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To Trust (Living) or Not to Trust (Living)
Old 04-09-2019, 02:06 PM   #1
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To Trust (Living) or Not to Trust (Living)

Hi All,

Spouse and I are checking off our list of "stuff to do" and Living Trust is next on the list - along with about 100 other things :-)

I have done lots of reading, have watched several friends go through the process - but, still get the feeling many trusts aren't really necessary ... or are they?

Circumstances drive the decision - here are ours:

1. Married with two grown male children, one of which is married
2. Florida
3. Have several (paid for) single family rental properties
4. Military and corporate pensions (live well on these and rental income)
5. IRAs (very low seven figures)
6. House with very small mortgage (no other debt)
7. Joint accounts (very low seven figures)
8. Still collecting money by not spending much - probably won't change

We have current wills and are both in good health in early 60s.

Would appreciate your thoughts - to LT on not?
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Old 04-09-2019, 02:22 PM   #2
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Depends on how much work it will be to probate your real estate assets,
whether or not anybody else will contest the asset distribution in a will
if the assets need to be distributed quickly or can wait for probate
and if you want any of the info to remain private or not.
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Old 04-09-2019, 02:39 PM   #3
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Comprehensive estate planning is a gift you leave to those who are left behind to settle your estate. Moving everything you own into a revocable trust can be a lot of work, but completely avoiding probate makes your estate much easier and less expensive to settle.

As far as probate costs go, here's an example: my sister is personal representative for the estate of a family friend. This friend did no estate planning whatsoever and left behind a multi-million dollar mess. My sister received the attorney's bill for the month of March recently: $34k. Ouch!
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Old 04-09-2019, 02:57 PM   #4
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In our case, we only have a home (both on the deed) and virtually all other assets are in either IRAs or a single small 401k. No children. Doubt a trust would accomplish much for us. Maybe the house (value of $550K)?
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Old 04-09-2019, 05:25 PM   #5
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In our case, we only have a home (both on the deed) and virtually all other assets are in either IRAs or a single small 401k. No children. Doubt a trust would accomplish much for us. Maybe the house (value of $550K)?
Do you plan to sell the rentals at some point or is the intent for them to inherit them?
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Old 04-09-2019, 05:36 PM   #6
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Good question - sorry - our intent is to sell them within a few years - bought market low, so about the time the market recovers, i’ll Be ready to get out of the fixit business, I think. Thinking 5-7 years.
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Old 04-09-2019, 08:18 PM   #7
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We have designated TOD, POD, Beneficiaries (with secondaries) on all accounts and the home. After reading this thread, I checked out vehicles, and found in MO we can do the same with the cars, so we will. With these in place, we might qualify for the "small estate" plan for estates under $40k (just household belongings).
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Old 04-09-2019, 08:43 PM   #8
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Remember a well set up estate plan is planning for both death AND disability. I believe Florida has expensive probates so you should have a trust for sure but, again, probate is only 1/2 of the issue.
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Old 04-10-2019, 06:15 PM   #9
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As someone said up thread, it's a gift to those left behind--and that includes whichever spouse is left behind, because the act of updating existing trusts is so much easier than starting from scratch. And when there's just one of you, and there's the need to be more specific about end of life wishes and for providing a way for savings to easily be accessed by the trust in case of incapacitation. Having the discussions of how to handle things when there's only one of you will be such great guidance.

(Spoken from experience)
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Old 04-10-2019, 06:41 PM   #10
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Would you want your daughter in law to receive the full share of your married son’s inheritance should he pass shortly after you, or even before you if you don’t have time to update the will? If she got remarried another husband might get his hands on it. Don’t you want to protect it for future grandkids? What about putting some away for grandkids college? Speak to an attorney who specializes in estate planning. It’s worth the money.
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Old 04-10-2019, 06:48 PM   #11
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We set one up because when we did our child was a minor, so we had someone designated as trustee until they turned 26. Now, I've been told there is some protection against civil suits, but more importantly, real property can't be titled/deeded TOD in our state, so it's in the trust.
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Old 04-12-2019, 08:28 AM   #12
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We set one up because when we did our child was a minor, so we had someone designated as trustee until they turned 26. Now, I've been told there is some protection against civil suits, but more importantly, real property can't be titled/deeded TOD in our state, so it's in the trust.
I think civil suit protection is only in irrevocable trusts where you surrender control of the assets. Revocable trusts (you still control the assets) are still fair game.
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Old 04-13-2019, 02:00 PM   #13
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Originally Posted by stephenson View Post
I have done lots of reading, have watched several friends go through the process - but, still get the feeling many trusts aren't really necessary ... or are they?
My vote is a strong yes for three reasons:
1. Your disability/dementia care.
2. In case your spouse (or co-trustee) has to sell your rental properties or your home for your long-term care. Lawyers, title companies, and title-insurance companies hate selling homes (via a durable POA) when the owner is still alive yet incompetent. In some states you might even be nudged to file for conservatorship.
3. To avoid probate disputes. Even when probate goes well it’s still fraught with issues.

Here’s the theory: the person who takes over for you (your death or disability) should be able to make all the decisions (for you) that you would make for yourself. There are a number of ways to do that when you die (in addition to a RLT). The most widely-accepted ways to make decisions during your disability are a conservatorship or a RLT. The former can cost $5K-$10K and a protracted approval process (with a court hearing). The latter is about $1500-$5K and a little quicker, with no court hearing.

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Originally Posted by stephenson View Post
Spouse and I are checking off our list of "stuff to do" and Living Trust is next on the list - along with about 100 other things :-)
I used to think that estate planning was done poorly (or not at all) because people don’t want to confront their vulnerability or their mortality.

It’s more than that. I’ve learned that the process is just too damn hard, for our own protection. Lawyers can tell you all the ways it goes bad, and you’ll put contingencies in place. However you and your spouse might be a little surprised at the intensity of some of your emotions (and your opinions) and there might be disputes about how to proceed. Even when you think you’ve finally reached consensus on the issues, the lawyer will ask two or three questions and suddenly you’re right back where you started.

Whether or not you actually sign a RLT, the process is worth the effort (and the thoughtful discussions). It’s the disability & death version of pre-marital counseling, and it’s essential to a smooth estate settlement.

It’s also essential to have the discussion with the co-trustees, the successor trustees, the heirs, and even the spouses of the heirs. If you were surprised by some of your spouse’s opinions, then at least you’re ready for the surprising reactions from the rest of your participants.

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Originally Posted by stephenson View Post
3. Have several (paid for) single family rental properties
6. House with very small mortgage (no other debt)
In an ideal world your heirs would inherit these (at a stepped-up cost basis). If your state has a transfer-on-death deed (TODD) then that works well... for your death.

However if you’re in a coma or dementia or otherwise incompetent, a conservatorship or a RLT are the best methods for transferring titles to the buyer. A durable POA might not satisfy anyone but the person you paid to prepare it. Everyone’s worried that you’ll recover and second-guess the decision made by the person named in your DPOA. They could even second-guess your conservatorship or your RLT, but the court can easily handle those issues.

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Originally Posted by stephenson View Post
1. Married with two grown male children, one of which is married
A RLT is great for situations with minor children (needing a guardian and a trustee), blended families (ex-spouses, kids from other relationships), spendthrifts, and addicts. You could pull all sorts of controversial control-freak strings from the grave.

It’s also great for resolving disputes among heirs. Just as with a will, you can attempt to poison the trust’s shares to anyone who files a legal challenge. Unlike a will, the trustee can more easily take unilateral action like selling the beach house (even if everyone inherited a share) and giving them their portion in cash instead of arguing about shared vacation times or buyouts.

Again, if you’re disabled, a co-trustee can more easily make decisions on your behalf. This is especially good for trustee landlords who might have to raise rents, evict tenants, and spend money on maintenance/repairs. A durable POA could get that done as well, but a judge in a tenant-friendly state might decide that a DPOA is not enough for a landlord to evict a tenant. You’d want the landlord advice of a lawyer (or three) before going the DPOA route.

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Originally Posted by stephenson View Post
4. Military and corporate pensions
There’s no way my spouse (a military retiree too) or daughter (a military servicemember) could easily deal with DFAS or the VA on my behalf... let alone for any total civilians to handle veteran’s benefits. I’m pretty sure the only answers to these issues are a medical directive, a healthcare POA (including HIPAA), and a RLT.

Our lawyer pointed out that the healthcare POA needed to have HIPAA access even after death so that we could obtain health records for lawsuits.

I was my father’s conservator during his Alzheimer’s, and it was stressful enough. Very few financial institutions respect a conservator’s appointment, and even if they accept it they’ll still argue with you about more paperwork. It got bad enough that I started doing everything online, where I could more easily give the impression to the financial institution that they were dealing with my father instead of me. I still acted in a fiduciary manner, yet what they didn’t know couldn’t get in the way of my father’s best interests.

With that experience, here’s what my spouse and I decided after interviewing three lawyers and a bunch of friends with RLTs.

My spouse hates having gatekeepers. By that she meant our daughter (or any contingency trustee) having to get two doctor’s certificates of mental incompetence, or having to consult a lawyer, or having a committee to select a successor trustee, or having to use a trust company. She wanted our daughter to be able to act as us whether we were in a coma, or suffering from dementia, or dead. No obstacles or bureaucracies in her way.

I think it puts a lot of trust in a successor trustee. You not only have to know your kid but hope that they won’t join a cult or develop an addiction or be coerced by their spouse. They might have to be comfortable with handling large sums of money... and not (too) tempted by it.

My spouse and I decided to form our RLT with me, my spouse, and our daughter as equal co-trustees. There are successor trustees but we three are starting as equals. That eliminates a lot of the gatekeeping, but you really have to trust. In our case we’ll also have enough pension income (and Social Security) that if our daughter does run amok then we’ll at least have future cash flow to afford to start over.

We’re only putting two assets in our RLT: our primary residence and our rental property. That lets our daughter do everything she’d want to do (“act as us”) without title-transfer issues for our disability. She knows that she wants to inherit those properties through the trust, but she can sell them if she needs money for our care.

Our IRAs will pass by beneficiary, of course, and shouldn’t go in a trust. We’re also working on a durable POA for our daughter to tap them if needed for our disability care.

Our joint taxable account and my personal taxable account will have durable POAs for our daughter. We’ve already done this for my personal taxable account. Fidelity’s instructions aren’t very comprehensive and they made us jump through several flaming circus hoops, but now my account shows up in her Fidelity account summary. She could execute a trade even as I’m writing this, although Fidelity would send a slew of confirmations and alerts to make sure they’re legally covered in case I recover and object to my daughter’s actions.

My spouse and I each have checking accounts, and we’re each joint on the other’s account. We could add our daughter as a signature authority, but not all banks or credit unions offer that feature. We’re going to add our daughter as a joint owner. That exposes our checking accounts to any lawsuits against our daughter, but we don’t keep much money there. If she was sued then we’d just open a new checking account for our future streams of income.

I’m leaving my angel investments outside of the trust. As those wind down, I’ll add the proceeds to our Fidelity brokerage account.

All of our personal property (including vehicles) is under $100K. In Hawaii, that pour-over will does not require probate.

I’m already turning over all of our family finances to my spouse— the monthly bills, the property taxes, the insurance, everything. (She’s asked me to keep doing our income-tax returns, but if I couldn’t handle them then she’d hire a CPA.) It’s nice getting that time back in my life, and it’s quite the exercise in learning to let go. You other nuclear-trained submariner control freaks will appreciate the challenge.

Our spouse says that when she’s 83 years old (our daughter will be 52) she’s turning all of our finances over to our daughter. Everything will be in autopay and we’ll live off our pension, SS, rental, & dividend income. Even our tenants will have to contact our daughter.
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Old 04-13-2019, 02:10 PM   #14
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I think civil suit protection is only in irrevocable trusts where you surrender control of the assets. Revocable trusts (you still control the assets) are still fair game.
Your trust becomes irrevocable at death and for sure can be set up to give kids, or other beneficiaries, creditor protection. It is the #1 best estate planning you can do for a loved one. They can even be their own trustee though the protection is less. To not set up a trust to provide creditor protection to a loved one is one of the biggest mistakes a person can make. I would call it malpractice for an attorney not to offer that choice to their clients.
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Old 04-19-2019, 03:11 PM   #15
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>>Your trust becomes irrevocable at death >>

I don't know I'd agree about that, at least not in the state I live. My in-law's RLT, when FIL died, was split since we're a community property state. His half became irrevocable - but MIL's share remained revocable.

A new RLT was set up with MIL's assets; she and her son as co-trustees. Then when she died, we had to make a second effort to fulfill all FIL's legacies (he had an illegitimate son nobody could find). Then we wound-up her trust, and put the assets into our own RLT.

However, FIL's IRA had to remain as a Deceased Trust account until the $$$ was exhausted. MIL's IRA is also still existing, as we take DH's inherited RMD distribution out of that account - again, that continues until the funds are exhausted; only then can her Deceased IRA account be closed.
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