Do I need a living revocable 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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lepa71
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Do I need a living revocable trust?

Post by lepa71 »

I'm interviewing a couple of attorneys to do estate planning. Some saying I should have a living trust and rollover real estate assets into it.
We have a family of 3( husband, wife, and 14-years-old son). We have 3 rental properties in addition to our primary residence. All those rentals are in different names as they were acquired before me and my wife met. The proposal is to put those into trust right away. We also have separate bank accounts, life insurances, 401Ks and so on.

So what do you guys think? Any other suggestions are welcome.

Thanks
Last edited by lepa71 on Tue Jan 12, 2021 2:37 pm, edited 1 time in total.
sailaway
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Re: Do I need a living estate trust?

Post by sailaway »

You seem to be mixing I and we pretty indiscriminately here.

Are you talking about two individual trusts or a family trust?

Have you considered that property (and the individual bank accounts) as joint property or separate property up until now? What is the legal status of those properties?

Your state and your goals for your estate will also play a role in your decision.
Topic Author
lepa71
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Re: Do I need a living estate trust?

Post by lepa71 »

It is for a family. I made some updates to the original post.
sailaway
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Re: Do I need a living estate trust?

Post by sailaway »

lepa71 wrote: Tue Jan 12, 2021 2:01 pm It is for a family. I made some updates to the original post.
Your updates didn't address any of my questions. Just because you have a family does not clarify what kind of trust you are considering.
supalong52
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Re: Do I need a living estate trust?

Post by supalong52 »

Your 401k and life insurance would not be owned by the trust, but would specify the trust as a beneficiary. The trust can distinguish between separate and joint ownership of property so you would not necessarily be commingling assets simply by putting them in trust.
supalong52
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Re: Do I need a living estate trust?

Post by supalong52 »

sailaway wrote: Tue Jan 12, 2021 2:03 pm
lepa71 wrote: Tue Jan 12, 2021 2:01 pm It is for a family. I made some updates to the original post.
Your updates didn't address any of my questions. Just because you have a family does not clarify what kind of trust you are considering.
Doesn't the title say living trust (aka revocable trust)? Are there different types of living trusts?
sailaway
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Re: Do I need a living estate trust?

Post by sailaway »

supalong52 wrote: Tue Jan 12, 2021 2:04 pm
sailaway wrote: Tue Jan 12, 2021 2:03 pm
lepa71 wrote: Tue Jan 12, 2021 2:01 pm It is for a family. I made some updates to the original post.
Your updates didn't address any of my questions. Just because you have a family does not clarify what kind of trust you are considering.
Doesn't the title say living trust (aka revocable trust)? Are there different types of living trusts?
You can establish one jointly or individually. OP says that the property is in different names and that "I should have a trust." That is different than "We want to put all of our property into a trust."
Topic Author
lepa71
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Re: Do I need a living estate trust?

Post by lepa71 »

sailaway wrote: Tue Jan 12, 2021 2:00 pm You seem to be mixing I and we pretty indiscriminately here.

Are you talking about two individual trusts or family trust?

Have you considered that property (and the individual bank accounts) as joint property or separate property up until now? What is the legal status of those properties?

Your state and your goals for your estate will also play a role in your decision.
I'm not sure I understand the question
What is the legal status of those properties?
.
As for the bank accounts, we would keep them separate. In some cases, there is a beneficiary designated for some things like life insurance. For real estate, we could just add spouse with the county but I don't know if a family trust is a better way. Rental properties, probably, will not be kept forever. They will be sold in retirement. I thought I would create a family trust only if both parents(us) pass away for some unfortunate reason so our son would have some...

I'm not sure if I use the right terminology so please correct me when I'm wrong.

Thanks
Topic Author
lepa71
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Re: Do I need a living estate trust?

Post by lepa71 »

sailaway wrote: Tue Jan 12, 2021 2:06 pm
supalong52 wrote: Tue Jan 12, 2021 2:04 pm
sailaway wrote: Tue Jan 12, 2021 2:03 pm
lepa71 wrote: Tue Jan 12, 2021 2:01 pm It is for a family. I made some updates to the original post.
Your updates didn't address any of my questions. Just because you have a family does not clarify what kind of trust you are considering.
Doesn't the title say living trust (aka revocable trust)? Are there different types of living trusts?
You can establish one jointly or individually. OP says that the property is in different names and that "I should have a trust." That is different than "We want to put all of our property into a trust."
You are right. I should have said, "We should have the trust". Our goal is to avoid probate for real estate. I could simply add the other person to the title with the county, this way all properties will have both spouses on the title but I can't add a minor to the title, I think.
bayview
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Re: Do I need a living estate trust?

Post by bayview »

I think you want the phrase “living revocable trust,” not living estate trust.

There are some really good discussions of the pros and cons of these, depending on what state you live in. It’s a good idea to leave assets to your son in trust, at least for now.

Perhaps if you edit the thread title, it will clarify the discussion. If you can’t do that, click the [!] exclamation point Report button, and a moderator can do it for you.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri
Topic Author
lepa71
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Re: Do I need a living revocable trust?

Post by lepa71 »

bayview wrote: Tue Jan 12, 2021 2:30 pm I think you want the phrase “living revocable trust,” not living estate trust.

There are some really good discussions of the pros and cons of these, depending on what state you live in. It’s a good idea to leave assets to your son in trust, at least for now.

Perhaps if you edit the thread title, it will clarify the discussion. If you can’t do that, click the [!] exclamation point Report button, and a moderator can do it for you.
Thank you.
morbo
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Re: Do I need a living revocable trust?

Post by morbo »

What state? A revocable living trust can make sense in a few states where probate is cumbersome. Otherwise, I’m of the opinion that they are oversold.
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lepa71
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Re: Do I need a living revocable trust?

Post by lepa71 »

I'm in MN.
Lee_WSP
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Re: Do I need a living revocable trust?

Post by Lee_WSP »

Go with the attorney who understands commingling of assets and is able to actually explain the pros and cons of a living trust vs a testamentary trust. If they say you avoid probate, that's not by itself a great reason. Probate is usually pretty simple, albeit tedious, but so is a living trust.
bsteiner
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Re: Do I need a living revocable trust?

Post by bsteiner »

Minnesota is a Uniform Probate Code state, which means the procedures should be simple.

Is there some other reason revocable trusts would be appropriate for you and your spouse?

Why is this the thing you're concerned about? You should focus on the dispositive terms, such as planning for the Minnesota estate tax, the degree of control the surviving spouse should have, the age at which each child should gain control over his/her share, executors, trustees, guardians, etc.
Topic Author
lepa71
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Re: Do I need a living revocable trust?

Post by lepa71 »

bsteiner wrote: Tue Jan 12, 2021 4:31 pm Minnesota is a Uniform Probate Code state, which means the procedures should be simple.

Is there some other reason revocable trusts would be appropriate for you and your spouse?

Why is this the thing you're concerned about? You should focus on the dispositive terms, such as planning for the Minnesota estate tax, the degree of control the surviving spouse should have, the age at which each child should gain control over his/her share, executors, trustees, guardians, etc.
I think one of the attorneys who advising for a living trust said that trust would help for the transfer of assets including the real estate throw the trust to next-generation meaning our son and/or surviving spouse.

I just don't know enough to ask the right questions. That is the reason I'm asking here. I assume I'm not the 1st and not the last who is in this situation.

Is there a like questioner that I can use for questions asking the attorney? We still can have the 1st consultation with each of them for free before selecting one. So far I was just making what their pricing could be and some suggestions on what to have. This will have the wills and medical directives as well as who would become guardians for our son just in case. Some of them just saying that they could create a trust that would kick in in case both parents would become deceased but the question then. What happened is if the kid is still a minor?

Thanks
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lepa71
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Re: Do I need a living revocable trust?

Post by lepa71 »

Here is a quote from one I kind of like and he is the one who talks about living trust
"I generally recommend trying to achieve a "non probate estate" in which you and your wife own nothing in your own name upon your death. Without utilizing either a TODD or a trust, ALL real estate will ultimately require probating -- along with any PERSONA PROPERTY owned in your own name valued at $75,0000 or more."
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WarAdmiral
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Re: Do I need a living revocable trust?

Post by WarAdmiral »

I have been fiddling with $58 NOLO software and that seems to have all the required docs. (See my post here: viewtopic.php?p=5693161#p5693161
) This may be a good start to come up with questions before seeking an attorney.

btw, I have a question

My wife and i jointly own our house. How does the house transfer if one of us were to die without a will or trust ?
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ipdiddly
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Re: Do I need a living revocable trust?

Post by ipdiddly »

I am not sure whether a revocable trust is viable for two grantors/donors or how it works. That requires deeper and more expert analysis.
I can speak about a revocable trust for one grantor as I recently put a relatively simple one together for an elderly friend. It is a great way to manage the assets and expenses for the grantor and a great way to avoid probate.
In a revocable trust, the grantor puts assets into the trust. So in the case of my friend, she transferred her bank accounts into a bank account in the name of the trust, naming the trustee, and she deeded the house to the trustee of the trust (not personally, but as trustee).
The trust is revocable at any time and the grantor can instruct the trustee what to do at any time. The trust will include provisions setting out what the trustee has the power to do: e.g., make deposits and withdrawals, write checks, pay expenses (assisted living or nursing home care, medical bills, taxes, etc.), buy or sell stocks if there is a brokerage account - whatever power the grantor is willing to grant.
The trust also can include how the trust assets are disposed of after death. This is the part that avoids probate.
In my friend's case, I, acting as trustee, sold the house before she passed so that there would be sufficient funds available to pay for her medical care, assisted living, then nursing home care. Plus she no longer needed the house once she went into assisted living. As trustee, I paid all of her expenses as they came in.
After she passed, I, as trustee, paid any remaining bills, filed and paid her taxes, then distributed the balance of the funds in the trust to her beneficiaries as set out in the trust. It was all relatively simple in her case because she didn't have a lot of assets to sort out. It was basically money (held in bank accounts) and the house (initially, until it was sold).
It was much easier than handling my in-law's estate where it went to probate and I had to wait for the probate court to grant permission to sell the house and had to provide the court with information about any long lost family members. It wasn't all that difficult, but it just added several extra layers of steps that were tedious, when all you want to do is finish it already.
I'm sorry I can't provide more info pertaining to your situation because I really don't know how this might work with two grantors. I should learn more about it because my wife and I need to update our estate planning.
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ipdiddly
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Re: Do I need a living revocable trust?

Post by ipdiddly »

WarAdmiral wrote: Tue Jan 12, 2021 5:08 pm
My wife and i jointly own our house. How does the house transfer if one of us were to die without a will or trust ?
Assuming it is owned JTWROS (joint owner with right of survivorship) or tenants by the entirety (essentially the same thing), the property automatically transfers to the survivor. Generally, I believe all the survivor needs to do is file the death certificate with the registry of deeds. But that step may vary depending on the state.
bayview
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Re: Do I need a living revocable trust?

Post by bayview »

lepa71 wrote: Tue Jan 12, 2021 4:54 pm
...I just don't know enough to ask the right questions. That is the reason I'm asking here. I assume I'm not the 1st and not the last who is in this situation....
You are absolutely not the only one trying to figure this out! Keep asking; that’s how you develop a mental framework to take to the estate attorney when you’re ready to nail this stuff down.

Cheer up: your situation is relatively uncomplicated. You may find that you don’t need a living revocable trust while you’re alive. Maybe you just establish a testamentary trust if you both die, to protect your son.

Maybe try to brainstorm some ideal scenarios with your spouse (while maneuvering around that awkward death thing, lol), so that you both have a vision of how you would like things to be if one or both of you die. I think an estate attorney will be grateful if you can tell her/him where you want to wind up, and let her/him figure how to get there.

Best wishes :beer
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri
fourwheelcycle
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Re: Do I need a living estate trust?

Post by fourwheelcycle »

lepa71 wrote: Tue Jan 12, 2021 2:18 pm Our goal is to avoid probate for real estate. I could simply add the other person to the title with the county, this way all properties will have both spouses on the title but I can't add a minor to the title, I think.
If you have your attorney prepare a joint revocable trust, with you and your spouse as the trustees, and if you choose to include your real estate as property within the trust, which you should if your goal is to avoid probate for the real estate, you will have to formally change the title of your real estate so the trust is the titled owner of the real estate. The trust itself will say if either trustee dies all property in the trust will become the property of the surviving trustee (with or without a life interest provision in favor of your minor son upon the death of the surviving spouse), so there will be no need for probate. If the surviving spouse ever wants to sell the real estate they only need to sign the sales agreement as trustee of the trust.

Your 14 year old son is a minor, so he cannot be the titled owner of any real property, or of any brokerage account or bank account. He also cannot legally sign any contract, etc. You will have to name sequential successor trustees for your trust when the second spouse dies, but none of the successor trustees can be a minor. The trust could provide that if your son is still a minor when the second spouse dies, all remaining property of the trust, which will become an irrevocable trust on the death of the second spouse, will be retained in the trust and managed by the successor trustee for the benefit of your son, to be distributed at age ....., or not, if the son develops a variety of risks such as law suits, divorce, drug use, special needs, etc.

My wife and I have a joint revocable trust that essentially says these things. We are the only trustees now. If we both die together, or when the second of us dies, our adult child, who is our DPOA for finances and executor of our pour-over wills, will become the successor trustee. If that child dies, or chooses to add their adult sibling as a second trustee, their sibling will be the next successor. If both adult children die, for example with us in one plane crash, our attorney's firm will name the next successor (quite possibly themselves) and our trust says the shares of our children's children will be retained in the trust for the benefit of any minors until they reach age 26, unless they develop a range of risks, as noted above.

PS As bsteiner pointed out, you, with the advice of your qualified attorney, should also be planning for your state's estate tax laws. One of our adult children lives in MA, where state estate tax is a consideration.
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lepa71
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Re: Do I need a living revocable trust?

Post by lepa71 »

Can you elaborate more on estate tax with some examples? Please.
We are no rich by any means but it would benefit us to preserve whatever we have.
Thanks
fourwheelcycle
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Re: Do I need a living revocable trust?

Post by fourwheelcycle »

lepa71 wrote: Wed Jan 13, 2021 8:38 am Can you elaborate more on estate tax with some examples? Please.
We are no rich by any means but it would benefit us to preserve whatever we have.
Thanks
Many states have their own estate taxes that start as low as $1M. If your estate(s) at death, whether in a join revocable trust with your spouse or in regular wills for each of you that go through probate, is (are) over your state's estate tax limit, your estate(s) will owe estate taxes UNLESS a qualified attorney helps you prepare proper estate documents, most likely trusts, which enable the first $X dollars of you estate (where $X equals your state's estate tax threshold) to pass to your heirs in a way that avoids exposure to your state's estate tax.

If I sound vague, that is because I am not an attorney and I barely know what I am talking about. Our state does not have an estate tax, but one of our children lives in a state with an estate tax and estate planning web sites for that state talk endlessly about trusts to help minimize state estate taxes.
Nowizard
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Re: Do I need a living revocable trust?

Post by Nowizard »

The primary question to ask is what benefit do you receive from a Trust. For example, some might use it as protection from family discord, others for avoiding probate. The latter led to creation of a Revocable Trust for a family member who had a small estate and for us as a benefit for our children who are Successor Trustees. Answering the question of "why" will answer whether you need a Trust or not. As always, we receive information from professionals that is generally applicable but must evaluate it in terms of our own circumstances since we live with the consequences of our own decisions.

Tim
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