Now that we have a little one, it was important for my wife and me to look at preparing our first will and trust as a family. Being financially responsible for another individual is a huge responsibility, and we wanted to make sure that he was taken care of should anything happen to us.
But that is easier said than done. In fact, the whole process has taken us several months now to complete.
Let me walk you throughout the process of preparing our first will and trust to take care of our family and ensure our little one is taken care of.
Assessing Why You Need a Will and Trust
The first thing you need to consider is why you need a will and trust. For us, the choice was simple — we needed a way to make sure that our child was taken care of should we die. That's why we wanted a will and trust.
A will is pretty simple — it simply states where you want your assets to go when you die, and also who will take care of your children. This was the document we needed to prepare to ensure our wishes with our son were carried out should we die.
The trust is more complicated. We wanted to have a trust for several reasons:
- If our son is a minor when we die, he can't inherit our assets directly anyway.
- Since he couldn't inherit our assets directly, our estate would have to go to probate, which would be costly and a hassle for our loved ones.
- Should nobody survive us, it allows for clear dispositions of our assets in a manner we wanted — what the probate process might not have done should we not have explicitly asked for it.
There are other options for estate planning, but if you have children, a will and a trust make the most sense.
Finding the Right Attorney to Prepare Your Will and Trust
Since we decided that a will and trust were the right choice for us, we now needed to find a lawyer to help us draft it. There are options for you to do it yourself, but this was important to us, and ideally, there could be a lot of assets in the trust upon our deaths, and we wanted to make sure that everything was done correctly.
For us, this meant finding the best estate lawyer. The best advice we received was to use a lawyer that specialized in estate planning, and you can find that lawyer through your state bar association.
Most states certify lawyers in specialties, and estate planning is one of them. When I looked up the state bar website, I found five lawyers in my area that had this specialization, and I contacted them to discuss — eventually settling on one.
What You Need to Bring to Set Up Your Will and Trust
When you set up your first appointment, you'll want to be prepared. Most lawyers charge by the hour and by the service. For setting up a will and trust, our lawyer charged a flat rate for the items, which included a 1.5-hour appointment upfront and a 1-hour appointment to execute everything with a notary public. If our estate was more complicated or took more appointments, we would then be charged an hourly fee of $400 per hour.
As such, it's super important that you come prepared. After talking with the lawyer prior to the appointment, we learned we should bring the following (in an organized manner):
- Copies of all prior estate planning documents (if applicable).
- A financial statement, in any format, which shows what you own, how title is held, and the approximate value. Include life insurance showing who is insured and the face amount.
- Copies of deeds and real property tax bills for each parcel of real estate you own.
- Evidence of ownership in any other assets (including businesses).
- A family tree.
Also, it is important that you have a good idea regarding to whom (or where) you want to leave your money, and also who will take care of your children, if applicable. For us, it was also important to have conversations with those people ahead of time, so it wasn't a shock. In our case, my wife's sister would take care of our baby boy should anything happen — but we wanted to make sure she was okay with that as well before making any decisions in writing.
So, prior to your appointment, make sure you have in mind:
- Selection of the “executor” of your will and trust, including 2nd and 3rd alternates.
- “Trustee” of your trust upon your death, including 2nd and 3rd alternates, and what happens if nobody survives (e.g., charity).
- Who will have power of attorney if you're incapacitated.
- Who are you comfortable making medical decisions on your behalf.
Understanding Your Will and Trust
It's extremely important that you fully understand your will and trust once it's created. Our lawyer sent us physical copies of the wills, trust, and power of attorneys to review prior to signing and executing. My wife and I then went through and read to make sure everything was correct.
When we were reviewing the documents, we discovered several things we missed, and also a choice on beneficiaries we needed to change. It's important to catch these things up front, so you don't have to pay to have them redone quickly.
An ideal will and trust will last many years, and require few changes.
Executing Your Will and Trust
Once you're completely satisfied with your will and trust, it needs to be executed. This means several things.
First, it needs to be signed and notarized. In many counties, it also needs to be filed with the county clerk to be official. In our state, in order for power of attorneys to be valid to conduct real estate transactions, they must be recorded at the county clerk. One of the main assets in our trust will be our home, so this was very important.
Also, filing the documents with your county clerk and having them recorded makes them much more official. Should someone contest your estate plans after your death, this act goes a long way to show that you meant what you did.
Second, once your trust is recorded, you need to actually put your assets into the trust. This is the more time-consuming portion of setting up a trust, but a good lawyer will do a lot of the legwork for you.
Our lawyer drafted quitclaim deeds to change the title of our home into the name of the trust, and filed those for us. Our lawyer also caught something interesting: the way we held title was “wrong” (i.e., not ideal). As such, we actually had three quitclaim deeds that needed to be filed in the proper order to transfer the house to our trust.
Finally, we set up our life insurance beneficiaries to match our wills and trusts. That meant keeping each other as the primary beneficiary, and naming the trust as the secondary beneficiary. The reason for this is because our child is a minor, and the trust would be needed to hold the money on his behalf should we both die.
While not difficult, all of these steps take time. We had to go and open a new brokerage account in person, because they wanted a copy of the trust document when opening the account. For our life insurance policies, we had to send in a physical form stating the beneficiary change (which we also had to request sent to us via mail). Bottom line is, even after the trust was official, it took several weeks to get everything put inside of it correctly.
What You Need to Remember Going Forward
Going forward, it's important to remember how your estate plan is setup — both of you. When making purchases, you need to decide if you're going to buy them inside or outside the trust. For example, our next home will be purchased inside the trust.
Second, we need to remember the tax implications for the trust, since it's now its own entity. Our accountant will take care of this for us, but it's just something to remember. Your tax situation will depend on the type of trust you created. In our case, a living revocable trust doesn't have anything special, but other types of trusts do.
Finally, just because you have a lot of final instructions listed in the will and trust, doesn't mean it covers everything. Along with our estate plans, we put together a document laying out everything someone may need to know in the future. This document included things like:
- List of bank accounts.
- Where to find stuff (documents, birth certificates, etc.).
- Computer passwords (including Quicken).
- Where our life insurance policies are.
- Location of safe deposit box, keys, etc.
- Important recurring payments to remember (e.g., property taxes, cord blood banking, etc.).
There's a lot to think about when it comes to planning for your will and trust, but it will make the financial transition easier for your loved ones if the time comes too soon.
Have you set up a will and trust for your estate plan? How was your experience?