Modify trust after buying additional term life?

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TheOscarGuy
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Modify trust after buying additional term life?

Post by TheOscarGuy » Fri Sep 14, 2018 3:46 am

We have a will that stipulates that all proceeds in case of our death (me and my SO) will go to a trust (created in case of our death). We recently upped our term life policies and were wondering if either the new life insurance company or the lawyers need to be involved, to make sure proceeds from that term policy are directed to the same trust. We are in MA. We had existing term life policy at the time will was created, but I don't remember what we/lawyers did for that policy. Any help will be appreciated!.

RickBoglehead
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Re: Modify trust after buying additional term life?

Post by RickBoglehead » Fri Sep 14, 2018 5:55 am

Simply make the trust the beneficiary of the policy.

Gill
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Re: Modify trust after buying additional term life?

Post by Gill » Fri Sep 14, 2018 6:23 am

Was the trust the primary beneficiary or a contingent beneficiary? There shouldn’t be any need to modify the trust, but be careful the beneficiary designation is consistent with your wishes.
Gill

TheOscarGuy
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Location: MA

Re: Modify trust after buying additional term life?

Post by TheOscarGuy » Fri Sep 14, 2018 7:20 am

Gill wrote:
Fri Sep 14, 2018 6:23 am
Was the trust the primary beneficiary or a contingent beneficiary? There shouldn’t be any need to modify the trust, but be careful the beneficiary designation is consistent with your wishes.
Gill
Beneficiary for first or second policy was never changed. I checked and the old policy document still states my wife as the beneficiary.

TheOscarGuy
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Location: MA

Re: Modify trust after buying additional term life?

Post by TheOscarGuy » Fri Sep 14, 2018 7:22 am

RickBoglehead wrote:
Fri Sep 14, 2018 5:55 am
Simply make the trust the beneficiary of the policy.
How does one do that? Is the trust called 'Trust of Mr. TheOscarGuy'? I re-read my will and it does not explicitly call out name of the trust, just that 'distribution of estate shall be held in a trust'.

Gill
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Location: Florida

Re: Modify trust after buying additional term life?

Post by Gill » Fri Sep 14, 2018 7:24 am

TheOscarGuy wrote:
Fri Sep 14, 2018 7:20 am
Gill wrote:
Fri Sep 14, 2018 6:23 am
Was the trust the primary beneficiary or a contingent beneficiary? There shouldn’t be any need to modify the trust, but be careful the beneficiary designation is consistent with your wishes.
Gill
Beneficiary for first or second policy was never changed. I checked and the old policy document still states my wife as the beneficiary.
Is your estate an alternate beneficiary which would have the effect of the proceeds passing to the residuary trust if predeceased by your wife?
Gill

Gill
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Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Modify trust after buying additional term life?

Post by Gill » Fri Sep 14, 2018 7:26 am

TheOscarGuy wrote:
Fri Sep 14, 2018 7:22 am
RickBoglehead wrote:
Fri Sep 14, 2018 5:55 am
Simply make the trust the beneficiary of the policy.
How does one do that? Is the trust called 'Trust of Mr. TheOscarGuy'? I re-read my will and it does not explicitly call out name of the trust, just that 'distribution of estate shall be held in a trust'.
It’s called “trust under the will of ________”
Gill

RickBoglehead
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Joined: Wed Feb 14, 2018 9:10 am

Re: Modify trust after buying additional term life?

Post by RickBoglehead » Fri Sep 14, 2018 8:49 am

I'm not a legal expert, but here's my understanding. Sometimes assets are put into a Revocable Trust and held their during your life. At death, the assets are then distributed per the terms of the trust. No probate is needed.

Another option is to put the wording into a will that puts the assets into a trust that is created when the will is created.

A third option is to not create a trust, but to have the will put the assets into a trust to be created at time of death.

Options 2 and 3 can have the result that a probate court has to review things, and an estate attorney needs to be involved.

A great book that discusses these things, as well as explains how sometimes estate attorneys try to maximize their earnings, is Living Trusts for Everyone: Why a Will Is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates (Second Edition)

Edit - the author recommends that when you create your revocable trust, you have the attorney write out the steps that need to be taken after death so that the trust can be executed without further consultations.
Last edited by RickBoglehead on Fri Sep 14, 2018 9:14 am, edited 1 time in total.

johnnyc321
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Re: Modify trust after buying additional term life?

Post by johnnyc321 » Fri Sep 14, 2018 9:00 am

In Florida, it is generally a bad idea to name your estate as the beneficiary of non-probate assets. First of all, this will require a probate. Second, this will subject the proceeds to your creditors. I also do not like trusts created under wills because they are not created without admitting the will to probate. So basically, you are adding fees and costs for an unnecessary reason and at worst, you are putting the proceeds at risk of creditors.

So my advice is to schedule an appointment with an estate planning lawyer to review your documents, beneficiary designations, and titling of assets.

TheOscarGuy
Posts: 506
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Location: MA

Re: Modify trust after buying additional term life?

Post by TheOscarGuy » Fri Sep 14, 2018 9:56 am

RickBoglehead wrote:
Fri Sep 14, 2018 8:49 am
I'm not a legal expert, but here's my understanding. Sometimes assets are put into a Revocable Trust and held their during your life. At death, the assets are then distributed per the terms of the trust. No probate is needed.

Another option is to put the wording into a will that puts the assets into a trust that is created when the will is created.

A third option is to not create a trust, but to have the will put the assets into a trust to be created at time of death.

Options 2 and 3 can have the result that a probate court has to review things, and an estate attorney needs to be involved.

A great book that discusses these things, as well as explains how sometimes estate attorneys try to maximize their earnings, is Living Trusts for Everyone: Why a Will Is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates (Second Edition)

Edit - the author recommends that when you create your revocable trust, you have the attorney write out the steps that need to be taken after death so that the trust can be executed without further consultations.
Thanks, ours falls in #3 category.

RickBoglehead
Posts: 637
Joined: Wed Feb 14, 2018 9:10 am

Re: Modify trust after buying additional term life?

Post by RickBoglehead » Fri Sep 14, 2018 10:42 am

I recommend you grab the book I listed. A pretty quick read. Seems like textbook "I'm trying to maximize my earnings" by the attorney that set things up based on my understanding (not a lawyer, don't play one on TV, didn't stay in a Holiday Inn Express last night).

Keep in mind that if your trust has specific beneficiaries (i.e. wife, if she doesn't pre-decease, then person a and person b get 50%), that's easy to do with beneficiaries on the policy.

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