Setting up a Living Trust - Advice, anyone?

[youbet]

We have divided up our assets to minimize estate taxes - if one of us dies our assets go into a trust for the kids (proceeds available to the other spouse as needed during life). When the other dies his or her assets go into the trust. Estate taxes still apply but are reduced by being assessed against two pots at different times. If all assets moved over to the other spouse and were taxed jointly upon his or her death taxes would be higher.

I firmly believe in taking advantage of all tax breaks the American public chooses to give me. At the same time, I think estate taxes make sense -- even if they affect me. Just like I thought the Bush tax cuts were insane, even though they benefit me. There is nothing inconsistent with calling for higher taxes and taking advantage of the breaks available. When I have ranted against the Bush cuts in the past various posters here (not saying you were among them) suggested that I should put my money where my mouth is and just send a check for the difference to the Treasury. That is a cheep shot argument. Voluntary tax payments have no material effect on the Nation's economy - for that we need tax policy, not futile gestures. Warren Buffet recently said we should tax the rich (speaking of the cuts set to expire in January) but you can bet your bottom dollar he takes careful advantage of all cuts available to him.

Do you think these "tax breaks" or "work-arounds" should be eliminated?

I do.

 

[donheff]

Do you think these "tax breaks" or "work-arounds" should be eliminated?

I do.

Maybe. I am certainly not wedded to them but I haven't given it much thought. The issue is estate size and concentration. One person is entitled to $X dollars exempted from estate tax. With a trust those assets are assessed when the person dies. The same $X amount is assessed against the spouse when he or she dies. With joint property, when the first spouse dies all of the assets go to spouse 2. When she dies she now has $2X and goes over the threshold. It seems to me the only equitable way to equalize things would be to double the threshold for married couples. If you leave the threshold as is but eliminate the ability to separate assets it seems to me you are penalizing marriage. An unmarried couple (e.g. same sex couples currently) or a couple that chooses to get divorced get $2X but the married couple get $1X? Again, I haven't analyzed it those are just off the cuff thoughts.

 

[rescueme]

It does sound like you want to have a power of attorney so someone (your brother?) can take care of your affairs if you become incapacitated. A trust won't help with that.

Actually, you are incorrect.

A durable POA is part of the trust documents, along with a will, a living will (end of life decision/authority), and other documents to ensure that your estate is settled in the manner in which you expect.

It also has documents related to issues while you are still alive (such as the POA documents) which are important as you approach end of life - regardless if you are in a hospital bed or many years from death and need assistance for someone else to make decisions for you (such as Alzheimer's, or in our case, continuing care for our adult, disabled son).

Every circumstance is different, and every state has their own "rules" in a trust establishment.

The only thing I can suggest is that you contact an elder law attorney (as we did), who has a practice that has been around awhile. They see a lot of different circumstances (based upon personal/family requirements) and can suggest a course of action for you to consider, based upon their long-term exposure to such cases.

Is it cheap? Not as cheap as going to Nolo Press, but then again (with a disabled "child"), DW/me want to go with a good, solid plan - not one that was selected just on price alone.

Just my $.02.

 

[growing_older]

I agree that these issues can be technical and a competent attorney with the right specialized knowledge is necessary to do the right thing in your state. On the other hand, I have no doubt that some attorneys are in this for the fees they generate and not for the purpose of providing their clients the best and most appropriate estate planning for their specific situation.

I am confused as to why you suggest that I am incorrect in stating that power of attorney documents will be able to allow someone else to take care of your affairs if you become incapacitated. It appears that when you had a trust drafted, you also got a will, a living will and a power of attorney. Probably also got HIPPA paperwork, it's been a very popular attorney add-on recently. I'm glad you have such a comprehensive plan that you are happy with, but the fact that you got all these done at about the same time does not mean all trusts automatically contain power of attorney provisions. Similarly, the fact that your trust was "not cheap" does not mean that any other combination of professionally drafted wills and powers of attorney are inferior, inappropriate or equivalent to doing it yourself from a Nolo Press book.

 

[Seeking Hobbes]

Clearly this is a complicated topic (is anything that involves lawyers and state law not?)...

As the OP, I appreciate everyone's input. This discussion has helped me better form the objectives and questions I will present to my attorney, et al.

I find the area of "Accounts Payable On Death" particularly interesting (I'm ashamed to admit that I didn't know this existed) & have added my FA to the Insurance broker and lawyer as another call to make.

My hope is, in my case anyway, added insurance (cheap)... POD provisions (free)... a DPOA and will; can cover most of the objectives I have.

Mine may be a very "simple" case... but I sure am glad that I'm thinking through it now!

 

[Brat]

I am not a lawyer, what I am writing reflects my experience.

When the grantor of a revocable living trust dies the trust becomes irrevocable and, yes, it must get its own tax ID. No big deal. The smart thing is to disburse the income generating assets ASAP.

Discovering an error in the titling of asset you thought was in the trust is a royal PITA which is why it is important to review that periodically. In the worst case it becomes a part of the deceased's estate and handled under the language of the will. That is why you always want a will with a revocable living trust.

In my Mother's situation (an Oregon resident) she wished to leave something to a disabled grandson (also an Oregon resident). He receives SSI and directly leaving him a substantial sum could cause problems. As a result an account for him was established in a trust set up through was was then known as the Oregon Assn for Retarded Persons (the trust is available for all persons with a disability, not just the retarded) which was funded under the terms of the trust at her passing.

 

[meierlde]

As pointed out the difficulties of an estate depend on the state greatly. In Tx you get appointed, file an accounting of the estate and that is that as far as the state is concerned. In addition you file a 1041 for the estate for the years it is open, but then you have to do the same for a trust. Tx has the independent executor mode where the courts don't get involved. I handled both my parents estates, and really there was not that much hassle involved even with no trust. Now my maternal grandparents lived in IN and had a trust, which was run by a bank, and took care of a lot of things including selling the house, and finding a nursing home for my grandmother. So check with a knowledgeable lawyer in your state. Note that if you move states you probably want to have the will modified anyway.