How do you know when you need a trust?

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jgdsss
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How do you know when you need a trust?

Post by jgdsss » Wed Mar 21, 2018 10:28 pm

Is there a certain dollar amount to have in investments/multiple homes/cars/possessions that makes it worth it?

I spoke with an estate planning attorney and she of course recommends an asset protection trust . It’s $1,500 to set up and it seems like it wouldn’t need too much “adjusting” after initial set up.

We have no children but we do already have wills. Since retirement accounts would be excluded from any type of lawsuit, is it just that you’re protecting/shielding cash/taxable accounts?

Trying to decide if we really need it.

clown
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Re: How do you know when you need a trust?

Post by clown » Wed Mar 21, 2018 11:38 pm

In my mind, the principal advantage of a trust (a "revocable living trust") is that it avoids the probate process when one passes away. In California (and I presume elsewhere too) the probate process is lengthy, quite expensive, and a listing of all your assets is put into the public record (providing fodder for scammers). All of which can be avoided by having a trust.

PS - A will is basically a set of instructions to a judge.
Last edited by clown on Wed Mar 21, 2018 11:39 pm, edited 1 time in total.

mrsbetsy
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Re: How do you know when you need a trust?

Post by mrsbetsy » Wed Mar 21, 2018 11:39 pm

It can be state specific. In CA, probate is 10% of the estate. OUCH! We have a trust with health care directives, power of attorney, etc etc. It's all relative to your state and your situation.

Do you own a home or other real estate? We hold that in trust as well. It's a shelter.

denovo
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Re: How do you know when you need a trust?

Post by denovo » Thu Mar 22, 2018 12:12 am

jgdsss wrote:
Wed Mar 21, 2018 10:28 pm
Is there a certain dollar amount to have in investments/multiple homes/cars/possessions that makes it worth it?

I spoke with an estate planning attorney and she of course recommends an asset protection trust . It’s $1,500 to set up and it seems like it wouldn’t need too much “adjusting” after initial set up.

We have no children but we do already have wills. Since retirement accounts would be excluded from any type of lawsuit, is it just that you’re protecting/shielding cash/taxable accounts?

Trying to decide if we really need it.
There's a bunch of different types of trusts. You should specify which one you are talking about. They each have distinct advantages and disadvantages.
"Don't trust everything you read on the Internet"- Abraham Lincoln

mrpotatoheadsays
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Re: How do you know when you need a trust?

Post by mrpotatoheadsays » Thu Mar 22, 2018 12:16 am

How do you know when you need a trust?

When you realize the natural order is undesirable.



Read Nolo's book. I set my trust up for under $50.

denovo
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Re: How do you know when you need a trust?

Post by denovo » Thu Mar 22, 2018 12:20 am

clown wrote:
Wed Mar 21, 2018 11:38 pm
In my mind, the principal advantage of a trust (a "revocable living trust") is that it avoids the probate process when one passes away. In California (and I presume elsewhere too) the probate process is lengthy, quite expensive, and a listing of all your assets is put into the public record (providing fodder for scammers). All of which can be avoided by having a trust.

PS - A will is basically a set of instructions to a judge.
This information is outdated, at least about avoiding probate. For real estate, you no longer need a trust to avoid probate. California now has revocable transfer on death deeds, (effective Jan. 2016)

http://www.edmundvincentlaw.com/blog/co ... eath-deeds
"Don't trust everything you read on the Internet"- Abraham Lincoln

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Earl Lemongrab
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Re: How do you know when you need a trust?

Post by Earl Lemongrab » Thu Mar 22, 2018 11:32 am

A transfer deed can work, but all it does is transfer the property to one or more beneficiaries. They then have to figure out what to do with the property. Every time you have a change you have to file a new deed. I don't know all the details, so I can't say if contingents are allowed or variable percentage of ownership.

A trust can say to sell the property and distribute cash in various percentages, or any of the usual qualifications.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

JBTX
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Re: How do you know when you need a trust?

Post by JBTX » Thu Mar 22, 2018 12:45 pm

Depends on the state. In some states like TX probate isn’t terribly expensive.

If you have no children your need for certain types of trust are certainly less.

NotWhoYouThink
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Re: How do you know when you need a trust?

Post by NotWhoYouThink » Thu Mar 22, 2018 2:29 pm

jgdsss wrote:
Wed Mar 21, 2018 10:28 pm
Is there a certain dollar amount to have in investments/multiple homes/cars/possessions that makes it worth it?

I spoke with an estate planning attorney and she of course recommends an asset protection trust . It’s $1,500 to set up and it seems like it wouldn’t need too much “adjusting” after initial set up.

We have no children but we do already have wills. Since retirement accounts would be excluded from any type of lawsuit, is it just that you’re protecting/shielding cash/taxable accounts?

Trying to decide if we really need it.
Most people here setting up a trust are thinking about estate planning. It sounds like OP is talking about asset protection.

Are you in a line of work that is particularly subject to lawsuits? Do you have umbrella insurance? If the answers are no and yes, then I'm not sure what else you need to do.

bsteiner
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Re: How do you know when you need a trust?

Post by bsteiner » Thu Mar 22, 2018 2:37 pm

jgdsss wrote:
Wed Mar 21, 2018 10:28 pm
Is there a certain dollar amount to have in investments/multiple homes/cars/possessions that makes it worth it?
I spoke with an estate planning attorney and she of course recommends an asset protection trust . It’s $1,500 to set up and it seems like it wouldn’t need too much “adjusting” after initial set up.
...
Most clients who create asset protection trusts have assets in the 8 or 9 figures, and if in the 8 figures, the first digit isn't a "1".

They cost more than $1,500 to create, but the people who create them don't need to worry about the cost. In addition, unless you live in an asset protection jurisdiction, you'll need a trustee in an asset protection jurisdiction, which will cost a few thousand dollars a year, The trustee won't want to hold the underlying assets, so you'll need to create an LLC, which will cost something to create and something each year to maintain.

RudyS
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Re: How do you know when you need a trust?

Post by RudyS » Thu Mar 22, 2018 9:12 pm

mrsbetsy wrote:
Wed Mar 21, 2018 11:39 pm
It can be state specific. In CA, probate is 10% of the estate. OUCH! We have a trust with health care directives, power of attorney, etc etc. It's all relative to your state and your situation.

Do you own a home or other real estate? We hold that in trust as well. It's a shelter.
That 10% sounds high. A random Google search came up with much lower number for allowable attorney fees: https://apeopleschoice.com/costs-to-pro ... alifornia/

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CAsage
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Re: How do you know when you need a trust?

Post by CAsage » Fri Mar 23, 2018 4:34 pm

California is generally a beneficial state to have a trust, because the probate fees are still considerable: 4% of the first $100,000 of the gross value of the probate estate. 3% of the next $100,000. 2% of the next $800,000. 1% of the next $9 million.... Still a TON more than one would want to just throw away. Especially if you have a typical house - gross value, not net!
Well worth considering alternatives - beneficiary declarations, TOD statements, trust for things where needed. Like all questions, this one really depends on the situation. An older couple with mature, responsible children probably don't need a trust if their intent is to just pass things on immediately to the heirs, People with complex situations do need one. I chose to put my house in a grant deed TOD to my responsible children - they can do what they please....
And this certainly does not address any address protections, or the fancy stuff on IRA or spendthrift protection etc. See a real lawyer if you have complications.... and I don't think it can hide money from debt or ???
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

mrsbetsy
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Re: How do you know when you need a trust?

Post by mrsbetsy » Fri Mar 23, 2018 9:58 pm

That 10% sounds high. A random Google search came up with much lower number for allowable attorney fees: https://apeopleschoice.com/costs-to-pro ... alifornia/
[/quote]

Add 4% executor fee and all the headache and you are close to 10%.

afan
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Re: How do you know when you need a trust?

Post by afan » Sat Mar 24, 2018 8:49 am

The protection of retirement accounts is complicated, depending on the type of account, whether inside or outside of bankruptcy, state law and whether it is a Roth. For non Roth accounts, the money becomes exposed to creditors when you withdraw your required distributions. Even for Roth accounts the money is protected only so long as it stays in the account. If you take some out to spend then it becomes exposed.
If you are young, then creditors are not likely to be interested in getting their hands on your money decades in the future. But as you grown older, unless your risk has gone away, the time they have to wait becomes less of a concern.

Asset protection trusts are expensive to set up and maintain. They are expensive enough that they only make sense when you have exhausted the other options, including insurance for whatever risk you are preparing against. Bsteiner's guideline for networth to make it reasonable should give you some idea of the cost and complexity. Foreign trusts are supposed to be better than domestic trusts, but even more cost and hassle. To really make them work, you have to not only remove the trust from the jurisdiction of US courts. You have to remove yourself to an asset protection country before it is too late.

Short of that, for either domestic or foreign, you try to make the hurdles to your assets so high that creditors decide to settle for what money is on the table without getting at the trust.

Bsteiner, can we assume that fighting your way through such a case would be even more expensive than setting up and maintaining the trust?
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: How do you know when you need a trust?

Post by michaeljc70 » Sat Mar 24, 2018 10:05 am

I was more concerned with avoiding probate if I die than protecting things from lawsuits. In IL where I live, estates over 100k go through probate (generally). I found that I could designate beneficiaries on my tIRA, Roth, and checking accounts. I could also do a land trust cheaply for my home. On my taxable brokerage account, I can do a TOD (transfer on death). That leaves only my personal possessions which fall under $100k. The problem with this is you cannot always specify more complex scenarios like if X dies before my, then give it to Y instead. I don't have any kids so I don't need to worry about that either.

The reason I don't want to spend a lot of money on a trust is I am in my 40s. I would expect many changes over the years (which would add costs) and I don't plan on going soon (though you never know).

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CABob
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Re: How do you know when you need a trust?

Post by CABob » Sat Mar 24, 2018 10:14 am

If you are wondering whether you need a trust, I suggest you read Beyond the Grave by Condon. Generally I don't think that the dollar amount is more important than the specific conditions in making the determination. The cutoff limits for estate taxes would be on of the conditions.
Bob

SrGrumpy
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Re: How do you know when you need a trust?

Post by SrGrumpy » Sat Mar 24, 2018 11:32 am

CAsage wrote:
Fri Mar 23, 2018 4:34 pm
California is generally a beneficial state to have a trust, because the probate fees are still considerable: 4% of the first $100,000 of the gross value of the probate estate. 3% of the next $100,000. 2% of the next $800,000. 1% of the next $9 million....
But if the house is covered by the revocable TOD referenced above, and retirement savings + any other financial assets are also covered by TODs, then the gross value may not be more than a couple of Beanie Babies and some change behind the sofa. Unless gross does include house, etc?

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CAsage
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Re: How do you know when you need a trust?

Post by CAsage » Sat Mar 24, 2018 11:56 am

SrGrumpy wrote:
Sat Mar 24, 2018 11:32 am
CAsage wrote:
Fri Mar 23, 2018 4:34 pm
California is generally a beneficial state to have a trust, because the probate fees are still considerable: 4% of the first $100,000 of the gross value of the probate estate. 3% of the next $100,000. 2% of the next $800,000. 1% of the next $9 million....
But if the house is covered by the revocable TOD referenced above, and retirement savings + any other financial assets are also covered by TODs, then the gross value may not be more than a couple of Beanie Babies and some change behind the sofa. Unless gross does include house, etc?
Gross value of the assets that go through probate - so you are absolutely correct. If you take care of the big stuff (house, IRA) then you just need a simple little will that covers personal effects and that change behind the sofa! I will also add that many people have friends or family that act as executor or trustee and do not charge, so unless you are paying an executor, that's "free". Trusts still very good for any situation with complexity or if/then/else situations, or protecting assets from gold digging son-in-laws for example.... Read a good book on estate planning (Nolo Press has some) and then decide if your situation requires a trust. So many special cases!
Example: My Mom passed away at an advanced age with two very mature, very capable children. Everything was TOD, no issues.
Me: Two heirs, one still in school. Not at all clear I want the money to wrap a Corvette around a tree... so trust for college until they are 35.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

PinotGris
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Re: How do you know when you need a trust?

Post by PinotGris » Sat Mar 24, 2018 4:22 pm

Earl Lemongrab wrote:
Thu Mar 22, 2018 11:32 am
A transfer deed can work, but all it does is transfer the property to one or more beneficiaries. They then have to figure out what to do with the property. Every time you have a change you have to file a new deed. I don't know all the details, so I can't say if contingents are allowed or variable percentage of ownership.

A trust can say to sell the property and distribute cash in various percentages, or any of the usual qualifications.
Can't a will say the same thing?

ze233
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Re: How do you know when you need a trust?

Post by ze233 » Sat Mar 24, 2018 7:58 pm

clown wrote:
Wed Mar 21, 2018 11:38 pm
In my mind, the principal advantage of a trust (a "revocable living trust") is that it avoids the probate process when one passes away. In California (and I presume elsewhere too) the probate process is lengthy, quite expensive, and a listing of all your assets is put into the public record (providing fodder for scammers). All of which can be avoided by having a trust.

PS - A will is basically a set of instructions to a judge.
I agree with this. My wife and I are currently setting up our estate plan, and we are going with a revocable living trust to avoid probate.

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Earl Lemongrab
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Re: How do you know when you need a trust?

Post by Earl Lemongrab » Sat Mar 24, 2018 11:57 pm

chabil wrote:
Sat Mar 24, 2018 4:22 pm
Earl Lemongrab wrote:
Thu Mar 22, 2018 11:32 am
A transfer deed can work, but all it does is transfer the property to one or more beneficiaries. They then have to figure out what to do with the property. Every time you have a change you have to file a new deed. I don't know all the details, so I can't say if contingents are allowed or variable percentage of ownership.

A trust can say to sell the property and distribute cash in various percentages, or any of the usual qualifications.
Can't a will say the same thing?
But then the real estate goes through probate, with CA probate fees, which was the reason for the TOD deed.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

PinotGris
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Re: How do you know when you need a trust?

Post by PinotGris » Sun Mar 25, 2018 10:41 am

ze233 wrote:
Sat Mar 24, 2018 7:58 pm
clown wrote:
Wed Mar 21, 2018 11:38 pm
In my mind, the principal advantage of a trust (a "revocable living trust") is that it avoids the probate process when one passes away. In California (and I presume elsewhere too) the probate process is lengthy, quite expensive, and a listing of all your assets is put into the public record (providing fodder for scammers). All of which can be avoided by having a trust.

PS - A will is basically a set of instructions to a judge.
I agree with this. My wife and I are currently setting up our estate plan, and we are going with a revocable living trust to avoid probate.

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Sandtrap
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Re: How do you know when you need a trust?

Post by Sandtrap » Sun Mar 25, 2018 11:19 am

Disclaimer:
Not legal counsel nor the law expertise of excellent resident "bsteiner". :D

From personal experience with family and extended family and relatives with substantial assets who have had as variety of trusts from poor to excellent.
IMHO:
The larger the estate, the more complex the holdings, and the more family dynamic considerations, the greater the need for an excellent, well thought out trust drawn out with the help of reputable legal counsel.

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