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Do Young People Really Need Wills? Print E-mail

July 2010

by Michael P. Bentzen and Stuart Sorkin

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n June 14, 2010 an article entitled “Planning for the Unthinkable” appeared in The Wall Street Journal (page R5), based on the premise that most 18-year-olds “probably should” have wills.  To be sure, there are situations in which it would be important for a person of that age or a little older to execute a will.  Many of those situations are discussed in the article, such as young parents with children or of wealthy parents who do not want to upset established family estate planning.  Additionally, some wealthy families have transferred significant amounts to children in Uniform Gift to Minor Accounts to be used to pay for children’s education and as a part of a gifting program, however, absent a will, if a child dies, under the laws of intestacy, then these accounts will revert back to the parents.  This is a clear case, where an 18 year-old child should have a will.

  
             The drafting of a simple will is not inexpensive and self-prepared wills, following form books, may create more difficulties than they solve.  Accordingly, it is the view of the Hughes & Bentzen estate planning group that the reasons for a will for a young person should be thought out and discussed with legal counsel (hopefully on a no charge basis) prior to acting on an impulse or engaging in self-help.           

PICKING THE JURISDICTION IN WHICH TO BASE YOUR TRUST

           The same issue of The Wall Street Journal (page R4) contained an article entitled “States Want Your Trust.”  This article contained a great deal of substance in discussing selection of the State in which a trust could/should be based for various reasons.  Trusts are governed by state law, and those laws vary greatly, including whether out-of-state beneficiaries can be taxed on trust income.            

           As the article noted some, perhaps most, states now permit trusts to last for hundreds of years – a term sometimes used is “dynasty” trust.  The typical law not all that long ago required a trust to vest (be terminated) within a period of 21 years following the death of the persons (grantors or beneficiaries) living at the time the trust was created.

  
             Other reasons to consider going out of state include protection of trust assets from personal liabilities of the grantor or future descendants.  A properly drafted trust can protect the beneficiaries from third party creditors including spouses in a divorce.  These types of trusts may also provide parents with some protections to prevent future generations from becoming “trust fund babies” or having access to trust funds if they develop a substance abuse problem.
 
  
             Each of the reasons for going out-of-state may appear compelling.  But, there are additional expenses involved, such as having a trustee in the foreign jurisdiction who collects an initial fee and annual fees, establishing an investment account in the foreign state (for example, Alaskan trusts have a $1,000 set-up fee, an annual maintenance fee of $3,000 and maintenance of a minimum of a $10,000 certificate of deposit in Alaska).  However, the Alaska trust statute is the oldest in the country and the costs associated with a creditor challenging an Alaska trust from the East Coast is significantly more because of the time and expense associated with cross country litigation.
 
             Therefore, there is a balancing required with the desired benefit on one side and costs and inconvenience of dealing with a foreign trustee and state.  These are matters that should be weighed in consultation with the legal advisor.  The premise in the article is correct.  There are situations in which seeking out a favorable jurisdiction in which to establish a trust can make a huge difference to the grantors and beneficiaries.
  
© 2010 Hughes & Bentzen, PLLC.
 
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