don’t let probate be the last memory your kids have of your legacy!
Below is an article by my personal friend Jason Morris, and one of Reno’s best estate planning attorneys. In it, he explains why everyone needs a trust. If you’re rusty on the difference between a trust and a will, just know the main difference is that a will only takes effect after you pass away, whereas a trust starts working immediately and can actively distribute assets while you’re alive. If you haven’t already drafted a living trust, stop putting it off and just get it done. It is the right and loving thing to do.
Hollywood Estate Planning Mistake
By Jason C. Morris
In the Hollywood movie, Inception, Leonardo DiCaprio plays a corporate espionage thief who extracts information from subjects while they are dreaming. DiCaprio and his crew of thieves are hired to plant an idea in the mind of an heir to the world’s most powerful energy company. The spies try to coax the heir into believing his father wants him to break up the father’s vast energy empire. The flaw in Inception is that the dying patriarch of the energy giant sets forth his wishes in a “Last Will and Testament” only. What, no trust? Is he crazy? What’s more, am I the only person who noticed that he didn’t have a trust? It’s understandable if the average viewer didn’t pick up on it, but from an estate planning perspective, it was a glaring error in the movie plot. A smart business owner or energy titan would not hold business interests outside of a trust, having his or her wishes only set forth in a will. No way, José! A trust serves many valuable functions and is not just for business owners or the wealthy. Here are five imperative reasons to make a trust part of your estate planning:
1. A Trust Provides Financial Management of Your Property
You may act as trustee at first and later decide you no longer wish to do so. A trustee or successor trustee whom you’ve appointed can take over the day-to-day asset management.
2. A Trust Provides Property Management if You Are Unable to Manage Your Affairs
If you become too ill or disabled and cannot manage your assets, your trustee or successor trustee will do this for you. With no trust in place, you would need a guardianship (or a conservatorship if you live outside of Nevada). You can avoid the trouble and expense if you have a living trust.
3. A Trust Keeps Your Estate out of Probate
The nasty “P” word is something to avoid at all costs. Any property left outside your revocable living trust must go through probate after your death. That is a miserable expense, not to mention a long, drawn-out process for your heirs. They will be cursing your name at times if you make them go through that horrible experience.
4. A Trust Allows for a Quick Distribution to Beneficiaries
This is another advantage of avoiding probate, since probate delays asset distribution. With a trust, your trustee can distribute assets to your beneficiaries sooner.
5. A Trust Ensures Privacy of Records
Your trust will not be divulged to the public, as trusts are not filed in public records. Wills, however, are lodged with the court as part of the public record. When a celebrity will is lodged, the will is available online the same day. There is no assurance that a dream thief like DiCaprio cannot access your wishes, but if you only have a will, privacy is a moot point.
As important as trusts are, they don’t eliminate the need for a will, so make sure you have both. For example, if you have property that never gets transferred to your trust, a will can act as a backstop to ensure that the property is appropriately transferred.
Setting up a trust may seem complex (that’s what estate planning attorneys are for), but the message is simple: whether you own the world’s largest energy company or are just one of us regular folks with assets built up over time, it’s imperative to draft a living trust.