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Old 06-15-2016, 01:43 PM   #41
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As to living trusts, I concur

As to Totten Trusts (POD / TOD Clauses), why not? I want my estate settled in 30 minutes or less with it all going to my beneficiaries as I state. In that I'm single, totally do-able
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Old 06-15-2016, 03:22 PM   #42
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For all his good intentions, documenting everything, etc - he messed up his beneficiary designations for his qualified plans and those had to go through probate, not to mention the immediate tax treatment.
How do you mess up the beneficiary designations and how do you not mess up the info? Do you know how long the money can stay in the IRA before it is transferred to beneficiary IRA?
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Old 06-15-2016, 03:24 PM   #43
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How do you mess up the beneficiary designations and how do you not mess up the info? Do you know how long the money can stay in the IRA before it is transferred to beneficiary IRA?
it wasn't in an IRA it was in a company 401k plan. Even worse, he designated the beneficiary to his "trust" which doesn't exist.

We had to fight with the TPA to get them to pay his estate, then we distributed it amongst the beneficiaries per the will. ALL TAXABLE.
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Old 06-15-2016, 03:25 PM   #44
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Oh crap!
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Old 06-15-2016, 03:44 PM   #45
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Do you know how long the money can stay in the IRA before it is transferred to beneficiary IRA?
AFAIK, there's no law about the duration. If the will and/or trust do not specify a duration, it is up to the executor to determine the timing of asset transfers not overseen by probate.
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Old 06-15-2016, 03:51 PM   #46
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Schwab states the rule is within 5 yrs. But I'm having difficulty finding the IRS reg
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Old 06-15-2016, 04:33 PM   #47
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So true. In doing tax returns, I have found many folks unnecessarily complicate their financial life through using a "living trust". One situation I know of is where the living trust was written in such a way that when the husband died, all his rentals had to be reported half owned by the resulting irrevocable trust, half by his surviving wife. This went on for years, enriching the accountants and lawyers in an effort to avoid probate.
Could the original intent have been due to the $1MM estate tax exemption amount? By splitting it up like this, was the intent to maximize the stepped-up basis when the original owner died? Then, when his wife died (with the other 50%), the remaining amount received an additional stepped-up basis? There were some major differences back before the estate tax laws changed in (?) early 2000s.

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I've settled two estates in PA in the last decade and I did not find either to be difficult. A few letters, a few forms, never appeared before any court. Worst was the PA Inheritance Tax forms. The only lawyer involved was one I used as an adviser on a per hour basis. Settled each estate for less than a thousand dollars in legal fees. Including jointly owned assets, each estate was under half million $$. Since it was family, I did not request any administrative fee for my time, just direct reimbursement for out of pocket expenses. In my cases, the court would only become involved if a heir or potential heir filed a petition for the court to review my handling of the estate.
I'm confused - how did you settle an estate in probate court that was roughly $400,000 without probate fees and with legal fees of under $1,000 for "some advice"? Many probate courts REQUIRE a lawyer to represent the estate, and laws fix the amount that probate lawyers charge (I know that is the case in Missouri, don't know about other states).
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Old 06-15-2016, 04:36 PM   #48
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Like I said, avoid probate by using Totten Trust (pay on death / transfer on death clause) = POD / TOD
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Old 06-15-2016, 04:39 PM   #49
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So my question is (and maybe I should just ask accountant son who will be executor): is a standard trust or totten trust the better option for property?
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Old 06-15-2016, 04:43 PM   #50
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Safety deposit boxes are tricky, as banks want to seal them and make you jump through hoops.
As executor of my dead mom's estate I didn't want to deal with this and it's a real catch-22 if the will is in the safety deposit box.

Using my POA, I emptied the safety deposit box, got the will, and later notified the bank with death certificate and returned the keys.
While there I literally saw about a hundred or more, of sealed safety deposit boxes.

Same issue for when setting up bank account as executor: example Estate of X. Y. Zzz
There were a lot of estate accounts at the one branch I was at, which told me the banks want to hang onto the money as long as possible for liability and profit reasons (since they didn't pay interest on these accounts).

Lots of funeral home copies of death certificates was critical.
Note that the issue of safe deposit boxes depends on the state. If the state has no inheritance tax then probably they don't have much of a restriction. My folks had a joint box in Tx and when my dad died my mother could get in immediately. To close the box after my mother died I just needed the letters testamentary as executor (as well as the death certificate).
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Old 06-15-2016, 04:44 PM   #51
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Note that the issue of safe deposit boxes depends on the state. If the state has no inheritance tax then probably they don't have much of a restriction. My folks had a joint box in Tx and when my dad died my mother could get in immediately. To close the box after my mother died I just needed the letters testamentary as executor (as well as the death certificate).
that's what we had to do in TX for my FIL
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Old 06-15-2016, 04:47 PM   #52
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Note that the issue of safe deposit boxes depends on the state. If the state has no inheritance tax then probably they don't have much of a restriction. My folks had a joint box in Tx and when my dad died my mother could get in immediately. To close the box after my mother died I just needed the letters testamentary as executor (as well as the death certificate).
Yeah, USAA needed the small estate affidavit which named me as executor to close out mom's checking account.
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Old 06-15-2016, 08:21 PM   #53
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I'm confused - how did you settle an estate in probate court that was roughly $400,000 without probate fees and with legal fees of under $1,000 for "some advice"? Many probate courts REQUIRE a lawyer to represent the estate, and laws fix the amount that probate lawyers charge (I know that is the case in Missouri, don't know about other states).
I specifically addressed legal fees paid to an attorney for advice and guidance in settling the estate, ie, fees paid to the attorney. I looked it up and the total from 2005 through 2007 was $1,237.50

The attorney was an adviser to me, he was not the attorney settling the estate, there was none. He provided guidance, I was the person doing the work as the executor. Many (most?) folks hand all task to the attorney but I chose not to. It is the personal representatives that has the responsibility to settle the estate. PA has no requirement that it be an attorney. Of course, it is wise to seek an attorney's expertise when needed.

Had to meet the probate's court requirements regarding advertisement of the estate, taking possession of the estate's assets, write letter to state Dept of Welfare to document if any claims existed against estate assets (think Medicaid), deal with an IRA that erroneously listed a trust as beneficiary (mostly an IRS issue), transfer real estate once conditions established by the will were met (this I had the lawyer complete).
Paid the probate court about $900 in fees over three years, paid PA Inheritance Tax of over $22,000, filed 1040 and 1041 forms as required. And yes, I prepared a final accounting and filed it with the court along with a family settlement agreement. The latter basically says all heirs were satisfied with the estate administration. If they are happy, the court is happy.

Also had to establish trust as directed by will and act as trustee for ten years. Those costs not reflected in the figures above.

BTW, a living trust is disregarded when computing the PA Inheritance Tax, doesn't save you a dime. Technically, any person who inherits assets is responsible for paying the PA Inheritance Tax, but it is most commonly handled by the executor or trustee.

Attorney fees must be fair and reasonable and is left to the discretion of the probate court to define what is reasonable based on the facts and circumstances. The general rule of thumb for an estate of the size I worked on is 3% for the attorney fees, 3% for the executor, as reasonable. That is in addition to any taxes and documented expenses incurred by the estate.

The other estate I acted as an executor on was straight forward, most assets were in joint accounts (thus not subject to probate), the real estate had been sold, just needed to settle final expenses and distribute the funds from the real estate sale. Still took about ten months to meet probate court requirements.

Neither estate involved any property,other than real estate, that would be considered valuable.

It helped that I was retired as both relatives passed away in 2005, I was executor on the two estates simultaneously.
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Old 06-16-2016, 03:03 AM   #54
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I have properties that I have owned for 15 to 20 years that are worth more than twice what I paid back then and continue to increase in value. Even if I could avoid probate by signing a quit claim deed today, the basis would go up as of that date. Then there is the sticky little problem of gift tax and gift tax returns. Finally, if your heir recorded that quit claim deed in California, your heir would owe increased property taxes under Prop 13 rules from the date of the QC deed forward.
Good news. The transfer of property to a spouse, a child, or certain trusts such as a revocable living trust will not trigger a property tax reassessment in California, with some limitations. This is also true for inherited property.

In California, avoiding probate significantly reduces one's legal fees. Placing one's property in a revocable living trust is a common way of doing that. My dad put farm property and his entire taxable portfolio in the family living trust. It really simplified things when he passed away. I hired a lawyer in town to guide me through the process. I probably spent $1000 total for his time. I did all the transfers myself, including dividing up the assets.


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Old 06-16-2016, 10:38 AM   #55
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Good news. The transfer of property to a spouse, a child, or certain trusts such as a revocable living trust will not trigger a property tax reassessment in California, with some limitations. This is also true for inherited property.

In California, avoiding probate significantly reduces one's legal fees. Placing one's property in a revocable living trust is a common way of doing that. My dad put farm property and his entire taxable portfolio in the family living trust. It really simplified things when he passed away. I hired a lawyer in town to guide me through the process. I probably spent $1000 total for his time. I did all the transfers myself, including dividing up the assets.


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That's true, if it's a parent to child or interspousal transfer. The parent to child exclusion, originally known as Prop 58, passed a year or two after Prop 13 IIRC. For other transfers, the property will be revalued at current market value. And staying out of probate in California will substantially reduce the cost and time needed to settle the estate.

Here's an example of how these California property tax laws can really work to your advantage. A couple bought a house in the early 1960's. When one died in 1996, no property tax reappraisal was done because of the interspousal transfer exclusion. The other moved to a county accepting inter county base year transfers in 1998 and bought down, so the factored 1975 base year value was transferred to that property (Prop 90). When the second person died, the property transferred to the offspring, and it was excluded from revaluation. Result? Factored 1975 base year value on a property worth more than 8 times the factored base year value as of the DOD.
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Old 06-19-2016, 12:23 PM   #56
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Here's a good reason for a revocable living trust: dementia.

When my father's Alzheimer's meant that he could no longer live independently, we didn't even have a POA. After $10K in legal bills and probate court appearances, I was appointed his conservator. By then my emergency fund had supported about $18K of his expenses (eventually reimbursed by his assets).

Instead of my brother and me handling Dad's finances in a fiduciary manner, I'm operating under the benevolent oversight of the Denver probate court. This includes completing (and paying for) a satisfactory criminal background check and waiving extradition from Hawaii. Instead of maintaining our own accounting, I'm required to file an inventory of assets, a financial plan, an annual conservator's report, and (if there are deviations from the plan) an updated financial plan. I also serve at the pleasure of the court (my appointment letter has to be renewed each year) so I could hypothetically be "fired" at any time and replaced by a professional (paid) conservator... at Dad's expense.

Each one of those reports requires about five man-hours of research, math, and prep. Maintaining the payments register (included in the report) takes a few minutes per month. Thinking about it and tracking the probate court's receipt/approval takes a few more hours.

Dad's assets are relatively simple: a Westinghouse pension, a life insurance policy, a brokerage account (mutual funds), a bunch of CDs. The brokerage account and the CDs are TOD (I'm glad Dad took care of that before Alzheimer's kicked in) so no probate is required. His checking/savings account will hypothetically skip probate too (since it's under the asset limit) but that bank manager was a real PITA for the conservator's paperwork. Ideally all I'll have to do is file a bunch of death certificates with the financial firms, file the final state/federal tax returns, and send a final conservator's report to the probate court. There might not even be any legal fees.

My spouse and I have a will that establishes marital trusts to avoid estate taxes. Now that we expect to stay under the federal/state estate tax limits for the rest of our lives, we can do better. We're establishing a revocable living trust with my spouse and I as the trustees and our daughter as the contingent trustee. (And we'll follow up with the retitling/transfer of our assets into the RLT.) If I become disabled due to dementia (or anything else) then my spouse would step in anyway, but the RLT covers the legal aspects. The real benefit of the RLT will be seamlessly turning over the financial management to our daughter if we parents are both disabled. And, of course, there's no probate.

In Hawaii, the cost of establishing a RLT is about the same as the cost of probate.

Over the last 30 years I've done the gruntwork of our financial management. (My spouse asks the thoughtful supervisory questions.) In a few years (when she turns age 60 and her Reserve pension starts), she'll take over the finances. (The joke is that it'll all be automated and there'll be nothing left to do.) This way she'll be totally familiar with all the accounts (and the website logins/passwords) instead of just reviewing the Personal Capital summary. Then when she feels that she's had enough (perhaps in her 70s or 80s) she'll be able to use the RLT to turn over all the financial management to our daughter.
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Old 06-19-2016, 01:37 PM   #57
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I hadn't thought about a trust for the case of incapacity. It must vary by state. My MIL was declared incompetent due to dementia and DH was appointed her legal guardian. Same background check type stuff before he was appointed. (He was vetted prior to the guardianship hearing by the county attorney's office). If he'd had anything sketchy he would have been required to post a bond. In his case, they waived the bond. The family court assigned guardianship at the same competency hearing.

When MIL was unable to live in her home (with daily checks from SIL) we moved her to a memory unit in a different state (with 3 family members nearby). DH had to jump through hoops again to get the guardianship transfered. He had to present the new guardianship paperwork to the various banks/financial institutions. I'm not sure a trust would have helped with this.

We have a trust - that we set up before the estate tax exclusions were set up. We're under that limit, now.... so should consider going back to a will or TOD situation. But we're in CA and real estate will remain our largest asset. We also have minor children and I like the way the trust handles inheritance, college, etc. Once the kids are launched and responsible, I'll relook at whether we need a trust.
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Old 06-19-2016, 06:57 PM   #58
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Lot of good info in this thread and a lot of incorrect info or possibly varies by state info. I can speak with a fair amount of confidence that anybody with assets in California should have a properly funded living trust. Yes a full probate is only required for assets over $150k but it still can be a pain to deal with after death and worse than a pain during life if incapacitated. A trust is for incapacity planning as much as avoiding probate. Plus you can set your assets to be held in trust for your chosen beneficiaries which gives them creditor protection that you otherwise would not have. Do your due diligence and find a highly experienced estate planning attorney. NOT an attorney who just does living trusts but find someone whose practice is focused on estate work. It is much more than a "form" so find someone that knows what they are doing. A good estate attorney will provide way more value than 2-3 grand they charge for a trust. A bad attorney, likewise, might be a waste of money so choose carefully!
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Old 06-19-2016, 07:47 PM   #59
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in California should have a properly funded living trust. Yes a full probate is only required for assets over $150k but it still can be a pain to deal with after death and worse than a pain during life if incapacitated.
In California, estates that are valued at more than $150,000 (including only probate assets) generally have to be probated. There are exceptions made if the decedent is survived by a spouse. See the small estates page for more information.
This is for California ONLY
What is a probate asset? Assets held only in the name of the decedent are generally probate assets. An asset is not counted as a probate asset if it is owned in joint tenancy (but not if it is owned in tenancy in common) or if there is another means of determining who receives the asset after death of the owner, such as beneficiary designations for life insurance and IRAs. If those designations have been made, the asset avoids probate, otherwise it will be added to the estate and probated. If there is a surviving spouse, a formal probate can usually be avoided with a spousal property petition.
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Settling an Estate
Old 06-19-2016, 11:17 PM   #60
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Settling an Estate

Having been through this in the last year with late DFIL, my best advice is to remove as many decisions as possible from those who are left. Just have everything wired. The man had a negative net worth, yet it cost us $18,000 to bury him. No will, no instructions, just a body in AZ that my grieving DW had to get moved up north, all the while fighting with a lunatic sister who was convinced the nursing home murdered FIL and who was only interested in getting hold of his cell phone. It was an emotional time and, consequently, the burial industry fees really added up when everything had to be decided on the fly ASAP and paid for by the responsible child.
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