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Estates, Wills, Trusts, etc
Old 05-16-2010, 07:41 AM   #1
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Estates, Wills, Trusts, etc

We are revisiting our estate plan.

We are currently using a Will. Most assets are jointly owned with survivor or have the spouse as the beneficiary. For example: the house and bank accounts are setup with spouse joint ownership with survivor. All other IRAs, 401ks, etc. have the spouse as the beneficiary.

Once the estate tax laws reset in 2011, our assets will exceed the federal maximum on estate taxes.

I have some questions for the group:

  • Should we consider setting up some sort of Trust to avoid probate, legal expenses, etc?
  • If we setup a trust between the spouses, should it be a revocable trust?
  • What might be the benefits of an irrevocable trust?
  • What are the ongoing expenses and duties of maintaining a trust?
  • If you willing to share your experience... if you are using a trust, please describe it and why you decided to set one up. What you think are the up side/down side to it?

Thanks ahead for your comments.
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Old 05-16-2010, 08:16 AM   #2
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If the trust is revocable, you still have to put the assets in your estate for tax purposes... so no benefit there...


Think of it this way... IF you had a say in where the money can go the day before you die... it is part of your estate...
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Old 05-16-2010, 08:38 AM   #3
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If the trust is revocable, you still have to put the assets in your estate for tax purposes... so no benefit there...
...
Thanks.

Although I am interested in the estate tax planning consideration... I am interested in other considerations. For example, if using a trust helps avoid probate (hassle) and legal costs. Does a trust offer better or worse asset protection from adverse life events, etc

Of course, if the maintenance on a trust is expensive (requires ongoing accountant and attorney fees), it might outweigh the cost of going through probate.
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Old 05-16-2010, 08:42 AM   #4
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Can anyone recommend a good (thorough) book for a novice on estate planning?

We have an attorney for estate planning (and will continue to do so), but I am a DIY kinda guy... In this case educating myself helps me to better understand our decisions and the trade offs.
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Old 05-16-2010, 09:03 AM   #5
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Originally Posted by chinaco View Post
Can anyone recommend a good (thorough) book for a novice on estate planning?

We have an attorney for estate planning (and will continue to do so), but I am a DIY kinda guy... In this case educating myself helps me to better understand our decisions and the trade offs.
Did you look at the stuff at Nolo Press?

Wills, Trusts, Living Wills, Estate Tax, Probate & Estate Planning – Free Law Resources – Nolo
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Old 05-16-2010, 09:06 AM   #6
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Perhaps it might be useful to review what are commonly thought of as the weaknesses of passing via will.................the costs, delay, publicity of probate.
Passing via trust supposedly eliminates the probate cost, delays, and publicity
although there may still administrative costs at death of first spouse if you get lawyer and accountant involved and some more minor delays.

Depending on how you view it, the trust may/may not give you estate tax benefits...........comparing w/ (as you seem to have it) jt tenancy, it will;
comparing w/ will and (grasping for some word here.....meaning trusts that don't get born until after the 1st death---testamentary), there won't be since you could have similar provisions as in a living trust.

If you do your own taxes, there wouldn't necessarily be an ongoing maintenance before the 1st death. After the 1st death, there would likely be
2 tax entities instead of 1..........again if you did your own taxes (some learning involved perhaps but not impossible), no additional cost tho you'd be filing 2 returns instead of 1.

I believe after the 1st death, the assets of 1 trust could provide some degree of creditor protection.

Living trusts also are supposed to provide some protection for managing assets if one person gets incapacitated .

The Dummy and/or Idiot series of books probably have something on this subject that are good learning places. Nolo Press also puts out some good books.
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Old 05-16-2010, 11:48 AM   #7
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We set up a revocable trust mainly to allow each spouse to transfer the maximum tax-free amount to the kids. That retains the maximum exemptions for each person, rather than loading the entire estate onto one person and only getting their one exemption when finally transferring to the kids. There is very little hassle once the trust is set up and funded.

They're are good for avoiding probate. My mother really liked how easily her trust worked after my dad died.

They used to be good for keeping estates private, but current law requires trust disclosure on the passing of any of the principals. I received a copy of my parents trust documents after my dad died. At least the estate stays out of the public courts.
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Old 05-16-2010, 11:54 AM   #8
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Since you have an estate lawyer, what book(s) did they recommend that you look at?
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Old 05-16-2010, 11:59 AM   #9
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The cost of setting up the trust is a factor that stops some; also the nuisance keeping it funded. But in the long run probate can be more expensive and a well designed trust could save on estate taxes. This is one area, in my opinion, that it would be well worth while to talk to a specialist. Our estate planning attorney had a free initial consultation in which we were able to articulate our needs and get his advice and the cost structure on what we could do.

I am currently half-way through an estate planning course as part of the CFP education program in the Univ of Calif. system. My instructor has 30 yrs experience in the field as a practicing attorney/specialist. I am very impressed by his expert knowledge. The text we are using is well-written and thorough if you wanted to go pretty deep into it. It is called Estate Planning and Taxation by John C. Bost.
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Old 05-16-2010, 02:29 PM   #10
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Since you have an estate lawyer, what book(s) did they recommend that you look at?

Now that you mention it.... he gave us his draft of a set of white papers he was intending to give to his clients that includes legal considerations for our state. I will dig that out and take a look at it.
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Old 05-16-2010, 03:55 PM   #11
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Originally Posted by chinaco View Post
Thanks.

Although I am interested in the estate tax planning consideration... I am interested in other considerations. For example, if using a trust helps avoid probate (hassle) and legal costs. Does a trust offer better or worse asset protection from adverse life events, etc

Of course, if the maintenance on a trust is expensive (requires ongoing accountant and attorney fees), it might outweigh the cost of going through probate.

It makes a big difference in what state you live.... in Texas, you can basically get out of court supervision of an estate if you say it in your will... there is very little reason to put stuff in a trust...

AND, you can put all that stuff in a trust that you create in your will... ie, "I leave everything to Chinaco Trust"... and then spell out what the trust if for etc.....

This also helps if you don't want you assets to go to the 'bimbo'...
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Old 05-16-2010, 03:57 PM   #12
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What is the maximum amount of money a trusts can protect? Is there any use for them under one million?
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Old 05-16-2010, 04:14 PM   #13
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A trust can mean many, many things. Our wills are set up to create what is sometimes called a bypass or A-B trust so that the 2nd-to-die will be under the estate tax limitation.
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Old 05-17-2010, 01:36 PM   #14
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I'm looking into a special needs trust. There are a couple of talks at the local Easter Seals, but I won't be able to make them due to child care issues.

When my dad was dying, he and my mom put everthing in a revokable trust. It made things easier after he passed away. It did cause some issues when she moved from SC to CT tho.
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Old 05-17-2010, 05:51 PM   #15
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My Mother's revocable living trust provided for the funding of a grandchild's special needs trust. It is administered by AARP (name may have been changed) in Oregon.

Privately established SNTs are expensive to administer as, I understand, the annual reports to IRS are beastly.
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Old 05-18-2010, 12:53 AM   #16
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I've heard the idea of a trust many times. What does it buy you 'Merkins'.

Up here, in the frozen north, we just pay our final tax bill (income tax for death year including all unrealized cap gains). A trust is something we may consider for an 'incompetent' dependant, but it's seldom used.

Estate tax avoidance?
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Old 05-18-2010, 10:23 AM   #17
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The two reasons for revocable trusts: the ability of trustees to manage the finances of grantor trustees when they are unable to do so; after the grantor's pass to resolve the estate in the trust without having to go through the courts.

Revocable trusts can be designed to avoid unnecessary estate tax issues.

A trust shouldn't be a do-it yourself project but there is little harm in creating a draft to discuss with an attorney.

It isn't possible to change or create a trust once the grantors start to loose their mental facilities.
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Old 05-18-2010, 09:44 PM   #18
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If your estate is large enough that you are speaking with an estate planning attorney, it would be well worth the few thousand dollars they charge you to set things up properly. If you are concerned about estate taxes that would need to be paid by your children/heirs in the event of the death of you and your wife, an irrevocable life insurance trust combined with a survivorship universal life insurance policy is the lowest cost way to transfer assets. You can have your children pay the estate tax with 100% of their own money (or yours being transferred), or you can gift ~1 cent on the dollar each year with the ILIT/SUL setup (depending on your age and health) and the gift can be used to pay the insurance premiums. Upon death, the insurance benefit is paid out and used to fund any estate tax obligation. If there is a surplus of insurance money, the kids can keep it. If there is a shortage, they will still have to pay the remaining applicable estate tax (less the insurance money used).

Keep in mind that even though your assets may exceed the unified credit (exemption) available in 2011, your life expectancy may be 15, 20, 30+ years. What will your estate be valued if you do live that long? Make sure you consider the answer to that question when planning your estate. It's always good to see people taking an active interest in doing things the right way the first time instead of half-assing it and letting the kids figure it out after the fact.
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