WILLS VS TRUSTS – How To Protect Your Assets And Make The Beneficiary Transfer Tolerable

We’ll start off with a story today.


About 12 years ago, when Anthony pastored a church in his pre-advising days, there was a lady named Ruth in his congregation. Miss Ruth, as he called her, was a widow who had accumulated $1.2 million in cash, as well as a farm.


Her son had recently been laid off and was going through some hard times – which included having his car repossessed. He asked if he could borrow Miss Ruth’s car until he got back on his feet, and she agreed.


About three months later Miss Ruth’s son was involved in a head-on collision at 75 mph. He barely survived and tragically, a six-year-old girl in the car didn’t make it. The judge presiding over the court case ruled that if the girl had lived to an average age of 69 years old, her life would be worth $8 million. Even though it was her son who was responsible for the wreck, the car was in Miss Ruth’s name and she was the one hit with the responsibility of paying the $8 million.


She lost everything – including $1.2 million and her farm – and still owed the court about $6 million.


It was a hard time for everyone, and as a minister and counselor, Anthony had to ask – was there anything that could have been done to prevent or change the outcome of this messy, tragic turn of events? Was there a way to prevent Miss Ruth from losing everything?


After consulting a lawyer in the congregation, Anthony was referred to an estate attorney who informed him about The Estate Planning Source. This was how he became involved in encouraging people to protect their assets by using trusts – and although he’s not an attorney, he works with trusted attorneys to gain protection for client assets.



So – how do trusts actually work?


There are two main types of trust – irrevocable and revocable.


With an irrevocable trust, a trustee is appointed to have control over the assets until it’s time for your beneficiaries to access them. Technically, since you are no longer responsible or have control over those assets, they can’t be taken from you. In Miss Ruth’s case, if her farm and cash and other assets had been placed in such a trust, they would have been protected from the court.


As its name suggests, an irrevocable trust typically cannot be changed after the agreement has been signed. Irrevocable trusts may be chosen to reduce estate taxes upon someone’s death, to protect assets for the trustmaker and their family, or to accomplish charitable estate planning.


Another important benefit of an irrevocable trust is to be a resource for Medicaid planning. Since it reduces an individual’s total asset amount, it allows Medicaid eligibility to be accelerated. These days, care in a nursing home facility can range from $60,000 to $140,000 per year, so you can see why this would be a desirable benefit as someone ages.


Irrevocable trusts also protect assets from creditors (or the court, in Miss Ruth’s case) – both for the trustmaker and the trustmaker’s family/beneficiaries. However, irrevocable trusts are not for someone who wants to have immediate access to their assets.


A revocable trust (also known as revocable living trust or living trust), on the other hand, is a type of trust that can be changed at any time. Although they do not provide the same tax reductions or offer the same level of protection from creditors, they are much more common and are quite effective.


Revocable trusts allow the trustmaker to use and manage assets while they are still alive and becomes irrevocable after the trustmaker dies because they can no longer make changes to it. The remaining assets would then be distributed to the listed beneficiaries.


This information might be a bit overwhelming, but typically unless you have assets that need extra protection or is used for Medicaid purposes, a revocable trust is the best way to save money, headaches, and trouble. Please let us know if you need clarification on this and we’ll be able to get you in touch with our estate attorney, Gwen Jones!


3 Shocking Financial Secrets Webinar


You may be thinking at this point – but I already have a will, why would I bother with a trust? Here are a few things to consider –


A will:

  • always goes through the probate process, which is the process of taking a will through the court system so a judge can deem it valid, as well as to appoint the correct representative to properly distribute the estate.
    • The probate process is costly, both in time and money. A typical probate case that goes smoothly can take 8 months to a year. If there are issues, 3-4 years is not uncommon.
  • is a public document on file within the court system. Anybody can see it, and anybody can contest it.


Let’s take a well-known celebrity case for example – when Prince (or the Artist Formerly Known as Prince) died, fifteen “love children” came out of the woodwork to try and prove that they owned part of his $300 million estate. It was a very long, drawn-out process for the court to deal with this and order all the paternity tests, etc.  Needless to say, it was expensive and depleted a lot of money from the estate itself.


A trust –

  • bypasses probate. In fact, it will cost less to set up a revocable trust than it will to go through the probate process. Think of it as a gift to your heirs – both in reducing trouble and monetary cost.
  • is a private document that nobody has the right to see unless you want them to


Now that you know more about wills and trusts, where do you stand with all of it?


Are you rethinking how you want to place your assets and how they will be handled when you’re no longer here?


Do you want your resources to be depleted in an expensive, complicated probate process or protected for your heirs?


Our advice is to think about these questions and meet with a quality estate-planning lawyer to review what you have in place and whether or not it will meet your needs. The Estate Planning Source is licensed in all 50 states to help you – and if you’re in Tennessee, we can refer you to the right people to protect and take care of your hard-earned assets.


If you thought this was helpful and want to learn more about other topics that can help you keep your assets working for you in and through retirement, click here for an upcoming webinar where we dive into several financial industry secrets. If you’ve already attended the webinar and would like to apply for a free consultation, click here now.


Life is unpredictable – let’s all take away something from Miss Ruth’s story and be prepared and protected when those hard times hit!


Leave a Comment