Will or Trust?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Re: Will or Trust?

Post by LarryAllen » Sat Jun 23, 2018 9:42 pm

I always recommend holding money in trust until at least age 30 but really prefer 35 or 40. Even then I always encourage people to leave it in trust forever which creates clear separation of assets of your kids from their spouses -- i.e. better if they get divorced. Your kid can be their own trustee once they hit the magic age you have selected.

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Re: Will or Trust?

Post by RickBoglehead » Sun Jun 24, 2018 7:23 am

cheese_breath wrote:
Tue Jun 19, 2018 7:28 pm
Something I don't understand in reading this thread. Some have stated their wills are written to direct their assets into trusts after they die. Why?

One of the advantages of a trust is to avoid probate. But taking the approach they're using won't the wills need to be probated before the assets can be put into the trusts? They can put the assets into revocable trusts right now and revoke them if they change their minds.
Correct. If one wants to avoid probate, and the fees owed to the probate court, and the lawyer fees to handle probate, then assets should be held by the revocable trust before death, with a pour over will that catches anything missed.

A good attorney will recommend this, and provide written instructions for the trustee to use upon death. Most attorneys want the trustee to have to come to them after death to get more fees.

I recommend this book:

Living Trusts For Everyone : : Why A Will Is Not The Way To Avoid Probate, Protect Heirs, And Settle Estates by Ronald Farrington Sharp. 2nd edition, 2017
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Re: Will or Trust?

Post by Counterpoint » Fri Jul 27, 2018 2:09 pm

bsteiner wrote:
Sat Jun 23, 2018 9:28 pm
Counterpoint wrote:
Fri Jun 22, 2018 6:49 pm
bsteiner wrote:
Mon Jun 18, 2018 5:09 pm
By far the more important issue is whether to provide for your children in trust rather than outright. I agree with FIREchief to provide for your children in trust rather than outright. If it's appropriate, you can give each child effective control over her trust at a specified age.
I'm curious, bsteiner, about your comment (which I put in bold above) that the child can have effective control over her trust. I also noticed that afan has a similar provision where his children will be the trustees. We're revisiting our wills and are looking at asset protection options for the next decade or so for our adult unmarried daughter in the event of marriage+divorce (and of course our unexpected death as a result of which she would inherit our assets).

If an adult child is both the beneficiary and the trustee, wouldn't that significantly dilute the asset protection of the trust in the event of divorce? I don't know if that is dependent on the laws of the state where the will + testamentary trust is drawn up (we live in Maryland).

And thanks bsteiner (as well as other knowledgeable contributors like afan, golfcaddy and Firechief) - I've learnt a lot from your posts.
Absent a disability, where the client would have provided for the child outright but for the desire for asset protection, we generally recommend giving the child the power to control his/her trust upon reaching a specified age.

In other words, upon reaching a specified age (the age when the trust would otherwise end), the child has the right to become a trustee, the power to remove and replace his/her co-trustee (provided the replacement trustee is not a close relative or subordinate employee), and the power to appoint (give) the trust assets to anyone he/she wants (other than the child or his/her estate or creditors).

Some lawyers instead let the child become sole trustee at that point, with the power to withdraw for health, maintenance, support and education, and the right to add a co-trustee if he/she ever wants distributions other than health, maintenance, support or education. That might expose the trust assets to creditors with respect to health, maintenance, support and education in some states, though some states provide that it won't exposes. It might also expose the trust assets to Medicaid. It also increases the likelihood that the child will inadvertently use the trust assets when it might be better to use other assets first. For these reasons, I prefer the method set forth in the previous paragraph.
Thank you bsteiner. (Just saw your reply - I've been away from the forums for a while.)

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Re: Will or Trust?

Post by genefl » Fri Jul 27, 2018 3:00 pm

I just read a very good book that delves into the issues being discussed here. My wife and I are thinking about estate planning etc and the book does a nice job discussing and clarifying the issues for novices.

"Estate Planning for the Sandwich Generation: How to Help Your Parents and Protect Your Kids." Author Catherine Hodder.

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