Will and Trust Usage Increases with Wealth
Wealthier investors are significantly more likely to use estate planning tools – in particular, a will and trust - to protect both their loved ones and their assets, according to a fourth quarter study by Millionaire Corner that examines the use of financial products by investors from a range of wealth levels.
High net worth Millionaires are three and one-half times more likely to hold assets in the legal structure than are wealthy investors with less than $1 million. A will allows investors to designate who will inherit your property and appoint a guardian to care for young children in the case of an untimely death. A trust can spare survivors lengthy, expensive and public court proceedings by circumventing probate court. With a trust an investor transfers title of property to a trustee, who is required to follow an investor’s written instructions in distributing the property after your death.
“Since your Trustee is the legal title holder, Trust property is not subject to Probate at your death,” according to a blog published by the estate planning law firm Morris, Hall & Kinghorn. “There is no need for a probate file at the courthouse. Instead, your Trustee distributes the property according to your wishes, and the terms of the Rust remain shielded from prying eyes.
A will and trust are the two key elements of an estate plan, according to Nolo.com, a website the aims to make the legal system accessible to all. Nolo also urges investors to make health care and financial power of attorney directives, consider life insurance needs and file beneficiary forms as part of estate plan.
A breakdown of our research on will and trust usage shows that Mass Affluent investors – those with a net worth of $100,000 to $1 million not including primary residence – are unlikely to hold assets in a trust. Twelve percent have established trusts. The vast majority – 95 percent – serve as their own trustee versus 5 percent who have a corporate trustee. Those who have engaged a corporate trustee are most likely to use the services of a bank trust department. Half use a bank, 30 percent a brokerage trust and 20 percent an attorney. Nearly three-fourths (72 percent) of Mass Affluent investors have a will. Older and wealthier Mass Affluent investors are even more likely to have a will.
More than 30 percent of Millionaires – those with a net worth of $1 million to $5 million not including primary residence - have established a trust and 90 percent serve as their own trustee. Millionaires who use a corporate trustee are most likely to use the services of an attorney (41 percent) or bank trust department (27 percent). Thirteen percent use an independent trust company, 11 percent a brokerage trust, and 7 percent, a private bank. Nearly 90 percent have a will, though the share is 96 percent for Millionaires age 65 and older.
Ultra High New Worth Investors – those with a net worth of $5 million to $25 million not including primary residence are most likely to have established a trust. Nearly 45 percent have a trust and 89 percent serve as their own trustee. Those who use a corporate trustee are most likely to use the services of a bank trust department (48 percent), attorney (33 percent) or independent trust company (26 percent). Nine percent use a brokerage trust and 5 percent use a private bank. The wealthiest of these investors – those with $15 million to $25 million – are most likely to use an independent trust company (96 percent), an attorney (65 percent) and a private bank (35 percent). Nearly all (94 percent) have a will. Will and trust usage among Ultra High Net Worth Investors increases with wealth and age.
