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Comparing Simple Living Trusts And Wills /
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Comparing Simple Living Trusts And
by Michael Palermo
The possibility of leaving assets
outright to minor children may be the greatest
disadvantage of the simple Will. If the parents die
while the children are minors, a guardian must be
appointed over the children's inherited assets (and over
the kids themselves), and this is a cumbersome form of
property ownership. E.g., the law might require division
of an asset, such as real estate, among the children,
rather than holding it intact. Remember, too, that
guardianship usually ends at age 18 and assets must then
be distributed outright.
A Trust, on the other hand, might provide for
distributions only at a later age, once more maturity
and financial responsibility have been developed. Until
then, almost unlimited flexibility can be achieved in
the management of estate assets with a Trust. This
flexibility is desirable in dealing appropriately with
the unique abilities and opportunities (or disabilities
or illness) of each child, without requiring rigid
equality of spending over the years. This is the
approach most parents take while alive. (This ongoing,
discretionary power to "sprinkle" or "spray" money as
needed can be useful, too, in providing income for a
surviving spouse, while protecting the principal of the
estate for your children from a previous marriage.)
BEWARE ! But watch out if your Trustee might also a
beneficiary! E.g., Oldest daughter becomes Successor
Trustee, after Dad becomes disabled. If the Trust gives
the Trustee broad discretion to "sprinkle" income, all
that income might be taxable to her, personally - even
if she never actually "sprinkles" herself a dollar!
TIP: The Trustee should be specifically empowered to
"assist" a child's guardian, e.g., by adding a bedroom
to the guardian's house, or buying a bigger car. These
are things that, obviously, benefit the guardian, in
addition to the child.
Therefore, without this authority, the
Trustee might be uncertain about whether such reasonable
expenditures were, in fact, permitted by the Trust document
With a Will, in contrast to a Trust, the Executor's management
ends with his final report to the court, soon after completion
of his legal duties. So, many simple Wills provide that when
both parents are gone, everything is distributed outright,
equally among the children. Never mind about their actual needs.
With a Will, the way to be "fair" is usually to just be "equal,"
because it is written in stone.
Unfortunately, though, nobody can tell what
the future might bring.
Probate court supervision over sales, investments and accounting
after death can be reduced or eliminated if, at the time of
death, assets are already held in a living Trust. This factor
can save time and expense, too.