We're in our 60s with $1.5 million. Would a trust be more effective than a will to prevent conflict among our heirs?

By Quentin Fottrell

'I realize that probate can be lengthy, public and expensive'

"Together, we receive pensions totaling $120,000 annually." (Photo subjects are models.)

Dear Quentin,

Two of my husband's siblings have recently set up trusts for valid reasons. The first sibling's trust was established to protect the interests of both his second wife and the children from his first marriage.

The second sibling's trust was created to address long-term medical-care concerns. I have been educating myself to determine whether a trust would be a good idea for our estate. The more I read, the more uncertain I become.

We are in our mid-to-late 60s and are both retired federal employees. My husband retired under the Civil Service Retirement System, while I retired under the Federal Employees Retirement System.

Together, we receive pensions totaling $120,000 annually. I have $1 million in my Thrift Savings Plan account, while my husband has $200,000. I will begin collecting Social Security in five years, at 70, with an estimated monthly benefit of $4,000.

My husband will begin Social Security at the same time, based on my employment record, with an estimated monthly benefit of $2,000. I also have approximately $350,000 in inherited IRAs. One IRA is a stretch IRA.

The other three are subject to the SECURE II Act, and I have six years remaining to empty those accounts. I also have a small life-insurance policy, and we both carry long-term care insurance.

Related: My husband is giving me 75% of his trust - and allocating 25% to his sister. Is that fair?

Wills and powers of attorney

We already have wills and powers of attorney naming our daughter for both financial and healthcare matters. I also maintain a letter to our executor (our daughter), which I update and share at least annually, detailing our financial and digital lives.

Our two adult children are equal beneficiaries on their father's TSP account, my life-insurance policy, and my inherited IRAs. My husband and our children are named as beneficiaries on my TSP account: 50% to my husband and 25% to each child.

The only assets remaining in our estate for the wills to cover are our house (currently valued at $400,000), vehicles, bank accounts and personal belongings. All of these assets are jointly held with rights of survivorship.

Our wills state that, after both of our deaths, these items are to be sold after our children have had the opportunity to address any sentimental belongings. Our son understands that there will be costs associated with probating our wills.

I realize that probate can be lengthy, public and expensive. I have been through the process myself as the administrator of my late sister's estate. Personally, I found probate less onerous than settling her estate without a will.

Is there anything I have missed or neglected? Or are we adequately covered? I understand that our situation could change in the future. But at this point, is there any reason for us to establish a trust?

A Couple In Our 60s

Related: I am 56, single, and renewing my $400,000 10-year term life policy. Am I making a huge mistake?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

You've wrapped things up pretty nicely.

Dear Couple,

No trust needed.

You appear to have "beneficiaried" yourselves out of the need for a trust. You've wrapped things up pretty nicely. In fact, I expect to get an email or two about the seriousness of your financial dilemma, perhaps with allegations of humblebragging. But I get it: You are afraid you have left some giant loophole in your estate planning that could cause delays or worse after you're gone.

What's more, you have roughly $1.5 million, including your house, which does not include the money you have in bank accounts, the value of your vehicles and/or other household or personal property. Nor does it include the value of your pensions or future Social Security benefits, which are not part of your probate estate. With your $120,000 pensions and Social Security, you can both live comfortably.

Typically, couples who are still in their first marriage and don't have children from previous marriages or relationships leave each other their assets, and the kids will either get their inheritance when the second spouse dies - or they are listed as secondary beneficiaries on life insurance and savings plans. It was a generous and thoughtful gesture to split your $1 million TSP with your husband and children.

Happily, you and your husband have done pretty much everything right. You have wills, powers of attorney, healthcare directives, long-term care insurance, organized records for your executor, and mutually agreed-upon beneficiary designations. Most of your major assets - including your TSP accounts, IRAs, life insurance and jointly owned property - are already set to pass outside of probate automatically.

You have three inherited IRAs subject to the SECURE Act, which creates an ongoing and increasingly urgent tax issue about how to pace required distributions, especially whether those withdrawals will push you into a higher tax bracket, given your $120,000 in pension income (and that's before you take Social Security). Talk to a tax adviser about possible Roth conversions and ways to manage a potential tax cliff.

Related: 'Time will tell whether that was a good bet': My adviser got me a full SpaceX IPO allocation. Was I lucky?

Marital and special-needs trusts

A revocable living trust is still a useful vehicle, particularly for wealthy individuals. For some families with complex estates, consolidating accounts and assets under one trustee can help everything run more smoothly. Beneficiary designations can become problematic if they contradict what a person has written in their will (a beneficiary designation would trump a will).

Your husband's siblings had their own reasons for establishing their trusts: a second marriage and medical expenses. Marital trusts are key for blended families, so each spouse ensures that their respective children are taken care of if one of them dies. A stepmother or stepfather may promise their spouse and stepchildren the world while both parties are living, but can change their mind after the death of their spouse.

A special-needs trust or spendthrift trust can also distribute funds based on need, including medical bills. If one child decides to go to college, for instance, the trust can provide for that. If another child falls off the wagon and needs rehab, the trust could fund that too (or not). The tax benefits are also significant and help a significantly higher portion of your estate pass to your children tax-free.

That does not mean that you're done. You may be better off opting for a transfer-on-death deed for your house instead of leaving it in your will. A TOD is a simple, low-cost way to pass your home directly to your kids while avoiding the lengthy and expensive probate process, which is a major priority for you. Despite your significant assets, your estate has been organized to not complicate matters.

A trust can give you more privacy and smoother estate management if you were to become incapacitated. However, those pros may be pretty modest when weighed against the costs, paperwork, bureaucracy, and ongoing management and review. Trusts can be extremely useful in families with other problems, such as addiction and substance misuse. I was all ready to ask you about long-term care insurance.

But you have sorted that out too.

Related: 'The S&P 500 seems to be doing particularly well': I'm 66. Is this a good time to invest $100,000 in the stock market?

The Moneyist regrets he cannot respond to letters individually. Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

More columns from Quentin Fottrell:

I was a slave to credit-card debt, then I got laid off and turned my life around. Here's how I did it.

I'm giving $10,000 to my stepchildren. My wife warned me against gifts of equal value for my nephews. Is that fair?

My mother regrets paying Social Security. She says she should have invested her contributions. I disagree. Who's right?

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-Quentin Fottrell

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08-02-26 1300ET