Updating / Modify a Revocable Living Trust

[PickitPaul]

After father passed, mother had Revocable Living Trust made (over 20 yrs. ago)
I was talking with both of my Mom & Sister, and they wanted me to ask those knowledgeable of Trusts on this forum a few questions regarding it. We know it needs updating from time to time, and when I last spoke on the phone to the original attorney who drew it up, he made me angry saying that my questions were time, and he billed for this. I originally paid $2500 20yrs ago.

Can I just go to another estate or elder estate planning attorney (shop prices first) and add changes to the existing Trust OR can we just add in what we need changed, have it notarized and file it with the original trust at the county / town (The house owned by Mom, title is in name of Trust) OR Do Nothing to Trust (see below)

What is needed to change: I am co-trustees with Mom, Sister is Successor Trustee. No other Trustees.
Sister now is married with 1 child, 13yrs. I am single, no children. We are both in mid 50's. Mom is almost 80.
My sister has been using married name, has had rocky 20yr marriage. Husband is not good with money. She is, however. He has had bankruptcy in past, no savings, IRS repayments - a big mess. She files taxes jointly. I told her to start filing separately (even if it is not tax advantageous)

The trust states that anything left is split 50/50 between us. My sister is worried that husband will end up taking her inheritance....so she asked if mom's house can be changed into my name only, as well as IRA. But that means I will be the only one taxed on them, not split 50/50.

If will / Trust is not changed, but I just instruct her to open two separate accounts: one for IRA Inherited and other for taxable funds, in her name but only known to her, then nothing needs to be altered in the original Trust. Then she can get her own Will done and include her child.

[snackdog]

Try emailing an itemized list to the original attorney and ask him how much to make the changes. If you don't like the price, get a new attorney but bear in mind they will likely want to read and change many things so it may cost more. $2500 sounds like a lot. I would expect more like $700.

[FIREchief]

$2500 may be reasonable (and potentially money well spent)

[rossington]

Are you also a successor trustee? tIRA or Roth?

[Spirit Rider]

The trust states that anything left is split 50/50 between us. My sister is worried that husband will end up taking her inheritance....so she asked if mom's house can be changed into my name only, as well as IRA. But that means I will be the only one taxed on them, not split 50/50.

Inheritance is separate marital property even in a community property state, but income after the fact is likely community property. However, she can set up a trust to receive the inheritance.

If will / Trust is not changed, but I just instruct her to open two separate accounts: one for IRA Inherited and other for taxable funds, in her name but only known to her, then nothing needs to be altered in the original Trust. Then she can get her own Will done and include her child.

That is exceptionally bad advice. Shielding assets to avoid their proper legal treatment can result in severe consequences up to including their loss.

This situation requires competent professional legal advice, not freelance steps that may backfire.

[Willmunny]

The attorney you spoke to may not have been as tactful as he should have been, and if you feel that way, then finding a new one is probably the best bet. However, the attorney is a service provider. Spending money on a service 20 years ago does not entitle you to free services from him (legal advice) into perpetuity. The attorney makes his money by selling his time to provide legal services to others.

There may be estate planning attorneys that will offer you a small amount of time (e.g. 30 minutes) for an initial consultation at no charge or a small flat fee. In any event, whether you find one that will charge in this manner or not, your family needs to discuss these issues with a qualified estate planning attorney.

[Sandtrap]

Some thoughts based only on my personal experience:

1. Seek legal counsel.
2. The original attorney may be able to do an addendum with the changes you want. Maybe. Or, if the changes are not simple and more extensive, etc, then he may want to redo the whole thing, or do a "restatement of trust", thus the fee. It would be money well spent.
3. If you seek other legal counsel besides the original attorney, they may suggest making a new one as they will be the one's to draw it up.

Not legal advice.
Hopefully "Bsteiner" will chime in with expert legal advice.

j

[PickitPaul]

Are you also a successor trustee? tIRA or Roth?

I am co-trustee. My sister is successor trustee. It is a tIRA, so will have to continue the RMD's based on our own life expectancy.

[PickitPaul]

If will / Trust is not changed, but I just instruct her to open two separate accounts: one for IRA Inherited and other for taxable funds, in her name but only known to her, then nothing needs to be altered in the original Trust. Then she can get her own Will done and include her child.

That is exceptionally bad advice. Shielding assets to avoid their proper legal treatment can result in severe consequences up to including their loss.

This situation requires competent professional legal advice, not freelance steps that may backfire.

The assets would not be shielded, the trust would be left alone as it is, she would get her inheritance like it is written. She would only be keeping separate accounts from husband, or better yet have her own trust set up to accept inheritance. But it would be up to her to do it. Probably better for us to just change it now and get it over with.

[johnnyc321]

Try emailing an itemized list to the original attorney and ask him how much to make the changes. If you don't like the price, get a new attorney but bear in mind they will likely want to read and change many things so it may cost more. $2500 sounds like a lot. I would expect more like $700.

Many lawyers cost more than $350/hour. This will take a lot longer than 2 hours.

[JGoneRiding]

IRA is always individual so husband can't just take it and in almost all states inheritance is none joint so an inheritated IRA is a great way to control funds and not allow spouse access or rights to the money!

[FrugalInvestor]

It's time to have the trust documents reviewed and updated. If you don't like the attorney who originally prepared them then look for another but don't just shop price or you'll likely get exactly what you pay for. Doing D-I-Y revisions will likely backfire on the one(s) who the document was created to protect.

I had our Trust documents reviewed and revised a few years ago due to the passage of time (15 years) and the associated changes in circumstances including an interstate move. There had also been changes in Federal estate laws. It cost me $2,500 to have that done and I considered it a bargain. If I have ongoing technical questions (i.e. I acquired a new type of property, how should it be titled?) the attorney will continue to answer them at no cost via email which I consider to be very generous of him.

I am always amazed that people make D-I-Y modifications to legal documents with as much significance as wills, trusts, etc.

[johnnyc321]

IRA is always individual so husband can't just take it and in almost all states inheritance is none joint so an inheritated IRA is a great way to control funds and not allow spouse access or rights to the money!

Divorce courts can and very often do split IRAs.

[PickitPaul]

IRA is always individual so husband can't just take it and in almost all states inheritance is none joint so an inheritated IRA is a great way to control funds and not allow spouse access or rights to the money!

Divorce courts can and very often do split IRAs.

Inheriated IRA's might be different, as it had nothing to do with the marriage - was in the trust stating it go to her only & it was before the marriage.

[Spirit Rider]

If will Trust is not changed, but I just instruct her to open two separate accounts: one for IRA Inherited and other for taxable funds, in her name but only known to her, then nothing needs to be altered in the original Trust. Then she can get her own Will done and include her child.

That is exceptionally bad advice. Shielding assets to avoid their proper legal treatment can result in severe consequences up to including their loss.

This situation requires competent professional legal advice, not freelance steps that may backfire.

The assets would not be shielded, the trust would be left alone as it is, she would get her inheritance like it is written. She would only be keeping separate accounts from husband, or better yet have her own trust set up to accept inheritance. But it would be up to her to do it. Probably better for us to just change it now and get it over with.

"in her name but only known to her", from above is clearly an intentional attempt to "shield" the accounts from her husband.

Establishing a trust in the plain light of day is the proper and legal way of doing it.

[neilpilot]

I see a lot of discussion regarding how the IRA is transferred from within the trust. However, aren't accounts that have a beneficiary designation TOD, including an IRA, passed down outside of probate, and exclusive of the trust?

[NotWhoYouThink]

If the account is titled to the trust, it won't have a beneficiary designation, because the trust determines the beneficiary. If the account does have a beneficiary designation (TOD) it probably isn't titled to the trust, which is a different but common situation.

I see no legal problem with a married person filing separately to have an account unknown by the spouse. Happens all the time. Now if you are trying to hide it from the divorce attorney or the IRS or bankruptcy court that's a problem, but having an account a spendthrift spouse can't touch seems pretty benign. What's the problem? If the trust as written leaves money to the sister outright, the sister can deposit that money in an account that is not joint with or accessible to the husband. If the IRA as written leaves 50% to the sister, the sister can set up an inherited IRA with her name only. Again, no problem.

[Arbol]

As a former estate planning attorney, I find it reasonable that the attorney expected to be paid for their time and work. Paying them 20 years ago to establish an estate plan does not entitle the client or their family to free legal advice in perpetuity. If you want someone to work for you, then you have to pay them.

A new attorney would need to review the entire trust documents which will add to the cost. No reasonable attorney would advise a successor trustee without reviewing the entire estate plan that they did not create. Liability minefield otherwise.

Bogleheads are frugal. You get what you pay for. The cheap gets expensive.

[Arbol]

Try emailing an itemized list to the original attorney and ask him how much to make the changes. If you don't like the price, get a new attorney but bear in mind they will likely want to read and change many things so it may cost more. $2500 sounds like a lot. I would expect more like $700.

How many hours of work do you expect to get from an attorney for $700? Do you really think that reading an estate plan, making changes, having clients come in to advise, and preparing new or updated documents will only take a couple of hours?

[brewbaker]

As always, advice is general, but filing separately usually has the worst possible tax outcome. If one spouse owes past tax and penalties, the married couple can file MFJ and the non-delinquent spouse can preserve their refund by using the injured spouse form, 8379.

[cresive]

Try emailing an itemized list to the original attorney and ask him how much to make the changes. If you don't like the price, get a new attorney but bear in mind they will likely want to read and change many things so it may cost more. $2500 sounds like a lot. I would expect more like $700.

I'd like to second this. With my limited experience with attorneys, I have found that I don't get billed for email, but can rack up attorney fees faster than calling a 900 number if I want to speak on the phone.

As for being charged for updating your trust, I have amended mine and paid a fee, although it was nothing like my origination fees were.

Good luck,
Ben