There are some very important differences between testamentary trusts and living trusts that will remain even after the newly-enacted Uniform Probate Code’s relevant provisions take effect here in Massachusetts next summer.
1. If time is money, then having to wait for your money is a waste of it. Putting a will and testatmentary trust through the probate process is still going to take longer than a private administration of a living trust. And while your loved ones are waiting, their money is being spent on unnecessary fees and expenses in the court – figure a minimum of several thousand dollars right off the top. Yes, the new law improves the probate process, but it doesn’t do away with it completely.
2. Records in the probate court, including wills with testamentary trusts, are still public, unlike private revocable living trusts. So to help you decide what makes sense for your family, you should consider whether you would be comfortable with anyone and everyone knowing how much money you are leaving to which people in which ways. Testamentary trusts will continue to be probated and be a matter of public record.
3. To properly protect your children’s inheritance when they do ultimately receive it, revocable living trusts are far superior to testamentary trusts. As a parent you need to ask yourself whether it is important to you to leave your children their inheritance in a protected way so as not to be squandered by your children’s perhaps less than fully mature choices such as impulsive spending, rash moves that cause the children to be subject to the claims of car accident plaintiffs, bad business decisions, or even unsuccessful first marriages. If not, you may be fine with leaving your children their inheritance to them to be distributed outright into their bank accounts to do with as they wish without any further protection.
4. There is the pragmatic question about the ease of updating and maintaining your estate plan current during your lifetime. A testamentary trust created by will must be revoked or amended by codicil with all the attendant formalities as the original to be effective. And codicils can get messy, clouding up even the best original will, and leading to confusion, so it’s often better to redo the whole thing. By contrast, a revocable living trust is super easy to amend and update as often as necessary and appropriate for your family’s changing circumstances, and all from the comfort of your family’s trusted lawyer’s office rather than an unfamiliar court proceeding with strangers. As I’ve hammered at many times before, it is of critical importance not to fall into the fallacy of believing that you can “do your will” once, set it and forget it. There is no surer way to an estate plan that ultimately fails to accomplish your goals and objectives when the time for it to work finally comes. Like most things, to ensure its effectiveness, an estate plan must receive regular maintenance or well-visit check-ups if you will. If, during a check-up, you realize you need or want to make some minor or even major changes, it is possible to do so quickly and painlessly with a revocable living trust.
5. The reality is that most of us are far more likely to be temporarily incapacitated during our lifetimes than we are to die prematurely, so disability or incapacity planning is of paramount importance. As all of us parents of young children know, between the regularly-scheduled well visits, we all have sick visits. With a revocable living trust you can provide an effective method for someone you trust to manage your affairs for you if you should ever become temporarily incapacitated during your lifetime without the need for court involvement and approval. You can be very specific, detailing what constitutes incapacity, who you want to be in control of your affairs, and what specifically that person can do. A testamentary trust cannot accomplish this as, by its very nature, it only comes into play after you are dead.