Living trust vs will

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WKaren
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Living trust vs will

Post by WKaren » Tue Jun 03, 2014 12:38 pm

Hello,
We are looking for some help in figuring out if we need a living trust. We are both in our mid 40's and the kids are between the ages of 14 and 8. Most of our assets (total about $2 MM) are with Vanguard in retirement and non retirement accounts. We have a house with a mortgage and about $400k in equity. All the assets are jointly held and we have primary and secondary beneficieries named on the investments, life insurance, and the emergency bank account.

We also have a will. Our desire is that if both of us pass away, all the assets be equally divided among the kids but they get the money only at reaching the age of 25. We have stated in the will that a trust be setup with named relatives as trustees. One of our friends suggezted that the will is not sufficient and we need to setup a living trust and not rely on creating a trust after the fact. They said that it helps avoid probate and it also has tax benefits. Is there a downside to setting up a living trust? It seems like an expensive proposition and I am not sure of the value. All comments would be most welcome.

KW

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FelixTheCat
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Re: Living trust vs will

Post by FelixTheCat » Tue Jun 03, 2014 12:58 pm

Trusts also have provisions such as a Health Care Power of Attorney. For example, you and your spouse get into an accident and you cannot communicate your wishes. Who speaks for you?
Felix is a wonderful, wonderful cat.

expat
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Re: Living trust vs will

Post by expat » Tue Jun 03, 2014 1:11 pm

>> One of our friends suggezted that the will is not sufficient and we need to setup a living trust and not rely on creating a trust after the fact. They said that it helps avoid probate and it also has tax benefits.

I agree with your friend.

>> Is there a downside to setting up a living trust? It seems like an expensive proposition and I am not sure of the value.

In your will, you are already agreeing to create an irrevocable trust when you have passed. There will be attorney's fee either way. Plus, you will have paid for probate and the cost of creating the trust.

I don't see any tax benefits though. Your estate is $2M and is therefore already exempt from estate tax.

expat
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Re: Living trust vs will

Post by expat » Tue Jun 03, 2014 1:17 pm

>> Trusts also have provisions such as a Health Care Power of Attorney. For example, you and your spouse get into an accident and you cannot communicate your wishes. Who speaks for you?

In California, at least, that is a separate document. You don't need a trust to have an advanced healthcare directive.

Retread
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Re: Living trust vs will

Post by Retread » Tue Jun 03, 2014 1:18 pm

imgritz wrote:Trusts also have provisions such as a Health Care Power of Attorney.
You are a bit confused. That is not part of a living trust, but is a separate document.
Bruce
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lululu
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Re: Living trust vs will

Post by lululu » Tue Jun 03, 2014 1:44 pm

Retread wrote:
imgritz wrote:Trusts also have provisions such as a Health Care Power of Attorney.
You are a bit confused. That is not part of a living trust, but is a separate document.
Bruce
I have a will, a revocable living trust, a healthcare power of attorney, and a regular power of attorney.

According to my attorney (I don't know whether this varies by state), the health care power of attorney I have includes the provisions of a living will.

I have a revocable living trust because then the trustee doesn't have to mess with getting probate court permission to do things like sell my house. There is also a tax advantage; my town taxes the value of the estate; stuff in the trust is not considered to be in the estate. This would save about $1000 on my current estate value. That is the only tax advantage I'm aware of.

The will has a rollover provision that says when I die, everything not in the trust goes into the trust. Still, I've named my house and non-IRA accounts in the name of the trust already.

i don't recall it being particularly expensive to set up the revocable living trust document.

Calm Man
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Re: Living trust vs will

Post by Calm Man » Tue Jun 03, 2014 1:59 pm

There are excellent reasons to have trusts as bsteiner will advise you on: protection of the legatees from creditors and spouses. Also for your youngsters, the age of distribution. I "punted" when the kids were young (now adults) and rolled the dice that I would live so the age issue went away. I still debate whether to go the trust route via the will (not creating a living trust). It would protect the beneficiary from creditors and spouses but requires a trustee and custodian and tax filing at very unfavorable brackets and rates. These are not easy decision.

bsteiner
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Re: Living trust vs will

Post by bsteiner » Tue Jun 03, 2014 4:33 pm

Calm Man wrote:There are excellent reasons to have trusts as bsteiner will advise you on: protection of the legatees from creditors and spouses. Also for your youngsters, the age of distribution. I "punted" when the kids were young (now adults) and rolled the dice that I would live so the age issue went away. I still debate whether to go the trust route via the will (not creating a living trust). It would protect the beneficiary from creditors and spouses but requires a trustee and custodian and tax filing at very unfavorable brackets and rates. These are not easy decision.
There are two separate issues that often get confused.

As Calm Man points out, there are benefits to providing for your beneficiaries to receive their inheritances in trust rather than outright. For example, instead of mandating distribution at a specified age, you could instead give each child control over his/her trust at that age. Our clients generally do this. However, you can do this just as easily in either a Will or a revocable trust.

Revocable trusts are appropriate in some cases, and in some states. They're common in California for reasons specific to California. However, they're overhyped and oversold, and for most people, in most states, they're mainly a distraction. In most states, probating a Will is not particularly difficult, expensive or burdensome.

Revocable trusts generally don't save (or cost) any taxes. They don't save (or cost) any estate taxes. Different states have different ways of determining when a trust is subject to state income tax. So a revocable trust could save or cost some state income taxes. That's not usually a significant factor, but occasionally it is.

ResearchMed
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Re: Living trust vs will

Post by ResearchMed » Tue Jun 03, 2014 4:47 pm

lululu mentioned "a will, a revocable living trust, a healthcare power of attorney, and a regular power of attorney"

One might also want whatever their state's version is of a "living will", which addresses types of health care, pain treatment, and other end of life decisions, for such a time as one might not be able to express those choices.

We have those "choices" also reiterated in the Health Care Proxy (the Health Care PoA), so there is less chance of anyone else misunderstanding them, or perhaps fighting them.

And one might want to consider a Durable Power of Attorney rather than a "plain vanilla" PoA, so that it survives any incapacity, or perhaps a Springing Power of Attorney, so that it springs into effect upon incapacity but not before.

RM

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heartwood
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Re: Living trust vs will

Post by heartwood » Tue Jun 03, 2014 10:10 pm

expat wrote:>>
I don't see any tax benefits though. Your estate is $2M and is therefore already exempt from estate tax.
Exempt from the federal estate tax, yes. The estate may still be subject to a state estate tax depending upon the state. For example the NJ estate tax exemption is $675k.

http://www.nolo.com/legal-encyclopedia/ ... tetax.html

I don't suggest that the efforts to establish a trust, fund it, file annual trust tax returns etc are trivial. I agree with other posters that it may be a decision that should consider the estate's location.

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bottlecap
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Re: Living trust vs will

Post by bottlecap » Tue Jun 03, 2014 10:41 pm

I don't know anything about California law, but in Tennessee, and I'm sure many other states, I agree with bsteiner. A testamentary trust is fine in most cases.

The big reasons for a living trust, as I understand it, is to keep things from the public record and avoid probate. And if you fail to put any of your future assets in the name of the trust, then guess what? You still wind up in probate. It sounds simple enough, but in practice it's not so easy.

I would want an attorney that I trust to give me some pretty convincing reasons as to why I need a living trust before paying him to do it.

JT

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Re: Living trust vs will

Post by Gnirk » Tue Jun 03, 2014 10:59 pm

I used my Durable Power of Attorney to set up a revocable living trust for my mother who has Alzheimer's, only so there would be successor trustees. She named only me as Durable Power of Attorney and Executor of her will. I wanted to be sure someone else was in line to manage things if something happened to me, and the DPOA gave me the power to set up a revocable trust. It cost about $1300, and I transferred all of her assets into the trust. Except for the EE Savings Bonds which are in her name.

By the way, the US Treasury would not allow me to use my Durable Power of Attorney to transfer the bonds from her name to the name of her trust. BUT, they said I could always cash them using my Durable Power of Attorney! So that part will still have to go through probate because the value is greater than $100,000, unless I cash them. And they are still earning 4% interest, so why would I do that? :annoyed

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Re: Living trust vs will

Post by placeholder » Wed Jun 04, 2014 12:08 am

I am reading Estate Planning Basics by Denis Clifford (Nolo press) checked it out from the library that goes over many of your questions (he doesn't like "pour over" trusts for most people either).

lululu
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Re: Living trust vs will

Post by lululu » Wed Jun 04, 2014 4:26 am

bottlecap wrote: And if you fail to put any of your future assets in the name of the trust, then guess what? You still wind up in probate. It sounds simple enough, but in practice it's not so easy.
That's what the provision in a will that puts everything in the trust at death is for.

ResearchMed wrote:lululu mentioned "a will, a revocable living trust, a healthcare power of attorney, and a regular power of attorney"

One might also want whatever their state's version is of a "living will"
I mentioned a living will in my post.

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heartwood
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Re: Living trust vs will

Post by heartwood » Wed Jun 04, 2014 6:30 am

lululu wrote:
bottlecap wrote: And if you fail to put any of your future assets in the name of the trust, then guess what? You still wind up in probate. It sounds simple enough, but in practice it's not so easy.
That's what the provision in a will that puts everything in the trust at death is for.
If you die with assets in your name instead of the trust, then you have an estate that follows your state process. You die owning a house, too late to re-title. You die owning a stock, too late to re-title. You die with your spouse (or an ex-spouse) as IRA beneficiary, too late to have it go to the trust. IRA beneficiaries are as named. Insurance policy owner is as named and by whom has been paying the premiums. Date of death is fixed at date of death. That's why you do estate planning.

I'd list what you are trying to accomplish and then talk with an estate attorney to craft an estate plan to accomplish your goals. Perhaps,

1. Divide our assets at death equally among our kids.
2. Put the assets in a trust until they're each 25.
3. Minimize estate taxes?
4. Avoid probate?
5. Extend RMD provisions of IRAs, etc?
6. Provide for surviving spouse upon death of spouse?
7. Anything else?

The attorney should advise you how titling of assets might affect each of those goals. For instance, how to name beneficiaries of IRAs, 401ks, etc. If you die now your account goes to the named beneficiary at death, probably your spouse. Should it be your spouse, then your children? Should it be a trust first? Who should own any life insurance?

The attorney could also advise or prepare powers of attorney, medical powers of attorney. Of course there will be a charge for the work.

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bottlecap
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Re: Living trust vs will

Post by bottlecap » Wed Jun 04, 2014 6:34 am

lululu wrote:
bottlecap wrote: And if you fail to put any of your future assets in the name of the trust, then guess what? You still wind up in probate. It sounds simple enough, but in practice it's not so easy.
That's what the provision in a will that puts everything in the trust at death is for.
But the will must be probated, no?

JT

kaneohe
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Re: Living trust vs will

Post by kaneohe » Wed Jun 04, 2014 9:21 am

bsteiner wrote:
Revocable trusts are appropriate in some cases, and in some states. They're common in California for reasons specific to California.
.
What are those reasons specific to CA?

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Re: Living trust vs will

Post by placeholder » Wed Jun 04, 2014 11:34 am

If you get most of the assets in the trust before death then even if probate is required to handle the remainder then you might well fall under the small estate classification plus even if some assets have to go through then a probate that merely moves them to a trust is probably going to be easier and likely cheaper to do.

pshonore
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Re: Living trust vs will

Post by pshonore » Wed Jun 04, 2014 11:40 am

Just a reminder to those living in CT, all assets whether in a will, or a trust (including a revocable trust) as well as POD, TOD, etc go through Probate for purposes of paying the Probate Court fees.
Last edited by pshonore on Wed Jun 04, 2014 2:28 pm, edited 1 time in total.

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Re: Living trust vs will

Post by Grt2bOutdoors » Wed Jun 04, 2014 1:29 pm

I don't believe anyone addressed having existing assets with a Payable on Death designation passes outside of the will and outside of probate.
So, if you title your stock with a TOD (transfer on death) designation, no need for a trust and no need to worry about a will, just present the death certificate and id proving the identity of the beneficiary and you are good to go.
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WKaren
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Re: Living trust vs will

Post by WKaren » Thu Jun 19, 2014 8:10 am

Thank you all for your responses and guidance.

Here is my progress report. I attended a free seminar from a local lawfirm. In a follow-up session, they did a huge sales job to get me to hire them immediately that completely put me off. Basically, their entire message was that a living trust is the ONLY option for me and that I absolutely must hire a lawyer to do it. This did not inspire confidence so I have done more research and decided to create a living trust on my own.

As a first step, I have purchased the Nolo book on creating a living trust and intend to follow it. Will probably get some decent Software to make the process of creating the documents easier.

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Re: Living trust vs will

Post by bsteiner » Thu Jun 19, 2014 8:20 am

WKaren wrote:....I attended a free seminar from a local lawfirm. In a follow-up session, they did a huge sales job to get me to hire them immediately that completely put me off. Basically, their entire message was that a living trust is the ONLY option for me and that I absolutely must hire a lawyer to do it. This did not inspire confidence so I have done more research and decided to create a living trust on my own....
They'll have to sell a fair number of them to cover the cost of the seminar and the follow-up sessions with the people who don't buy the timeshare living trust.

Even if a living trust is appropriate for you (you didn't provide any facts that would indicate that it would be), I would stay away from that firm.

jackholloway
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Re: Living trust vs will

Post by jackholloway » Thu Jun 19, 2014 9:10 am

kaneohe wrote:
bsteiner wrote:
Revocable trusts are appropriate in some cases, and in some states. They're common in California for reasons specific to California.
.
What are those reasons specific to CA?
CA has a large customary fee to probate a will - 2-4% on the first 800k - and the entire value of your house counts, IIRC.

http://www.leginfo.ca.gov/cgi-bin/displ ... 0810-10814

bsteiner
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Re: Living trust vs will

Post by bsteiner » Thu Jun 19, 2014 9:35 am

jackholloway wrote:
kaneohe wrote:
bsteiner wrote:
Revocable trusts are appropriate in some cases, and in some states. They're common in California for reasons specific to California.
.
What are those reasons specific to CA?
CA has a large customary fee to probate a will - 2-4% on the first 800k - and the entire value of your house counts, IIRC.

http://www.leginfo.ca.gov/cgi-bin/displ ... 0810-10814
While revocable trusts are common in California, it's not for that reason. That's not a probate fee. That's the executor's fee. It's similar in most states. If the spouse is the executor, the spouse will usually waive the executor's fee. If the children are the executors, they'll usually take or waive their fees based on tax considerations. If an independent person or a bank or trust company is the executor, he/she/it will usually want to be paid. If you instead create a revocable trust, the trustees will be entitled to compensation during the adminstration period, which may be about the same amount.

staustin
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Re: Living trust vs will

Post by staustin » Thu Jun 19, 2014 9:49 am

having just gone through the painful probate process in Louisiana, associated with my father's meager estate, I immediately asked for an estate attorney recommendation from trusted friends. I found a wonderful lady, in solo practice. The fees were minimal but the guidance excellent. I've now established a living trust and pour over will. Thankfully, my children will have to suffer through what I experienced through the probate process. Each will have a trust established in their name and probate will be avoided. I highly recommend it.

Retread
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Re: Living trust vs will

Post by Retread » Thu Jun 19, 2014 10:05 am

I'm always surprised that there isn't more mention of the lifetime benefits of a living trust. I spent my career as an attorney/executive in the trust business, and was often part of the smooth transition that takes place through the use of a living trust when the grantor becomes unable to manage his affairs. The successor to the individual trustee then steps in, continues to manage the trust and, without missing a beat, manages the trust for the survivors on the death of the grantor.
In my opinion there is no other device that can take the place of a living trust in this situation. My affairs are set up this way with a corporate trustee as the successor to me as trustee.
Bruce
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jackholloway
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Re: Living trust vs will

Post by jackholloway » Sun Jun 22, 2014 12:08 am

bsteiner wrote:
jackholloway wrote:
kaneohe wrote:
bsteiner wrote:
Revocable trusts are appropriate in some cases, and in some states. They're common in California for reasons specific to California.
.
What are those reasons specific to CA?
CA has a large customary fee to probate a will - 2-4% on the first 800k - and the entire value of your house counts, IIRC.

http://www.leginfo.ca.gov/cgi-bin/displ ... 0810-10814
While revocable trusts are common in California, it's not for that reason. That's not a probate fee. That's the executor's fee. It's similar in most states. If the spouse is the executor, the spouse will usually waive the executor's fee. If the children are the executors, they'll usually take or waive their fees based on tax considerations. If an independent person or a bank or trust company is the executor, he/she/it will usually want to be paid. If you instead create a revocable trust, the trustees will be entitled to compensation during the adminstration period, which may be about the same amount.

Quite right - the language is "for ordinary services the attorney for the personal representative shall receive compensation based on the value of the estate."

In our case, the executors are all kin or close friends, and will likely not request $15k based on the value of our house. Based on our discussions, their compensation is based on the work required, and may well come to more than that if we leave them with a mess. We are motivated not to. Certainly, if it fell to my lawyer, I would expect substantial fees.

So let me echo Kaneohe's question: what are the reasons specific to CA? I am concerned that I may have missed some considerations when I set up mine?

bowtie
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Re: Living trust vs will

Post by bowtie » Mon Oct 17, 2016 11:42 pm

I'm trying to understand the possible need/advantage of having to set up a trust vs. not setting one up, reading a few threads here.
It seems that the only difference is that with a trust, that helps if the person creating the trust becomes unable to make decisions etc. But... someone else said that that could also be solved by having a power of attorney for health and for finance, is that right? and then you could just have a will and those extra powers of attorney in case of incapacity?
If one has POD accounts with bene's set up on them and no property is owned, is a will and power of atty for health and for finance sufficient, or does one need a consult with the attorney to figure out if a trust is necessary? I agree with some posters above that some attorneys are simply trying to sell you 'more stuff,' and it's awfully hard to tell sometimes!

afan
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Re: Living trust vs will

Post by afan » Tue Oct 18, 2016 5:23 am

pshonore wrote:Just a reminder to those living in CT, all assets whether in a will, or a trust (including a revocable trust) as well as POD, TOD, etc go through Probate for purposes of paying the Probate Court fees.
I believe this is true for assets in a trust, but not for those held in a business, such as an LLC.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

afan
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Re: Living trust vs will

Post by afan » Tue Oct 18, 2016 5:28 am

Retread wrote:I'm always surprised that there isn't more mention of the lifetime benefits of a living trust. I spent my career as an attorney/executive in the trust business, and was often part of the smooth transition that takes place through the use of a living trust when the grantor becomes unable to manage his affairs. The successor to the individual trustee then steps in, continues to manage the trust and, without missing a beat, manages the trust for the survivors on the death of the grantor.
In my opinion there is no other device that can take the place of a living trust in this situation. My affairs are set up this way with a corporate trustee as the successor to me as trustee.
Bruce
Absolutely! Had the same experience taking over the affairs of a relative who got most, but not all, of her assets into a trust before she ran out of steam. Managing things in the trust was simple.

NO financial institution honored her perfectly valid DPOA. NOT ONE. It was a useless stack of paper.

The trust worked as intended. We have long had funded living trusts for just this reason.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: Living trust vs will

Post by Longdog » Tue Oct 18, 2016 5:34 am

WKaren wrote:Hello,
We are looking for some help in figuring out if we need a living trust. We are both in our mid 40's and the kids are between the ages of 14 and 8. Most of our assets (total about $2 MM) are with Vanguard in retirement and non retirement accounts. We have a house with a mortgage and about $400k in equity. All the assets are jointly held and we have primary and secondary beneficieries named on the investments, life insurance, and the emergency bank account.

We also have a will. Our desire is that if both of us pass away, all the assets be equally divided among the kids but they get the money only at reaching the age of 25. We have stated in the will that a trust be setup with named relatives as trustees. One of our friends suggezted that the will is not sufficient and we need to setup a living trust and not rely on creating a trust after the fact. They said that it helps avoid probate and it also has tax benefits. Is there a downside to setting up a living trust? It seems like an expensive proposition and I am not sure of the value. All comments would be most welcome.

KW
If all of your assets and accounts already have named beneficiaries, and those beneficiaries are individuals and not your estate or trust, then they already would avoid probate, bypassing your will and trust. If you create a trust, you'll need to retitle your assets and accounts to be part of the trust, or to have the trust named as the beneficiary.
Steve

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Re: Living trust vs will

Post by Longdog » Tue Oct 18, 2016 5:39 am

afan wrote:
pshonore wrote:Just a reminder to those living in CT, all assets whether in a will, or a trust (including a revocable trust) as well as POD, TOD, etc go through Probate for purposes of paying the Probate Court fees.
I believe this is true for assets in a trust, but not for those held in a business, such as an LLC.
That is surprising. Why in CT would assets titled with POD or TOD go through probate? What value does the court bring in that case?
Steve

afan
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Re: Living trust vs will

Post by afan » Tue Oct 18, 2016 6:14 am

As far as I can tell, setting up a will that includes a testamentary trust costs about the same as setting up a will and a living trust. One could be over charged for either, but there is no reason to assume the living trust route is more expensive.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

afan
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Re: Living trust vs will

Post by afan » Tue Oct 18, 2016 6:16 am

Re:CT probate fees- it is a way to raise money to support the probate court. The court may have nothing to do for these cases but it needs money to run the operation. It has some cases for people with no money, so it cannot collect for those.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

michaeljc70
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Re: Living trust vs will

Post by michaeljc70 » Tue Oct 18, 2016 11:31 am

Longdog wrote:
WKaren wrote:Hello,
We are looking for some help in figuring out if we need a living trust. We are both in our mid 40's and the kids are between the ages of 14 and 8. Most of our assets (total about $2 MM) are with Vanguard in retirement and non retirement accounts. We have a house with a mortgage and about $400k in equity. All the assets are jointly held and we have primary and secondary beneficieries named on the investments, life insurance, and the emergency bank account.

We also have a will. Our desire is that if both of us pass away, all the assets be equally divided among the kids but they get the money only at reaching the age of 25. We have stated in the will that a trust be setup with named relatives as trustees. One of our friends suggezted that the will is not sufficient and we need to setup a living trust and not rely on creating a trust after the fact. They said that it helps avoid probate and it also has tax benefits. Is there a downside to setting up a living trust? It seems like an expensive proposition and I am not sure of the value. All comments would be most welcome.

KW
If all of your assets and accounts already have named beneficiaries, and those beneficiaries are individuals and not your estate or trust, then they already would avoid probate, bypassing your will and trust. If you create a trust, you'll need to retitle your assets and accounts to be part of the trust, or to have the trust named as the beneficiary.
How do you name a beneficiary on a house? That cannot be done without a trust (typically land trust) as far as I know.

pshonore
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Re: Living trust vs will

Post by pshonore » Tue Oct 18, 2016 12:08 pm

Longdog wrote:
afan wrote:
pshonore wrote:Just a reminder to those living in CT, all assets whether in a will, or a trust (including a revocable trust) as well as POD, TOD, etc go through Probate for purposes of paying the Probate Court fees.
I believe this is true for assets in a trust, but not for those held in a business, such as an LLC.
That is surprising. Why in CT would assets titled with POD or TOD go through probate? What value does the court bring in that case?
Technically, they do not go through probate for "supervision" BUT are subject to the same probate fees as other assets.

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Earl Lemongrab
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Re: Living trust vs will

Post by Earl Lemongrab » Tue Oct 18, 2016 12:38 pm

michaeljc70 wrote:How do you name a beneficiary on a house? That cannot be done without a trust (typically land trust) as far as I know.
Some states support deeds with TOD beneficiaries.

https://www.nolo.com/legal-encyclopedia ... er5-1.html

Earl
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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SkierMom
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Re: Living trust vs will

Post by SkierMom » Tue Oct 18, 2016 1:38 pm

Not an attorney, but do have a living trust set up in CA:

In your case, you have minor children. Setting up a trust, I think, allows for the continuance of their care and access to the estate monies immediately upon you and your spouse's accidental death. This would not be the case if a will went to probate.

We set up our trust mainly for the seamless transfer of our assets to the care of our minor children.

DH was also in a major traffic accident two years ago and the Power of Attorney came in real handy. At a minimum I recommend this document.

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Re: Living trust vs will

Post by Longdog » Wed Oct 19, 2016 6:23 am

pshonore wrote:
Longdog wrote:
afan wrote:
pshonore wrote:Just a reminder to those living in CT, all assets whether in a will, or a trust (including a revocable trust) as well as POD, TOD, etc go through Probate for purposes of paying the Probate Court fees.
I believe this is true for assets in a trust, but not for those held in a business, such as an LLC.
That is surprising. Why in CT would assets titled with POD or TOD go through probate? What value does the court bring in that case?
Technically, they do not go through probate for "supervision" BUT are subject to the same probate fees as other assets.
Interesting (and seemingly unfair). How would that work, in terms of transactions? Would the financial institution require that the named beneficiary provide proof that they paid probate fees out of their own funds before releasing the TOD assets? Or would the state come after the beneficiary after the fact?
Steve

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bostondan
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Re: Living trust vs will

Post by bostondan » Wed Oct 19, 2016 7:36 am

ResearchMed wrote:One might also want whatever their state's version is of a "living will", which addresses types of health care, pain treatment, and other end of life decisions, for such a time as one might not be able to express those choices.

We have those "choices" also reiterated in the Health Care Proxy (the Health Care PoA), so there is less chance of anyone else misunderstanding them, or perhaps fighting them.
As a physician, I just want to emphasize the importance of having a health care proxy (HCP) who understands your wishes extremely well. Do not wait until the last minute to discuss your wishes with that person. Also, if you last spoke to them about it 20 years ago, your wishes may have changed, so it needs to be an ongoing conversation.

I frequently see HCPs who have no idea what the patient would want. They were chosen because they were a friend or family member of the patient, but no actual decisions were discussed. Sometimes both children are selected as HCPs and they have differing views, making the process very messy. When a patient has explicitly discussed his/her wishes with the HCP it is generally a much easier process. Also, when the decision is made to withdraw care, if it is being made based on clear prior conversations with the patient, the HCP generally feels less guilt and more relief, rather than doubt about whether the right choice is being made.

Lastly, a living will is not useless if done correctly, but more often than not it is very vague and not helpful. They will often say things like, "I would not want life sustaining therapy unless there is some chance that I might live for a reasonable amount of time. I would not want dialysis unless it might help me." Basically, they can be interpreted differently depending on who is reading them, so they are not clear enough.

In Massachusetts, rather than a living will one can fill out the MOLST (Massachusetts Medical Orders for Life-Sustaining Treatment). This is a form that is accepted everywhere and helps to make the choices a bit clearer. I believe many other states have similar forms.

It is still critically important to discuss your wishes with the HCP, because ultimately every situation is complex and we require a more nuanced approach that an informed HCP can provide.
“There may be times when we are powerless to prevent injustice, but there must never be a time when we fail to protest.” - Elie Wiesel

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Re: Living trust vs will

Post by fourwheelcycle » Wed Oct 19, 2016 8:09 am

WKaren seems to be in about the same position as my wife and I were at the same age, with two children and adequate assets to enable a trusted relative or friend to raise them if we both died before our children became adults. We started out with a will when our children were eight to ten years old that set up a trust to enable my parents to care for our children, with our children receiving full access to their inheritance at age 26. The will cost about $850 twenty-five years ago. When our children were in college, and our assets had doubled, there seemed to be some estate planning advantages to having two revocable trusts so my wife and I did that, with each of us putting half of our joint taxable assets in each revocable trust. That reconfiguration cost us about $1,500 twelve years ago.

Since then I have been the POA and executor for two relatives. Both had wills. One of them had a very simple estate that was easily probated with a single letter to the state from her attorney, leaving me to simply distribute her assets to her beneficiaries. The other person, not yet deceased and living in a distant state, also has a will. It became clear I would have to travel to the state multiple times to appear in probate court or else hire my relative's local attorney to represent me for all the probate work. The probate would not be complicated or expensive tax-wise, but the whole process could take some time and the estate would be paying the attorney to prepare lists of assets and possessions, etc., file documents, and make court appearances on my behalf. In consultation with my relative, I left their will in place but established TODs in favor of their beneficiaries for all of their assets except their house and car. The house has now been sold and the value of the car is below the state's probate threshold. The bottom line is that I should never have to deal with probate.

Our children are now married and in their early thirties. My two experiences with relatives convinced me of the value of a carefully thought-out joint revocable trust model in which our two children will simply become the trustees of their own trusts when the second of my wife and I dies. Since they are well past our target age of 26 they will not have any custodians or co-trustees. Everything, including the title to our house, is in the trust. The overall package includes a will, POAs, health care POAs, living wills, and a document which gives all of our personal and household possessions to our children. There are various nuances to care for surviving spouses and minor grandchildren if our children do not survive us. The whole package cost us $3K to set up. When the second of us dies our children should be able to step in and takeover their respective trusts very smoothly, probably with some paid handholding and coaching from the future members of our local attorney's firm, but no probate requirements.

We hope this will be our last reconfiguration, but we realize we may spend money again if there are changes in our circumstances or in estate tax laws.

I see WKaren is considering doing this on their own. That may be possible, but my wife and I valued the assurance (hopefully merited) of working with an experienced attorney. Also, by establishing a relationship with a trusted local firm that will survive us, we have given our now adult children a source of (again, hopefully) valuable, reasonable cost advice when the second of us dies.

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Re: Living trust vs will

Post by Dulocracy » Wed Oct 19, 2016 10:33 am

bsteiner wrote:
Revocable trusts are appropriate in some cases, and in some states. They're common in California for reasons specific to California. However, they're overhyped and oversold, and for most people, in most states, they're mainly a distraction. In most states, probating a Will is not particularly difficult, expensive or burdensome.
THIS. However, as laws differ in every state, and as you are asking for specific legal advice to a specific situation (which cannot be answered by the board's policies other than giving you good general information as bsteiner did), I would highly recommend speaking to an attorney about the laws of your state. Find out how they apply to your situation. I practice in Georgia, where there are no estate taxes (taxes on the estate itself) or inheritance taxes (taxes on those inheriting) outside of federal taxes. Further, probate is, despite being time consuming, so simple that a grand covers the entire process from filing to closing, presuming there is no fight. That means the cost of drafting a will and probating the estate together is actually less than the cost of a trust.

There are good and useful ways of using trusts (such as if a particular child is irresponsible or has special needs), but if someone recommends a trust, make sure you understand HOW that trust will benefit YOU or your heirs. I am in my 14th year of practice, and I have convinced more people NOT to create a trust than I have to create one, as it simply is better for them. (Most attorneys are ethical and care more about building client relationships than earning the quick buck, despite what you see on TV dramas.)

Make an appointment and go over it with an attorney. Understand how the laws of your state impact your estate. Then make the decision.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: Living trust vs will

Post by bostondan » Wed Oct 19, 2016 10:46 am

Dulocracy wrote:I am in my 14th year of practice, and I have convinced more people NOT to create a trust than I have to create one, as it simply is better for them.
Would you mind giving some examples of situations in which you would recommend to not create a trust?
“There may be times when we are powerless to prevent injustice, but there must never be a time when we fail to protest.” - Elie Wiesel

Dulocracy
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Re: Living trust vs will

Post by Dulocracy » Wed Oct 19, 2016 12:43 pm

bostondan wrote:
Dulocracy wrote:I am in my 14th year of practice, and I have convinced more people NOT to create a trust than I have to create one, as it simply is better for them.
Would you mind giving some examples of situations in which you would recommend to not create a trust?
Actually, let me clarify: the topic was living trusts. We very often include a basic testamentary trust in our wills.

A broad explanation of a time when no trust at all is (typically) recommended: Kids are old enough that they are trusted. Assets under $4mil (you want to start planning as you approach the federal tax limit, not after you reach it).

If someone still has minor children or children that are college age, a testamentary trust can take care of most people's needs. Most families simply do not need a living trust (revocable or non-revocable).

Our most frequently used trust outside of a standard testamentary trust is the spendthrift trust. There is an irresponsible child, or a child with creditors, and the parent wants to protect the money. Alternatively, there is a spouse from which the family wants to protect the money (although it still can be used in alimony arguments for overall income, depending on the situation, in my state). Some states allow for more or less protection when it comes to spouses than other states. It is notable that this type of trust is significantly less expensive than a living trust.

I know of a firm that pops out living trusts at $10,000 a pop, and almost every client they have gets one. That, in my opinion, is not the appropriate way of taking care of clients in my state. The reason that the money is important to this discussion is simply this: the guy who makes a lot more money by using this document thinks it is so inappropriate in so many circumstances that he (as a matter of ethics and client service) tells people not to give him money for something that would be extremely profitable. Caveats: every circumstance is different, and a living trust is useful at certain times for certain goals; this is based on the experience of an attorney from one state out of 50, and every state's laws differ.

Which brings us back to: anyone looking at a living trust should speak to an attorney about 1) whether it is appropriate for them, and if the attorney says yes, 2) why it helps their individual situation.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: Living trust vs will

Post by bostondan » Wed Oct 19, 2016 1:06 pm

Dulocracy wrote:A broad explanation of a time when no trust at all is (typically) recommended: Kids are old enough that they are trusted. Assets under $4mil (you want to start planning as you approach the federal tax limit, not after you reach it).
Thank you for the explanation.

Would a testamentary trust be appropriate for this person if the children are at risk later in life of having an estate large enough that it will be taxed? Wouldn't this allow for the money to be kept out of the kids' estates? If there are two children, each of whom inherit $2 million, then saving federal estate tax would be likely at least $800k savings for their children, correct? (assuming they don't need to spend that money and more likely it grows larger)
“There may be times when we are powerless to prevent injustice, but there must never be a time when we fail to protest.” - Elie Wiesel

Dulocracy
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Re: Living trust vs will

Post by Dulocracy » Wed Oct 19, 2016 1:09 pm

bostondan wrote:
Dulocracy wrote:A broad explanation of a time when no trust at all is (typically) recommended: Kids are old enough that they are trusted. Assets under $4mil (you want to start planning as you approach the federal tax limit, not after you reach it).
Thank you for the explanation.

Would a testamentary trust be appropriate for this person if the children are at risk later in life of having an estate large enough that it will be taxed? Wouldn't this allow for the money to be kept out of the kids' estates? If there are two children, each of whom inherit $2 million, then saving federal estate tax would be likely at least $800k savings for their children, correct? (assuming they don't need to spend that money and more likely it grows larger)
That is getting into specific legal and estate planning advice. (It may seem general on the surface, but it is too close to specific legal advice that I do not want to break forum rules or advise someone when I am likely not licensed in their state). It is a very good question to ask an attorney, though. :beer
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: Living trust vs will

Post by Broken Man 1999 » Wed Oct 19, 2016 2:08 pm

Although I am not worried about estate taxes, I do have an issue that must be addressed. My wife is uninterested in finances, completely hands-off with that aspect of our marriage.

My fear is she will squander the estate and become dependent on our children.

It seems, at least from the little research I have done, a spendthrift trust might protect her from herself and help preserve our children's inheritance.

And, honestly, I consider the fact my mind might leave before my body goes, so a trust certainly would help in that case as well.

Is there any other vehicle that does the same as a spendthrift trust? If so I would like to research it prior to meeting with a lawyer.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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