Navigating Life’s Legal Transitions

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Point of Law: Will, Trust or Nothing? [What difference does it make if I have children?]

by | Oct 24, 2020 | Firm News

family with their attorney

Many of our clients put off creating an estate plan because they don’t understand their options and…it is easier to do nothing.  The truth is that the options are not that complicated, once a competent estate planning attorney takes the time to explain them to you.  

Here is quick summary of what will happen if you die, intestate (without a will or trust), with a will, and with a revocable living trust. For this example, we are assuming you have two children, but no spouse:

  • Intestate. If you die intestate, your accounts and property will go through probate and all the world will know what you owned, what you owed, and who got what. Your mortgage company, car loan company, and credit card companies will all seek payment on balances you owed at the time of your death.  

Keep in mind that since your death has been published to alert valid creditors, it is not uncommon for predators (fake creditors) to come forth and make demands for payment – even if they are not owed anything.  

After that, state law will decide who gets what and when.  

  • For example, if your only heirs are your two children and you have not provided any instructions, state law will mandate divvying up proceeds equally.  
  • Your older child will get their share immediately if they have reached the age of 18. 
  • The court will appoint a guardian to manage the money for your minor child until that child turns 18. After that, your child will have full control of their money.
  • Your child’s guardian can charge quite a bit for their services and may be a total stranger.  
  • If you die without a valid will, the court, not you, will decide who raises your minor child.

The bottom line? Dying intestate allows state law and the court to make all the decisions on your behalf – regardless of what your intent might have been. Publicity is guaranteed.

Click here to read more about Estate Planning

  • Will. If you die with a valid will, your accounts and property will still go through the probate process. However, after creditors have been paid, the remaining accounts and property will go to whom you have named in your will.  
  • So, if you want to leave money to your children and name a guardian for the minor, the court will usually abide by your wishes.  
  • The same holds true if you specified that you wanted to give money to a charity, your Aunt Betty, or your neighbor.  
  • Keep in mind that predatory creditors are still an issue as your death has been publicized. Even with a will, probate is still a public process.

The bottom line? While a court oversees the process, having a will allows you to tell the court exactly how you want your affairs to be handled. But, a public probate is still guaranteed.

  • Trust. If you have created a trust, you have taken control of your estate plan and your accounts and property. Accounts and property owned by the trust are not subject to the probate process and one of the most important benefits of a trust is that the details and process of transferring accounts and property to the intended individuals is private

In the trust, you will have named a trusted individual (trustee) to manage your affairs with specific instructions on how your accounts and property should be dispersed and when.  

  • One word of caution – a trust must be properly funded in order to bypass probate.  
  • Funding means that ownership of your accounts and property has been changed from your name individually to the name of your trust. 
  • Think of your trust as a bushel basket. You must put the apples into the basket just like you must put your accounts and property into the trust for either to have real value.

You do still need a will (pour-over will) to get any accounts or property inadvertently or intentionally left out of your trust into the name of the trust. You will also still need a will to name guardians for a minor child.

A trust allows you to maintain control of your accounts and property through your chosen trustee, avoid probate, and leave specific instructions so that your children are taken care of – without receiving a lump sum of money at an age where they are more likely to squander it or have it seized from them.

Click here to read more about Estate Planning

Ora Schwartzberg is the founder of Schwartzberg Law and Legacy Strategies, PLLC in Plymouth NH.