Testamentary Trusts
It is Encore’s mission to empower the advisor to deliver the best estate planning experience for clients AND THEIR LOVED ONES. Testamentary trusts RARELY deliver the best estate planning experience to your client’s loved ones. At the critical moment when the next generation looks to their parent’s advisor for help, do you want to be the advisor saying, “You’ll need to head on over to probate court?”
What is a testamentary trust?
It is a trust established in a person’s will to come into operation after the will has been probated and the assets have been distributed to it in accordance with the terms of the will.
Why do advisors want them? Some advisors believe…
-It’s cheaper for my clients.
Yes, in the short term, but not the long term. The cost to submit a Trust Based Estate Plan at Encore is only a few hundred dollars more. The costs they will incur during probate will likely be thousands more. Possibly, tens of thousands.
-It’s easier than a living trust.
Maybe, initially, because you don't have to fund the Will. But this is where the simplicity ends. The complexity of probate and the issues that arise regarding listing a testamentary trust as a beneficiary on assets is usually enough to make those with testamentary trusts wish they had made a better choice.
We saved the best for last….
"They can always do something more complex later. This is all they need for now.”
As an advisor, you are trained to focus on long-term strategy. Why would you not do that here? Most advisors cite the cost as the basis of their decision here. Well, that doesn't make much sense. The clients will most likely pay for an estate plan TWICE and risk paying probate costs should they fail to create the new trust-based estate plan before they die.
Things you might not know about them.
The attorney recommending a testamentary trust knows they will likely be paid to probate the estate.
Didn't you say you were doing this to save them a few hundred dollars? Well, you didn't succeed if they died with a testamentary trust in place.
Did you use another site that offers testamentary trusts? Some online sites offer probate services, just like attorneys.
Creating Testamentary Trusts feeds this profit center! Just think- your clients could have spent a fraction of this to create a trust-based estate plan. Their beneficiaries and executor may have also avoided all the legwork and frustration associated with probate.
Take Aways
If you weren't listening or retaining any of the information prior to this. Stop what you’re doing and remember these few things-
Testamentary Trusts may save a little money upfront and delay the work associated with funding a Trust, but it's often not what's best for the client.
Funding a trust is not as difficult as some advisors might believe. We have excellent resources on this within the knowledge base. Enter "Funding" in the search bar to learn more about this.
It might save your client a few hundred dollars upfront but cost thousands on the backend. It's also more work for the family and the advisor to do it later vs. doing it now.
Final Thoughts
At Encore, we believe clients are seeking the most beneficial long-term plan. A revocable trust-based estate plan leaves them in control of their assets while they are living, offers privacy after death, is cost-effective, and increases the likelihood of a smooth transition during difficult times like incapacitation.
...more simply put- that's probably not a Testamentary Trust.
And for those that have clients with these in place, don’t be surprised if you don’t keep the assets. We doubt the heirs of the estimated $84 trillion passing in private wealth by the baby boomers to Gen X and Millennials would want to work with someone who just sent them “on over to probate court.”