In Part 1, of this series, I explained how disclosing information about legal services benefits clients, namely by helping you save money. For me and my colleagues, the benefit comes in happy clients, more clients, and less stress.
So, to continue gently pulling back Mr. Wizard’s curtain, the following are the last 6 of the 11 truths.
- Trusts are for old folks with lots of money.
Truth: Trusts are also for young folks who have loved ones they want to protect, e.g., new partners, newlyweds, and children.
- My trust will not be affected if I move to another state.
Truth: It depends. The document itself is not really affected unless it specifies a choice of law, and most do. This may be problematic because if you’re no longer in the state where the trust was created, the judge may consider it a jurisdictional problem. However, this can be easily remedied by amending the trust to reflect your current residency. Still, you might want to consider the valuation of the asset distribution with respect to state estate and gift taxes. Another challenge may also arise if you’ve moved from an equitable distribution state, like Illinois, to a community property state.
- Bank or corporate trustees are generally unnecessary.
Fact: Bank or corporate trustees are generally very necessary for 2 reasons. First, they can be considered a neutral party so that if family members question a particular distribution term of the trust, the dispute is with someone outside the family, which helps maintain family harmony. Second, institutional trustees are often more financially savvy than family members. Now, there is, of course, a cost to having this peace of mind. Yet, small banks may be more willing to assist families with small trusts. (Thank you to my colleague, Ray Prather of Prather Ebner LLC.)
- Having an attorney review my DIY trust is unnecessary because the entities holding the assets determine its legitimacy.
Truth: Yes, the banks and other entities that are asset-holders have the final ‘say-so’. But if they say, “Yes,” are they really correct? Consider this: Your trust only provides for your named children. The bank says the trust is valid and technically it is. Then later, you adopt or have another child but you don’t change the trust. The later child will be at the mercy of the trustee and the court. Attorneys are trained to ask questions related to these types of situations, which you may not consider when writing the trust yourself. You’ve already saved yourself money by drafting the document yourself. Allowing an attorney to review it in earnest, not just take your list through an auto-checklist like an auto-car-wash will also save your family money and potential heartache.
- Wills must go through probate.
Truth. Most wills do go through probate. On the other hand, in Illinois, if the estate is less than $100,000, it is considered a small estate and in certain circumstances, probate may be waived. Moreover, if you have a trust with a pour-over will, irrespective of the size of your estate, probate may also be avoided.
- A trust should list all of the client’s assets.
Truth. A trust should not detail every asset but only those assets listing title owner as the trust are covered by the trust.