Thinking of a Family Trust

[NanoSour]

Hi,

I'm thinking of making a Living Family Trust and was wondering if any one on the forum has one and how difficult/complicated it is to set up. Also, what would be the benefits of having one. I would plan on putting my home, cars and bank/investment accounts into the Trust.

Mid 40's couple here with 2 young one's at home; net worth around 550K.

Thanks for any help...Nano


Also any experience with LegalZoom.com

 

[OAG]

Hope you own all that stuff "free and clear" or the lender may have something to say about it. What do you hope to accomplish/or prevent? A, relatively inexpensive, umbrella liability insurance policy may be better in the long run - depending on what you want to do.

 

[73ss454]

DW and I live in Florida now and just completed our trust and wills.

My advise is to get a good attorney that handles this type of stuff and he or she will do most of it.

Our biggest problem was completing all the paper work with Vanguard. That took about 2 months to get it right. Vanguard screwed it up about 5 times till it was correct.

I didn't go as far as putting cars and stuff around the house into the trust. Gotta give the kids something to worry about, no?

 

[NanoSour]

I guess an umbrella policy would be the simplest way to protect the assets from any future attack on their value, i.e. being sued for liability.

I was wondering if a trust would shield assets come time to put the kids through college? Don't know if it works that way. As in the trust is what owns the assets and not the family per se. Would the trust save me from spending $100K/year putting 2 kids in private college?

 

[freebird5825]

i completed a revocable living trust for myself, with no heirs in spring 2008. a whole different animal than what you want to do.
i educated myself online first. i documented my desires using templates i found online.
then i used the 4 magic words - hire an estate attorney.
he took my upfront work and made sure it was valid in my state plus all the legal gobbledegook for inheritances, 2nd time through estate tax avoidance, wording for setting up a family trust for dh2b, etc.

 

[NanoSour]

So FreeBird, I take it you're saying I should consult an Estate Attorney. Sounds like good advice given that this is uncharted water for me.

I think the the Revocable Living Trust is what I'm after from what I can tell from my online research.

Thanks...Nano

 

[Nords]

I guess an umbrella policy would be the simplest way to protect the assets from any future attack on their value, i.e. being sued for liability.
I was wondering if a trust would shield assets come time to put the kids through college? Don't know if it works that way. As in the trust is what owns the assets and not the family per se. Would the trust save me from spending $100K/year putting 2 kids in private college?

So, are you planning to avoid the expense of probate through spending some money to set up a RLT? Or do you see it as a means of avoiding (not evading) federal/state estate tax?

Or are you asking the rest of us to tell you how to have us subsidize the cost of sending your kids through college as well as ours?

 

[freebird5825]

So FreeBird, I take it you're saying I should consult an Estate Attorney. Sounds like good advice given that this is uncharted water for me.

I think the the Revocable Living Trust is what I'm after from what I can tell from my online research.

Thanks...Nano

The Recipe (or...here's what I did):
Keep educating yourself online to the max before hiring an estate attorney. this will save you a lot of money later. you will be combining a lot of DIY upfront and using an estate attorney to make sure your end products are legally bulletproof.
If you do not have a Will of any kind, do a simple one until the Trust is finished. it must be witnessed and your signature verified. your bank has notary publics who can help here to guarantee that it is truly your signature on that Will.
NOLO puts out some really great books about estate planning. Buy them.
Download some good generic forms from your state's Bar Association, fill them ALL out electronically with your desires. Revisit in a few weeks, make changes, and put them on a CD. keep your spouse 100% fully involved.
Do a detailed net worth statement and place copies of all records - retirement stuff, debts like mortgages & loans, a copy of your current paychecks, savings/checking and investment accounts and insurance policy numbers in a folder.
Find or order a certified copy of your house deed - you need an original.
Ask around town and friends for an estate attorney specialist. visit their website. make a list of questions for the initial consultation. initial 30 minute consultation is usually free. use it well.
Ask for and get everything, especially the all-in-one FEE and list of ALL deliverable legal documents like trust, pour over will, HCP, funeral wishes, final arrangements, living will, house deed transfer fees and documents, etc in writing.
Request an all-in-one fixed fee contract, not an hourly basis as needed (translated money pit).
Sign nothing that day. Review the proposed contract for legal services and deliverables, add anything not covered, then renegotiate.
Sign only when you are fully satisfied.
BTW, i am a FIREd engineer. i ran big money contracts for 18 yrs for Uncle Sam. My attorney never had a chance. but he told me several times he really enjoyed doing business with me because i was so organized.
I also served as an Alternate Executor and Executor. that's why i know all the lingo and the process.

 

[NanoSour]

So, are you planning to avoid the expense of probate through spending some money to set up a RLT? Or do you see it as a means of avoiding (not evading) federal/state estate tax?

Or are you asking the rest of us to tell you how to have us subsidize the cost of sending your kids through college as well as ours?

Nords, I sense a tinge of cynism. No, I'm not trying to have you "subsidize" the cost of my children's education. The way I see it is, just about all private universities have a huge pool of money in their endowment funds; and I, as a middle class, working american would just like to have access to some of that money in lieu of liquidating my lives savings to the elite universities of our nation. (sorry about the run-on sentence)

I am a saver by nature (hence I found this forum) and don't won't it all taken to put my kids through college. Meanwhile, the spenders of the world get considerable access to the $$$ in the endowment funds.

That's how I see it.

Regards...Nano

 

[tightasadrum]

I've spent $100000 plus on education. It was our choice though. It probably wasn't worth the cost though. I could have had DD attend my state's university for a small fraction of that figure. Time will tell. At least it's almost over.

Here's a thought: why don't you just contact one of the private schools and one of the public schools in the top ten and ask them if a Living Trust will give your child a chance of more tuition relief. I'm sure they deal with it every year.

 

[kaneohe]

Here's an article about which assets are counted on for family financial contribution
for college https://www.collegedata.com/cs/content/content_printarticle_tmpl.jhtml?articleId=10089

The claim is that parental retirement assets and home are not counted by the govt
(but may be by private schools). I doubt that having assets in a revocable living trust will help avoid having to contribute for college since they are still your personal assets and even treated as such by IRS for income tax purposes.

 

[Nords]

Nords, I sense a tinge of cynism.

Just a tad.

As Kaneohe says, retirement assets (401(k), IRAs) and personal residences are not counted for FAFSAs. Assets under your control, as are revocable living trusts, are counted whether they're in the RLT or in your name. But private schools can do whatever they want with their endowments as long as they achieve the IRS' long-term spending goal of 5%/year.

The primary purposes of RLTs are to avoid the expense/publicity of probate and possibly to avoid federal/estate taxes. They also allow for a trustee to care for the estate of someone who's incapacitated. An excellent book on the subject is Jack Everett's "The Truth About Trusts".

Otherwise they don't have much power to shield assets.

 

[OAG]

The way I see it is, just about all private universities have a huge pool of money in their endowment funds; and I, as a middle class, working american would just like to have access to some of that money in lieu of liquidating my lives savings to the elite universities of our nation. (sorry about the run-on sentence)

So where does endowment money come from? I think the principal comes from contributions of "people". Also I think almost all endowment funds are now down considering most are "invested in the market".

Sounds like you want to "hide" your wealth then, when the time comes, you can come to the school door "hat in hand" to get some of the "endowment money"?

IMHO "endowment" does not equate with "entitlement".

 

[NanoSour]

I appreciate all the inputs and while it does seem that I'm trying to get a free ride on education expenses. Truth is, I just don't want to get penalized for being a saver as opposed to a spender when it comes time to foot the bill for college.

Take two family's living in the same neighborhood in essentially the same house. Same income and family structure. One family is a saver and drives a Honda Civic into the ground (you know the type) and the other is constantly getting the latest greatest of all the toys, (cars, boats, techtronics, vacations, etc). Kids the same age and go off to college. One family pay just about all the costs (because they saved it and have the money) and the other family goes to the same school and pays only 25% of the cost because they have no savings. Just seems like the saver is penalized in a way. Where's the incentive to save?

 

[kaneohe]

Nano....I don't think you're trying to get a free ride....just trying to play the game by the rules. Truth is, I think, we all do it. For education, there are advisors who show you how to minimize your income in the year before your kids apply for aid.....like trying not to sell large amounts of securities, maximize retirement contributions, etc. For income tax, there is similar advice about how to minimize taxes.....trying to get long term instead of short term capital gains, squeezing Roth conversions into the 15% tax bracket, taking all the deductions you're entitled too. Here it's called smart tax planning, tax avoidance.....unless, of course, you cross the line into evasion.
For estate planning there is similar type advice about titiing so that you can get a full stepup (instead of just half) of basis, etc. Again this is considered smart unless you push further into gray, then black areas.

Save in your name instead of the kids so that only (guessing here) 6% of your assets
instead of (guessing again) 35% of the kid's assets were required for support annually.
Save in 529 plan for the advantages it provides.

As one response noted, there is public vs private schools to consider, 2 yr community college----then transfer to public university for final yrs, student loans vs grants.
Have you looked at the FAFSA application form......one thing caught my eye ....there is a question about whether the student is independent (?not sure if that is the exact word) or not as if that might have some consequence. I have no idea of what "independent" means nor the financial consequences but you might check. I had the impression that whether or not you are legally responsible for supporting your kids through college could be a matter of state law so might vary depending on where you live. You might check into that also but surely that law would not mandate you to support 4 yrs of the most expensive private schools.

Still, in the end, I would think most folks would want their kids to get off to a good start and to help to the degree they felt comfortable.

 

[OAG]

IMO "that's life". I put 4 kids through college and thankfully, they all worked hard to get there, stay there, and several received merit scholarships (no needs based money). They all graduated debt free except one daughter (and she paid off her education loan herself). You do what you have to do the educate your children and not worry about the neighbors. I will agree "savers" have been and are somewhat penalized in our society but that too is life. Sorry if I seem to be a bit cynical. BTW I do not think any type of trust will work for this purpose.

 

[bubba]

My son is in his last year at a public university; he's paying his own tuition via a scholarship that he earned and we pay his living expenses. Sorry, but I see shielding assets to avoid paying for college, nursing homes, and such as just not right somehow. Your mileage may vary, of course.

 

[HpRyder]

I'm thinking of making a Living Family Trust and was wondering if any one on the forum has one and how difficult/complicated it is to set up.

I've had one since 1979. I set one up for my mother in 2001. Its easy & cheap to have an attorney set it up. Its best to have an experienced attorney do it, since his access to legal case law is usually more recent and his forms are more recent.

Also, what would be the benefits of having one. I would plan on putting my home, cars and bank/investment accounts into the Trust.

The benefit is really really apparent when you need it. This became obvious to me when my mother went into the hospital and became comatose. With a trust you gain access to accounts to pay her bills, almost immediately. Of course accounts as joint tenants with right of survivorship accomplish the same thing, but then there are tax complications.

In the case of a family situation, all assets possible should be titled in the trust, except a few smaller ones deliberately left out. Re-titling real estate has for me presented no problem. No banks objected, no letters, no nothing.

As Nords said, the trust value in a family situation by-passes the court and probate (the need for a court to validate you and your wife's wishes when you cannot communicate them due to death, incapacitation or incompetence).

You'll get no tax benefit from a revocable living trust while you live, but your children and spouse will, upon a death. Of course for a small amount of assets all these things can be accomplished easier by account titling. When your assets grow large enough, this is no longer easy feasible.

As for avoiding liability, the trust is like tissue paper, easily parted. The trust accomplishes nothing. Get good insurance for this.

Also any experience with LegalZoom.com

No experience.

 

[Martha]

Frankly, I find revocable trusts to be something of a PITA and do not have one. But some states have such onerous probate proceedings and high costs that a trust is nice to avoid that system. (Florida is one example). It also is good for ease of taking care of your affairs if you are incapacitated. I use a powers of attorney for that purpose. In my area, lenders and others accept powers of attorney without concern but I know some people here who live in other states who sometimes have had issues with powers of attorney and use trusts instead.

That said, my will leaves most assets to trusts.

Talk to a lawyer. You may lose certain homestead benefits if you put your home in a trust.

If you are looking at a trust as a mechanism to shield assets from creditors, you might want to look at the threads referred to in this FAQ: http://www.early-retirement.org/forums/f47/protecting-assets-from-creditor-claims-30768.html