Wills and Trusts - What You Think You Know (But Probably Don't)
Apr 06, 2016
This article regarding wills and trusts by Michigan lawyer Nicole Wipp and the Family & Aging Law Center PLLC is not, and should not be construed as, legal advice. It is for general informational purposes only. To better understand how this legal concept can be applied to you, consult with an attorney.
Clients often come to me with ideas about wills and trusts that they learned from friends, neighbors, and the internet. I’ve come to realize that a lot of people think they know about wills & trusts - but they don’t.
Unfortunately, most people don’t ever find out they don’t know, because by the time it comes to light, it’s simply too late. Here are some frequently misunderstood facts about wills and trusts:
Wills: Your Ticket Into Probate Court
Listen and Learn! Nicole's Podcast Episode About Wills (click the orange arrow to listen):
- A will is, essentially, your ticket into probate court. Many people think that if they have a will, they will avoid probate. The truth is that it is exactly the opposite.
- Everything that your will says is completely public. Even worse, any property that passes through a will is public record. This can be bad for those left behind, because even the most sensible people, when in the grieving process or subject to stress, may be vulnerable to predators.
- All property that passes through a will, and therefore through probate court, is subject to any and all debt that you have during your life. I tell my clients, “Probate is a lawsuit you file against yourself, with your own money, on behalf of your creditors.” What this means is your creditors, not your family, often gets first dibs on your property.
- A will only controls what you own in your sole name when you die. If you have assets that are jointly owned, or have Beneficiary Designations (IRA’s, 401k’s, bank accounts) the property passes directly to that person, even if you didn’t mean it to. Another problem here is regarding minor children: if you leave money directly to a minor child via a beneficiary designation (many people do) -- guess what? -- you're asking for the court to get involved.
- A will is subject to what we call “the State’s rulebook.” What this means to you is that, regardless of what the will says, probate is a court process that may result in changes to what you wanted to happen - and you won’t have any control over that.
Trusts: YOUR Rulebook
- A trust, if written properly, is your rulebook. It gives your family your rules for life, disability, and death -without having the state, or the court, involved.
- A trust remains private, because it avoids probate. Any property in the trust passes the way you specifically want it to, based on the rules you set in it, without court involvement.
- A revocable living trust is like an “open box” - it does not provide asset protection to you during your life (but it can provide asset protection for your beneficiaries after your death).
- You may name a Guardian of Your Minor Child in a will or a trust if something happens to you. That being said, regardless of how you name a guardian, there is a court process that must happen to make it fully legal. Naming guardians in advance makes the likelihood of your child(ren) going to who you want much, much higher (unless the person you nominate is simply not appropriate).
- Irrevocable trusts may actually be written in a way that allows the grantor (you) to retain control of the trust - unlike the way irrevocable trusts worked in the past. Even better, a properly written irrevocable trust can provide asset protection to you during life - unlike a revocable living trust.
- A trust that isn’t funded properly isn’t worth the paper it’s written on. There are a lot of people out there that have trusts and think that they are covered. If your property isn’t titled properly into the trust, it’s not a part of the trust and will be subject to probate.
To hear more about Irrevocable Pure Grantor Trusts, Click Here. For more about Revocable Living Trusts, Click Here to listen.
Wills and Trusts: Which is Right for YOU?
Have more questions? Contact us any time at (248) 278-1511 to schedule a time to speak with our attorney, Nicole Wipp!
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