Dear Dave,
How do you know if a will or a trust is best for you?
Monica Dear Monica,
This is a great question, especially since August is National Make-a-Will Month. The first thing you should do is take a serious look at your needs, your wishes and your overall life and financial circumstances.
If you’re like the average person with a couple of kids, a home and some savings, a will is all you need. There’s no reason to bring lawyers into the mix, unless there’s something complicated about your situation. In cases like this, you can even set one up online that’s perfectly legal in just a few minutes. If you’re older, your kids are grown and your estate is worth $1 million or more, a trust is the way to go. By doing this, you can avoid probate in a way that wills don’t allow. Now, if you have a large estate and dependents, having both a will and a trust is a good idea. And you don’t have to worry about the two bumping into each other. They’re separatelegalinstruments, and there’s generally no conflict between them. If there is a legitimate, legalconflictbetween them, the trust usually overrides the will. Simply put, everyone needs a will. But not everyone needs a trust. Trusts can be more than you need, but they can also be a great tool if you have a larger estate. So, if you’re in the vast majority of folks who don’t need a trust, just get yourself a will. You’ll spend a lot lessmoneyandfeelso muchbetterknowing your stuff will go to the right people— and that your family will be taken care of!
— Dave Dear Dave,
My husband and I are retired. I receive asmallpension, and we are both on Medicare and Social Security. We have about $25,000 left to pay on our mortgage, along with a second mortgage of $18,000. These are our only debts. We also have a nest egg of $30,000 set aside, and a small annuity that’s worth about $20,000. Would you recommend paying off our mortgages with our savings?
Jane Dear Jane,
If you know me at all, you understand how much I’d love to see everyone in control of their finances and living debt-free. Butbeingbroke,even in a house that’s paid for, isn’t a good idea. Believe me, I understand. The idea of paying off the house and everything is awfully tempting. But if you two did that, you’d be left with very little. To me, that’sascarythought whenyoursmallpension— along with Social Insecurity and Medicare—are all you have coming in.
No offense, but your nest egg is kind of small to begin with, so I don’t think I’d be raiding it right now. On the other hand, if you’d told me you had $400,000 or $500,000 saved up, I’d tell you pay off the house and second mortgage today.
If you’re not doing this already, I’d advise you two to start making and living on a regular monthly budget. Give every dollar a name on paper before the month begins, because if you don’t, your money will control you instead of you controlling it. Make sure you’re living on less than what’s coming in, and hopefully you can devise a plan to have the house and other debt paid off in a few years.
God bless you two!
— Dave