There seems to be an eternal debate in estate planning between having a trust or simply writing a will.
But when one reads about the subject, it seems that the particulars are so complicated that it is difficult to make blanket statements like "everyone should have a trust" or that "trusts are for millionaires".
Whether or not one should have a trust or a will -- or neither -- seems to depend on one's specific family situation and in which state one lives. For example, if one has a disabled family member that one is caring for and supporting, a trust can help to keep financial support in place without interruption. If one has a member of one's family whose spending is problematic (e.g., substance abuse issues), a will or trust helps to exclude them from an inheritance (for their own sake, if anything) that might otherwise be automatic.
Universalized estate planning advice seems dubious. For example, the celebrity financial advisor Suze Orman argues that "everyone should have their own trust".
Suze Orman may believe in her mission, but her ability to communicate so effectively with audiences might be linked to a tendency to provide overly simplified advice. Moreover, she is a salesman at heart and sells a Do-It-Yourself trust kit for $100.
This opens up another can of worms....
Do-It-Yourself options are free. One can make one's own will for free.
The rules vary from state to state (for example, California):
Here's how to make one's own DIY revocable trust.
Doing it on one's own involves a lot of reading and work.
Whether one gets a lawyer or resorts to DIY, the most important issue in estate planning might be "Know Thyself".
There might be a crude guideline for who should get a trust or a will.
Two facts that can help one decide whether to make a will or trust are that 20% of Americans have trusts and 20% have wills.
Revocable trusts tend to work for upper-middle class families, and wills tend to work for middle class families.
Here is an extremely simplified breakdown of class structure in the US involving income, education level and type of employment:
- 20% upper-middle class professionals; graduate degrees; income $100K+.
- 20% middle class households with college degrees; income ~$50K.
- 20% lower middle-class with some college; incomes ~$25K.
- 20% working class with high school diplomas.
- 20% poor (half are "working poor", half are "underclass").
This list excludes the top 1% of income earners -- the upper class -- whose incomes begin at $400,000. For the top 1%, an irrevocable trust is relevant. For this group, the benefits of and need for an irrevocable trust are very real -- privacy, and protection from lawsuits and taxation. (On the other hand, an irrevocable trust has a life of its own, and should only be drafted by an experienced lawyer.)
There is a gulf between those who should get a trust and those who can get by with a will, but there might be an even greater chasm between revocable and irrevocable trusts and who should get them.
