The Moneyist: ‘I do not trust many people due to unfortunate life experiences’: I’m leaving all my estate to charity. Should I make a will or trust?

In addition, I have named beneficiaries in all my bank accounts, retirement accounts and I am doing a transfer-on-death for my primary residence, so I have control of my main assets while I am alive. All my beneficiaries will be charitable organizations.

If it is not too much trouble, could you please be so kind as to let me know what the implications/drawbacks of taking this route would be? Any advice would be welcome. Thank you so much for your help.

Sincerely,

On My Own

Dear On Your Own,

Whatever you have gone through in your life, I appreciate you spinning that straw into gold by making sure that a portion of your assets go towards the causes that you most cherish. It will be your final act, and the best thing we can do in life is get through it without breaking anything, and leaving a positive impact in our wake. 

Holographic or handwritten wills are only legal in about half of the states in the U.S. (California does happen to be one of them.) Even so, write your will under the guidance of a trust and estate attorney. Word of warning: It’s not worth writing a will on the cheap, or downloading one from the Internet. Too many things can go wrong.

A side note: Make provisions for what happens when you are alive too. Arguably, this is more important. A power of attorney who would be able to make financial decisions during your lifetime should you become incapacitated. A medical power of attorney would make healthcare decisions as set out by you ahead of time, if you became incapacitated. 

Pros and cons of setting up a trust

One big caveat: If you want your estate and your wishes to remain private and confidential, a trust will serve you better than your last will and testament going through probate court. When your will is filed with probate court, your family, extended family, friends, nextdoor neighbor, old high-school peers can access them as part of the public record.

If you set up a revocable trust, you can be both grantor and trustee during your lifetime, and you have the freedom to change the terms. You can leave instructions to distribute the assets held by the trust according to your wishes. They may change over your lifetime. You can retitle your home, bank accounts and other assets into the trust.

There are limitations to a revocable trust. It cannot, however, be used for medical decisions during your lifetime, protect you from civil judgements, creditors or help you qualify for Medicaid, which is used to provide medical care for low-income Americans. They can be expensive to set up, and come with ongoing administrative and legal costs. 

Evaluating charitable institutions

Please be mindful about charitable donations. You don’t want your precious donations to be swallowed up by administrative fees. Guidestar.org, Charitynavigator.org and Give.org, which is run by the Better Business Bureau, all aim to help donors give wisely. They look at impact, financial management and accountability, culture, and leadership.

Leaving your estate to a court-appointed executor seems like something of a gamble to me, and could be a time-consuming and expensive process, and ultimately reduce the amount of money you wish to leave your favorite charities. Leaving your estate in the hands of an unknown individual does not appear to be the right approach.

Appointing an executor of your estate — someone you trust — would be a wise decision. Similarly, if you did decide to set up a revocable trust you can nominate a relative, friend, attorney or financial institution as a successor trustee. They are fiduciaries, and have a legal and ethical duty to carry out your wishes. 

Adding a ‘trust-protector’ clause

If you set up a revocable trust, that becomes irrevocable upon your death. However, you could add a “trust protector” clause — a third party to oversee the actions of your trustee. The American Bar Association says they can correct mistakes made in a trust and/or modify it to take advantage of tax law, approve accounting and compensation.

“A trust protector has the ability to change parts of the trust document that the trustee may be unable to,” according to Cunningham Legal, which has offices in California. Officially, a trust protector is a person with no vested interest, almost always an attorney named within the trust, who has power over the terms of a trust but who is not the trustee.”

Finally, it’s never too much trouble. Firstly, that’s what this column is here for. Secondly, the ability to ask for help does not come easily to everyone, but it’s an empowering act. As an advice columnist, it’s a privilege. I only wish more people asked for help when they needed it. If we are not here to be of service to each other then what is the point?

Good luck with your estate planning. 

You can email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on X, the platform formerly known as Twitter.

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Should I put my fiancé’s name on the deed to my $560,000 California home after we marry?