Matters of Life and Death
Bob and Elaine Kinne had been married for 38 years and had always talked about getting their wills in order but just never seemed to get around to doing it. “We thought we were still young and you never think something is going to happen,” says Elaine, 66. Then, four years ago, Bob was diagnosed with an aggressive pancreatic cancer, and the couple found themselves quickly drafting up a will on his deathbed. “He went into the hospital on a Wednesday, we did it on Sunday, and by Monday he couldn’t have signed anything because he was in a coma — that’s how fast it was,” she says. “The following Sunday he died.”
No one wants to think about his or her death. After all, it’s kind of creepy to picture yourself pushing up daisies. Which is probably why many people put off getting their financial affairs in order in the first place. But by delaying drawing up a will or putting your assets into a trust, it only makes it that much harder for those who survive you once you are gone. Deciding what to do with your property is another reason many procrastinate. Will? Trust? What are the advantages and disadvantages to each? (See chart.)
Simply put, a will is a legal document stating what you have and who you want it to go to when you die. “A will is probably the centerpiece that someone living wants to do with their remaining property at their death,” says Donald Gartrell of Gallagher, Callahan & Gartrell Law Firm in Concord. “In the best-case scenario, it’s everything you have and anything you can conceive of having. It’s the distribution of property to your surviving spouse, if there is one, your children or other beneficiaries.” In Kinne’s case, it was a very simple will, since everything was in both of their names and their house was paid off. Their children were also grown and on their own.
To make sure your wishes are carried out the way you want, you must appoint an executor to your will. A will also goes through probate court to determine its validity, and becomes a public document once it’s filed after your death. So whether you’re an Anna Nicole Smith or an Average Joe, you might not want what you have becoming public knowledge. Saddling your heirs with possible estate taxes once you die is another deterrent to a simple will.
On the other hand, a trust avoids going through the courts upon your death and remains private. “The virtue of having a trust is that you avoid the probate process of proving your will and carrying out its provisions in front of a court,” says Gartrell. “You can have your property held in trust yet still retain some control, and then distribute it and avoid some of the tax consequences at your death.”
In his experience, Gartrell also sees another advantage to trusts: “In this day and age, some people are concerned about their kids and grandkids getting involved with drugs and alcohol and having it impair their judgment. A trust gives the person running it the ability to make determinations if the recipients are indeed capable of receiving the property, and if not, to provide for their treatment.” If you think this is an issue just for the Lindsay Lohans of the world and can’t happen in places like Concord, N.H., think again. “I’m seeing it a lot,” says Gartrell. “Rather than give a gift outright, or at the age of majority, our clients are putting it into a trust format to be managed with responsibility. There are no liabilities against the property because [the recipients] don’t control it.”
After her husband’s death, when everything was settled, Kinne decided to form a trust with the money Bob had invested in his 401(k) and from his life insurance, with the help of a financial planner and a lawyer at Franklin Savings Bank. “Now I have a living will, a will and I have a trust. I set it up so that if something happens to Jeff [her son], Matt and Mason [her grandsons] will have to wait until they are 25, out of college and have their feet on the ground to get their inheritance.”
As an attorney with 42 years under his belt, Gartrell advises to always seek legal counsel to come up with an estate plan that works for you today. “I hear ads on the radio for what I call ‘drugstore wills’ and people who don’t understand what the alternatives are or the ramifications of tax consequences fill in the blank and sign it, when they really need some guidance and advice, someone to bounce issues off of.” He adds, “The federal tax laws were revised 10 years ago, and in 2010 the changes that were made are going to be undone and they’re going to start all over, so it’s a constantly changing field. And unless we see something extraordinary to simplify the tax code, you need someone who is on top of it.”
Whether will or trust, it’s important to update it periodically, especially after a major life change such as serious illness or the birth of a child or grandchild. One couple that Kinne has been friends with for many years has 12 kids and 14 grandchildren, and a lot has changed since they drafted their original wills 40 years ago. “They keep telling me ‘We have to do something,’ and I keep telling them to do it,” says Kinne.
Kinne knows from personal experience how waiting can be more stressful in the end. So she has taken steps to eliminate that worry for her two sons and their families. And her sons have also learned a hard lesson. “It taught the kids — they went out and got their wills done, and I’m grateful for that.” Her advice? “Don’t wait. It was foolish on our part to wait until Bob was sick like that. I don’t have a lot, but I have enough that I want it done right for my kids and grandkids,” says Kinne. NH