By Dr. James M. Dahle, WCI Founder
Ronald Farrington Sharp
I read a fantastic little book the other day called Living Trusts for Everyone. It is subtitled “Why a Will is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates.” In just 117 8″x5″ pages (1-2 hours of reading), you'll be convinced that you want to have a revocable living trust rather than just a will in place when you die. It was written by Ronald Farrington Sharp, an estate attorney. Sometimes it doesn't seem like there are very many “good guys” out there any more, but like Steve Weisman, whose annuity book I reviewed recently, and Jack Bogle, Ron Sharp is one of them.
Overview of Living Trusts for Everyone
He starts out the book explaining why wills are a profit center for attorneys. Sure, you pay less up front for a will than a trust, but when you die what do your heirs do? They go to the attorney's office to get the will and guess who they hire to take them through probate? Whether billed hourly at $150-$500, or as a percentage of the estate (1%-4% is typical) those fees add up fast, never mind the government probate fees and the expenses for the executor. $30K total on a $500K estate would not be an unusual amount. While you may be able to get a will for as little as $250 instead of say $3,500 for a trust, it's the wrong move financially in the end.
The other big advantages of a trust over a will are that it saves an immense amount of time and effort (you avoid probate with all assets inside the trust) and it gives you a lot more privacy. When your estate goes through probate anyone can see what you owned.
There really aren't any significant tax or asset protection benefits for a trust, so it is really all about the estate planning.
The book shows you what reasonable prices are for estate planning, as well as some of the “tricks” less ethical attorneys use to run up the price, and how to avoid them (See Chapter 4 – Trust Seminars: A Free Dinner, But at What Cost? and Chapter 5 – Watch Out for Attorneys).
Two of my favorite chapters were the ones on who MUST have a trust and who DOESN'T need a trust.
Who must have one?
- Those with minor children
- Those with disabled beneficiaries
- Those with spendthrift beneficiaries
- Unmarried couples (whether gay or straight)
- Blended families
- Estates subject to the estate tax (the exemption is currently [2022] $12.06 Million single and $24.12 Million married)
- Those who want to avoid the costs and hassle of probate
Who DOESN'T need one?
- Those with no assets (if you have less than a certain amount, you don't go through probate)
- Those whose assets all pass outside of probate anyway: life insurance, retirement accounts, jointly owned assets, gifts, or transfer on death deeds
Perhaps the most important (and longest) chapter in the book is the one that provides instructions to the trustee in the event of your death. Mr. Sharp is quick to point out that not all work done by attorneys in the event of death is actually LEGAL work, and that the trustee can do it just as easily as a lawyer, he just needs to know what to do. This chapter takes you step by step through all the little things that need to be done after death, from cancelling credit cards, to getting death certificates (order at least a dozen), to notifying creditors, to contacting the V.A. This list by itself is worth the price of admission to the book.
Should Your Read the Book Living Trusts for Everyone?
The cover price is $14.95, but I see it on Amazon for as little as $8.74. That's a bargain by anyone's standards. Buy the book, read it, then go get your revocable living trust. It probably isn't the first thing you need to do when you get out of residency, but don't put it off too long. You certainly should get it done by the time you turn 40.
Good post.
$3500 for a trust is a lot. We paid about half that for the whole package (revocable trusts, wills, POA, health care documents, etc. for both of us) with a dedicated estate attorney in a large city with LOTS of customization of the documents.
I think I am on the same page with the above, overall. Just to add, minor children trumps no assets, in my opinion. If you have minor children, you should have revocable trusts in place even if you don’t have ANY assets (or even a negative net worth). Any physician with children and few assets should have at least a couple million dollars in term life and you need to make sure that there is an appropriate plan (i.e. a trust) in place that makes sure the money will benefit them appropriately. Assuming you pay 1500 for the trust and die with 3M in insurance, the net cost if trust is implemented will be 0.05% of the life insurance proceeds, which would absolutely be worth it. The trust cost would be somewhere in the ballpark of a year’s premium on 30 year term insurance. For me, just the peace of mind was worth every penny.
BTW, before meeting with the attorney, I would recommend buying a cheap do it yourself online kit and going through it in detail so you know exactly what questions to ask. Will save time and money.
And for those of you in the military, the JAG provides all this. I am in the process of having my will, trust, and medical POA update as I am leaving the service. All free of charge for you and spouse.
Interestingly, when I had an attorney prepare a will last year he said that parents with minor children do no need a revocable trust. He said that the purpose of a revocable trust is to avoid probate and probate cannot be avoided if a court has to determine guardianship of a minor child.
With all due respect, I believe this advice is misguided. While I do not have all the facts, what happens to life insurance proceeds ( or any of your assets for that matter or joint property for instance) on you if you die simultaneously with your wife? This is a case where a trust should be named as a contingent beneficiary. So in my opinion a trust is absolutely required and recommended here. This way you can set the terms of the trust for your children rather than have a court decide. Guardianship is a completely separate matter and is not the same as setting up a trust for young children.
Ryan-
Remember that avoiding probate is not the only purpose of a revocable trust. A trust offers a lot more options in detailing how assets left behind are managed for the benefit of the beneficiaries.
I will add that when we set up our revocable trusts, I was concerned about my wife’s vulnerability and mine. If I predeceased her, she would be a “rich widow” and a potential target after getting my life insurance proceeds. Probate was the least of our concerns. If she got remarried without a prenuptial (a likely scenario) and without a trust, then if they got divorced, he would potentially get half of my life insurance proceeds. Even worse, if she passed away after getting remarried, her new husband could get all the money and then disinherit our children leaving them nothing.
On the other hand, I would not want her life insurance proceeds going in my name for both similar reasons as outlined above AND the potential that if I had a malpractice judgment or other judgment against me a creditor could take all the money again leaving me and our children without the proceeds. So I disagree with white coat about the trusts not having a component of asset protection for this specific scenario (based on what our attorney told us–you need to check this with your attorney).
Another issue that a trust addresses is when do your children get the money. Do you want someone else deciding or do you want to be involved? Do you want your children potentially getting all the money at age 18 or 21 or whatever the default is or do you want partial distributions at different times that you think are reasonable?
Obviously anyone reading this needs to get an estate attorney’s advice as I am not one. However, these were my concerns. I personally believe estate planning should take precedence over investing or even loan repayments for physicians if you want to prevent a lot of potential (and avoidable) heartache down the road for your loved ones or yourself.
Interesting take on using the trust for asset protection. I’m not sure how yours is set up, but the basic rule for a trust to provide asset protection from lawsuits against you is that you can’t take the money out and spend it on a boat at any time you want. Yours is probably set up so that if your wife dies you can’t get the money, thus providing asset protection to you.
Exactly right. Children are the beneficiary–as they should be.
Any opinions on the Vanguard Trust Department? Looks like they will provide trustee services for a relatively low fee and successor trustee at no cost until activated. Does not look like they will provide services for setting up a trust, however.
Haven’t used them, but given Vanguard’s structure I think you ought to keep them on the short list for trustee services.
Mr. Sharp,
You were the attorney handling the James & Barbara Carr trust. I’m the executor trustee for that account. I need to know who took over your files.We are in need of the last documents that were prepared by your office.
I’m sorry to trying to reach you this way but didn’t know how else to reach you,your numbers have been disconnectd.
My e-mail is [email protected] phone 269-381-5483 address 1228 Brownell Street Kalamazoo,Mi 49006.
I thank you for the work you have done for the Carrs and I await a response.
Thank you again
Angel A. Ayala
This website has no connection to Mr. Sharp and I can’t even guarantee he knows this review is here. Good luck getting a hold of him. Send me an email if/when you’d like your personal information posted above removed. You may try contacting him through his publisher.
I have to take issue with the idea that everyone needs a trust. I agree that they arr probably great for residents of most states, but Texas is an exception. Texas has an extremely enlightened Probate law, making a trust here completely unnecessary. I have not done the research to find out if other states have comparable laws, but I urge residents of other states to do so. Just to reiterate, it you are lucky enough to live in Texas, you do not need a living trust.
Interesting. I hadn’t heard that. You’re right that an efficient and inexpensive probate process could make a trust much less useful. I bet Texas’s law still makes probate a fairly public process though, so there is the privacy issue a trust can provide.
“Estates subject to the estate tax (the exemption is currently $5 Million single and $10 Million married, but scheduled to go back to $1 Million at the end of the year)”
This doesn’t sound right to me. I thought (and the new edition of Retire Secure I am reading seems to say) that the exemption amount is now $5.43M and has been $5M+ since 2011.
You know this post is over 3 years old right? You are correct that the amount is $5.43M and it has been since 2011, but it was scheduled to go back to $1M when the post was written.
Tax laws change frequently and it is nearly impossible to keep 1000 pages of the internet up to date at any given time so I appreciate the correction. But that is a key reason I make sure posts have dates.
Thanks for the book recommendation ?