What is the best way to pass on your assets -a Will or a Trust?

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What is the best way to pass on your assets -a Will or a Trust?

My wife and I are in our mid to late 70’s and have neither a Will or a Trust. We each have an IRA and we own a home in CO and another in NM. We would like to leave our estate equally to our daughter and our 3 grandchildren. We have talked to an attorney here in CO and he says our best choice is a simple Will. This is counter to advice we have gained elsewhere. What to do?

Asked on August 10, 2011 Colorado

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Is there no one-size-fits all answer, since the facts--how much money is at stake, for example--is critical. Here are the pros and cons:

1) Setting up a trust can avoid probate, so your daughter and grandchildren will get the assets more quickly and IF the estate tax would be factor, the assets will be exempt from it. Of course, at present only estates over $1mm in value will face the estate tax; as the IRS notes, only the wealthiest 2% of Americans actually pay estate tax.

2) On the other hand, to get the advantages above, the trust would have to non-revocable or irrevocable, which means you are taking some of your assets out of your control while still alive and also interjecting a trustee--another person--into the control of your assets.

It's not either/or--you can put some assets in trust, have others pass by will. You can gift some assets outright each year while still alive. You could potentially make your grandchildren and daughter joint owners of some of your property (e.g. the NM home), as another way to avoid probate, or even give them property now (e.g. the CO home) while reserving a life estate (the right to live there for life) for yourself. There are *many* ways to pass assets, all of which have different legal and tax consequences. With two homes plus other assets, you should find a trusts-and-estates attorney you trust and explore your options with him or her, probably in conjunction with your tax advisor.


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