Revocable Living Trust (RLT) Input please

[nwsteve]

DW and I met with an attorney preparing to update our wills done last in 2004.
We are planning to use a revocable living trust (rlt) and understand the benefits of avoiding probate for our 4 rental properties. However, the puzzler for me is she indicated she did not plan to put any financial assets with beneficiary provisos into the RLT. Her philosophy is that the POD/TOD provisos cover and avoid probate. All of which is true but excluding from the RLT does not provide the immediate ability of the trustee to manage financial assets in case of mental impairment. She felt the POAs would cover any needs there. Certainly possible but it would seem to still leave the trustee to fight with each financial entity on if the POA is "good enough". Keep in mind a situation where both DW and I are missing (think MH370 or have been severely injured and lack the capacity to manage our daily affairs for a period time.
Am I mistaken that at least some of the financial resources should also be included in the RLT?
Thanks for any and all assistance.
Nwsteve

 

[freebird5825]

Here's the results of a search for "revocable living trust" on the NOLO site.
revocable living trust - Lawyers, Articles and Q&A - Nolo.com

I am single, unmarried, with close relatives whom I can count on to challenge my Will. They did it when my Mom passed, so I can only use past behavior as a predictor for future behavior. It is what it is.
I did a RLT and Pour-Over Will, mostly to protect Mr B, my live-in life partner. In fact I am signing the updated version tomorrow.
My attorneys tell me that for my state of residence and my life status, it is best to list all of my financial, pensions and real property assets in Schedule A of the Trust, to make the j*b of my Successor Trustee and Trust Protector easier.
All of my "stuff" has my Revocable Living Trust designated as 100% Beneficiary.

My best suggestion is to read up on RLTs online, then run this by your attorney so that you get customized advice.

 

[kaneohe]

What prevents you from retitling the accounts in the trust name in the name of the trust instead of relying on the lawyer? Is this a joint trust?

 

[kaneohe]

My attorneys tell me that for my state of residence and my life status, it is best to list all of my financial, pensions and real property assets in Schedule A of the Trust, to make the j*b of my Successor Trustee and Trust Protector easier.

Do you know.. (or what does the lawyer say)
1) Suppose you list an asset in Sch A of the Trust. If you don't retitle with the name of the trust, is it in the trust?
2) Conversely, if you retitle it in the name of the trust, but it is not listed in Sch A of the trust, is it in the trust?

 

[donheff]

I was planning to put the houses and 501K beneficiaries in the trust and discovered a problem. At the Federal level doing so would still avoid estate taxes until the second spouse dies but at the DC level (and true for some other states as well) the assets would be subject to estate tax when the owner dies. DC starts taxing estates at $1M so this would make a big difference. We returned the houses to Joint holding and left each other as our designated beneficiaries. After the second spouse dies the assets go into the trust. When DC lifts it's thresholds we will rethink. Be careful out there folks, ther are some gotchas.

 

[urn2bfree]

I was planning to put the houses and 501K beneficiaries in the trust and discovered a problem. At the Federal level doing so would still avoid estate taxes until the second spouse dies but at the DC level (and true for some other states as well) the assets would be subject to estate tax when the owner dies. DC starts taxing estates at $1M so this would make a big difference. We returned the houses to Joint holding and left each other as our designated beneficiaries. After the second spouse dies the assets go into the trust. When DC lifts it's thresholds we will rethink. Be careful out there folks, ther are some gotchas.

As of January 1 the DC exemption increased to $2 Million. Also- this gets eye-crossingly, mind-numbingly dull (which keeps the lawyers employed) but there is the ABC trust model which may be able to structure the trust to avoid local estate taxes even in DC.


Sent from my iPad using Early Retirement Forum

 

[robertf57]

I was planning to put the houses and 501K beneficiaries in the trust and discovered a problem. At the Federal level doing so would still avoid estate taxes until the second spouse dies but at the DC level (and true for some other states as well) the assets would be subject to estate tax when the owner dies. DC starts taxing estates at $1M so this would make a big difference. We returned the houses to Joint holding and left each other as our designated beneficiaries. After the second spouse dies the assets go into the trust. When DC lifts it's thresholds we will rethink. Be careful out there folks, ther are some gotchas.

I am not an attorney; but, I think there are additional gotcha's here. Making the trust the beneficiary of your retirement plan is fraught with problems. If the trust is seen as the beneficiary and the documents don't lead to a "see through" to a natural person, you don't get to extend the withdrawal over the life expectancy of the beneficiary. And, unless the beneficiary is a minor or a spendthrift, I don't really see any advantages to the trust: the need to protect the assets from challenges to the will, as originally proposed by the OP, isn't applicable to the retirement accounts. They pass by beneficiary designation and are not subject to the will.

 

[freebird5825]

Do you know.. (or what does the lawyer say)
1) Suppose you list an asset in Sch A of the Trust. If you don't retitle with the name of the trust, is it in the trust?
2) Conversely, if you retitle it in the name of the trust, but it is not listed in Sch A of the trust, is it in the trust?

DISCLAIMER: I am not an attorney. My recommendation is to consult an attorney, because state laws vary and this stuff is too important to make a mistake DIY. I've been through two estate settlements, once as an Alternate Executor and the second time as an Executor. That is my knowledge base.

The guidance I am getting (NY resident, single, no kids) is this...

If it is something with a title, it has to be re-titled to the trust with me as Trustee. I retitled my home, but not my boat or cars. It would be a hassle at DMV, since I may change vehicles or sell the boat.

If it is something with no title, the beneficiary designation has to be made to "Freebird's Revocable Living Trust" if I want it to be considered a Trust asset, as well as specifically listed (account number and details) in Schedule A.
Conversely...If I don't want a non-titled asset to be part of the trust, I can designate any beneficiary I wish to independent of the Trust, and not include it in Schedule A.

As far as my govt pensions go, I did the beneficiary designation as "Freebird's Revocable Living Trust". Within my Trust and Pour-Over Will, I have percentage designations for people and organizations.

The Trust and Pour-Over Will are in lock-step, i.e. identical for beneficiary designations.

 

[kaneohe]

DISCLAIMER: I am not an attorney. My recommendation is to consult an attorney, because state laws vary and this stuff is too important to make a mistake DIY. I've been through two estate settlements, once as an Alternate Executor and the second time as an Executor. That is my knowledge base.

The guidance I am getting (NY resident, single, no kids) is this...

If it is something with a title, it has to be re-titled to the trust with me as Trustee. I retitled my home, but not my boat or cars. It would be a hassle at DMV, since I may change vehicles or sell the boat.

.............................

Thanks, freebird. Not an attorney either but my thinking is the same as yours.........must be titled as trust and not just listed on Sch A of trust.
If you ever find out.......if it is titled as trust but not listed on Sch A , is it considered in trust? Our attorney at one time requested periodic updated lists of deletions and additions but eventually ceased doing that.....too much trouble, I'm guessing. But still looking for answer to that question.

 

[freebird5825]

Thanks, freebird. Not an attorney either but my thinking is the same as yours.........must be titled as trust and not just listed on Sch A of trust.
If you ever find out.......if it is titled as trust but not listed on Sch A , is it considered in trust? Our attorney at one time requested periodic updated lists of deletions and additions but eventually ceased doing that.....too much trouble, I'm guessing. But still looking for answer to that question.

Just for fun, when I was signing my estate docs today at 1 PM, I asked my attorney about the "what if" question you posed. He essentially said that if an asset is listed on Schedule A, but is not either re-titled nor has the beneficiary designation to the RLT set up, it is null and void as an asset covered by the trust.

Schedule A of trust and title (to the RLT) of asset must match. Or be designated by beneficiary to the RLT as well as listed in Schedule A. Both have to match.

At least that's the way it w*rks in NY. His words were "all or nothing" as far as a trust asset. No middle ground.

My boat and cars are not-retitled to the RLT because of the NY Dept of Motor Vehicle laws. Not a problem, AS LONG AS I am the SOLE owner of said boat and vehicles. Otherwise, null and void as trust assets because only the sole owner (per the title) of boat and vehicles can assign them to a trust. In my case, all is good because I am the sole owner of them and the title is in my name.

I am single, which means I do not share joint ownership of anything. This makes a difference.

For married folks, consult your attorney in your state.

Did that help ?

 

[kaneohe]

freebird.........thanks for asking those questions. I've somehow come to the impression that the titling is the main thing. The assets I have now are nothing like what I listed for Sch A for the trust when it was set up and even for the 5 or so yrs we were asked to send in updates. I guess I'll have to be more serious in asking that question in my state.......wonder how many different answers I'll get. Anybody know a lawyers forum for CA?

 

[mathjak107]

we went with a disclaimer trust. it saves all the hassles of having everything written in stone if the surviving spouse has no reason to need the trust.

if a die my wife has 9 months to decide whether to split our estate or not . we did it for state estate tax purposes.

the way our state is raising what can pass we may not need it called upon at all.

a last minute roth conversion would help too.

ny has a very bad tax cliff. they are raising the estate tax exemption but they failed to put provisions in for making it bracketed.

so if you have 2 million in assets as of now you are exempt from tax. but if you have 2,50 million you don't get taxed on just what is over, the entire amount is taxed. it is an awful tax cliff they left in place whether by design or error.
Example 1: A taxable estate of $1,525,120 will pay no tax because the taxable estate is less than the basic exclusion amount. The applicable credit equals the amount of the tax.

Example 2: A taxable estate of $2,100,000 exceeds the basic exclusion amount by less than 5%, and is subject to a credit phase-out. The applicable credit is less than the estate tax due, resulting in a tax liability of $49,308.

example 3: An estate of, say, $2,165,650 would have an estate tax liability of $112,052. The increased tax liability for this estate over the $2,100,000 one is $62,744 ($112,052 – $49,308).


luckily ny is working its way to the 5 million exclusion the federal level is but they are increasing by 1 million every april 1st.

this year it goes to 3 million . it isn't high enough for us when our real estate holdings are included but a last minute roth vconversion would get us below that level .

we just have to both live until april lol.