Dumb ? - what is an asset for purposes of a trust

[ncbill]

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Originally Posted by SecondCor521 If the remaining amount is small enough, one can avoid full probate in my state by either doing a small estate affidavit and/or simplified probate. It is my understanding that many states have such laws. So in my state, even a revocable living trust may not be necessary to effectuate the transfer of property and still avoid probate.

Here the small estate is only for those with $20k & under in assets and the filing fee is $120 versus $150 for larger estates.

About the only perk here with a small estate is that the executor doesn't have to publish a "notice to creditors" in the local paper.

Since I was also serving as caregiver while they were living for the last two estates I handled I setup revocable living trusts.

The lawyer handled transferring any real estate into the trust, I used their DPOA to move any financial assets.

When they died I had the family come through and take what they wanted from the house with the rest being hauled away to the dump.

And after the house (only significant asset) sold I distributed the proceeds to the beneficiaries literally a day after the check cleared.

Then filed the final trust return the following year with everything going into the shredder three years afterwards.

[badatmath]

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Originally Posted by pb4uski Hindsight is 20/20 but the followup question would be "why is it better"? It sounds like all is done, so you can always consult another lawyer about a beneficiary deed and just not use the trust.

No, it is not done yet. I made a follow up appointment and have papers to fill out but no money has changed hands nothing written or signed. I did ask 3 times "why" and never got much of an answer but I suppose I really didn't want to think I had to start over with a new lawyer.

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Originally Posted by Trooper If I understand correctly your bank and brokerage accounts cannot have beneficiaries, but can be titled as POD/TOD, which avoids probate. Other types of accounts like IRAs, 401(k)s, annuities and life insurance can have beneficiaries.

Yes, I think that is true as what I currently have.

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Originally Posted by Trooper There is something called a "pour-over will" that gets included with the trust; this will provides instructions for any asset not included (funded) in the trust.

He didn't mention that but it is one of my concerns because I am actually not planning to die just yet and I would anticipate having to acquire or dispose of assets in the future.

I had a friend recently inherit from parents where assets were left out of the trust and not accounted for and it seems to be a big hassle. I could not tell you the details really as said friend is not very aware of such things and would not be able to explain accurately.

I left a vm this morning for a new lawyer to see what they say.

[Spock]

On the other hand, what does it hurt to have a trust?
Trusts became popular when death/estate/inheritance taxes where high as the trust could be split upon death of one of the trustees.
Build Back Better along with the resurgence of Eat the Rich was supposedly going to lower the estate tax thresholds again. I didn't pay attn as I'm no where close to it. But then all the tax increases were only supposed to hit incomes above 400K too...
Deficits are up. Taxes aren't going down.

Dad had a revocable trust setup. The benefit of it was when we had to take him to court to get him declared incompetent, getting a sole successor trustee to replace Dad as trustee was relatively easy. Putting most of the assets into the trust lowers the cost of the required conservator insurance bond required because the bond only covers assets outside the trust.
After dealing with blood sucking attorneys (my atty, his atty, and the temp 3rd party conservators atty) for the last 3 years on the conservatorship, having a trust to avoid probate looks cheap in comparison.

[Trooper]

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Originally Posted by badatmath I left a vm this morning for a new lawyer to see what they say.

Good. When you meet with him/her, explain that you want an estate plan, but are undecided between a will and a trust and would like to clearly understand the advantages and disadvantages of each. Also ask what the relative costs of updating each along the way are, as events in your life may dictate.

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Originally Posted by Spock On the other hand, what does it hurt to have a trust?... ...Dad had a revocable trust setup. The benefit of it was when we had to take him to court to get him declared incompetent, getting a sole successor trustee to replace Dad as trustee was relatively easy. Putting most of the assets into the trust lowers the cost of the required conservator insurance bond required because the bond only covers assets outside the trust. After dealing with blood sucking attorneys (my atty, his atty, and the temp 3rd party conservators atty) for the last 3 years on the conservatorship, having a trust to avoid probate looks cheap in comparison.

I don't have the expertise to say whether a trust helped in your situation. To answer your first question, trusts can be an overly complicated solution to a less complicated requirement. Trusts excel when the deceased have non-standard wishes for asset distribution, such as Johnny can't touch the money until he is 25, or Sally needs to complete a financial literacy class prior to distribution.

OTOH if distribution of assets is relatively straightforward, and all assets are titled properly or have the correct beneficiaries, I don't see the need for a trust.

[OldShooter]

Two things getting mixed up here (again): A revocable trust (marketingspeak: "living trust") is created and exists prior to the grantor's death. It becomes irrevocable at death and its terms determine what happens to its assets.

After death, an estate plan (whether or not a rev trust existed) can create any number of irrevocable trusts. (Irrevocable because the grantor is dead)

The mechanical structure of this stuff, language and documents, is why expert help is needed. There are lots of what-ifs and I-forgots that need to be dealt with and lots of I's to be dotted and t's to be crossed. For example, in our estate plan there is a sentence that solves the simultaneous death situation by stating something like "In the event of simultaneous death, Ruth is considered to have predeceased Fred." This lets the train roll down the tracks as planned.

Also, a couple of places here there are comments implying that a trust (rev trust) is an alternative to a will. It is not. There always needs to be a will. A rev trust is an add-on.

I had my gall bladder removed a month ago. I hires some experts to handle this, just as we hired an expert to do our estate plan. DIY is not a rational option in either case.

[pb4uski]

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Originally Posted by OldShooter .... DIY is not a rational option in either case.

I disagree. For many more complex situations I agree that professional help is needed, but for many people with simple finances beneficiary designations, TOD, POD, etc can be used to avoid probate and a trust is unnecessary and IMO simply adds unnecessary complications.

We're a pretty good example of that. 2 heirs, no special needs or anything like that. Vast majority of assets are financial accounts that can have beneficiary designations and real property can have enhanced life estate deeds.

Mom and Dad had living trusts. Dad passed and the trust is irrevocable now and I manage it. While it is very simple, it is a minor PITA... annual trust income tax returns, etc. Our family is lucky that I have the background and experience to be able to do it, otherwise we would have to hire that work out and it wouldn't be cheap.

After that experience and seeing the negligible benefit, I'd prefer to avoid trusts if we can.

[OldShooter]

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Originally Posted by pb4uski I disagree. For many more complex situations I agree that professional help is needed, but for many people with simple finances beneficiary designations, TOD, POD, etc can be used to avoid probate and a trust is unnecessary and IMO simply adds unnecessary complications. ...

Oh, I am not arguing for or against trusts of any flavor. But the problem with DIY estate planning is that any problems will arise after the DIY-er is dead and can't fix them. A classic example is an ex-wife still being listed as the beneficiary of an insurance policy.

I guess if the legal bill for help would comprise a substantial fraction of the estate to be protected I could see cutting a corner, but spending something like a percent or less to get it right seems to me to be a no-brainer.

[pb4uski]

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Originally Posted by OldShooter Oh, I am not arguing for or against trusts of any flavor. But the problem with DIY estate planning is that any problems will arise after the DIY-er is dead and can't fix them. A classic example is an ex-wife still being listed as the beneficiary of an insurance policy. I guess if the legal bill for help would comprise a substantial fraction of the estate to be protected I could see cutting a corner, but spending something like a percent or less to get it right seems to me to be a no-brainer.

True, but the same thing can be said of professionally prepared estate plans... any flaws that arise after the decedent is dead can't be fixed. I'm sure your DW has seen that lots when she was working.

Or to put it differently, IF your estate plan includes at trust then you should probably get professional help, but in many cases there isn't any need for a trust IMO.

[OldShooter]

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Originally Posted by pb4uski True, but the same thing can be said of professionally prepared estate plans... any flaws that arise after the decedent is dead can't be fixed. I'm sure your DW has seen that lots when she was working.

Yes. But your odds of having good documents improve when you hire experts.

Re DW yes, of course. There were supposedly "estate experts" whose documents were feared by her legal beagles. And all the probate judges knew her by name.

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Originally Posted by pb4uski Or to put it differently, IF your estate plan includes at trust then you should probably get professional help, but in many cases there isn't any need for a trust IMO.

Agreed, but even if there is no need for a trust that doesn't mean that professional help shouldn't be sought.

[G-Man]

I plan to do my estate planning next month. I signed up for the annual legal plan from my employer. It's the Arag Legal plan which includes creation of Wills and Trusts.

[RobbieB]

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Originally Posted by steelyman I’m also curious about this topic. There was a recent (Nov 17 ‘22) podcast by Ed Slott about naming trusts as beneficiaries. My question is: what are the downsides of establishing a trust when not all assets are retitled to it? (apart from expenses involved with creating the trust in the first place)

If all assets are not titled in the name of the trust, they can't be handled by the trust. You skip all the benefits that you paid for.

Establishing the trust is what you pay for. If it's not funded, it's worthless.

[pb4uski]

^^^ Absolutely, there are lots of trusts that the assets have never been transferred from the person to the trust or were done with the trust was established but wasn't kept up.

[badatmath]

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Originally Posted by pb4uski ^^^ Absolutely, there are lots of trusts that the assets have never been transferred from the person to the trust or were done with the trust was established but wasn't kept up.

Kind of what I don't get about the trust to begin with. My "assets" already are POD/TOD/beneficiary except for the house. (Even the car has a benef).

But in any case I will just keep chatting up new lawyers until someone can explain the point. (I have only seen one and clearly I missed it in that visit!)

I think really the "free" consultation is a dis-service because they kept it so short (20 minutes maybe). I'd rather have paid a fee and got real advice I think. And really, in their defense, they have been doing this for years and probably know what to recommend quickly - I just didn't understand WHY. "It's better" is not enough reason for me to spend twice as much money.

[steelyman]

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Originally Posted by RobbieB If all assets are not titled in the name of the trust, they can't be handled by the trust. You skip all the benefits that you paid for. Establishing the trust is what you pay for. If it's not funded, it's worthless.

Makes sense. I do have a trust and, because of this thread, spoke to a company with whom I have a taxable mutual fund account. They’re sending me the paperwork to have it retitled to the trust. That one had skipped my mind.

[ADDED] They reminded me I’ll need a medallion signature and first/last pages of the trust document. A minor hassle but free for me (I get the signature guarantee at my local credit union)

[OldShooter]

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Originally Posted by steelyman Makes sense. I do have a trust and, because of this thread, spoke to a company with whom I have a taxable mutual fund account. They’re sending me the paperwork to have it retitled to the trust. That one had skipped my mind.

I never tried to figure out the rationale, but our attorney is quite casual about smaller things going into our rev trusts. She had us put our two houses in, but just had us list specific beneficiaries on our brokerage account. IIRC the primary beneficiary is the spouse and the backup is the decedent's rev (now irrev) trust.

[steelyman]

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Originally Posted by OldShooter I never tried to figure out the rationale, but our attorney is quite casual about smaller things going into our rev trusts. She had us put our two houses in, but just had us list specific beneficiaries on our brokerage account. IIRC the primary beneficiary is the spouse and the backup is the decedent's rev (now irrev) trust.

That’s just me and probably comes from experience with being both an executor and trustee. They can be quite time-consuming.

[SecondCor521]

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Originally Posted by badatmath Kind of what I don't get about the trust to begin with. My "assets" already are POD/TOD/beneficiary except for the house. (Even the car has a benef). But in any case I will just keep chatting up new lawyers until someone can explain the point. (I have only seen one and clearly I missed it in that visit!) I think really the "free" consultation is a dis-service because they kept it so short (20 minutes maybe). I'd rather have paid a fee and got real advice I think. And really, in their defense, they have been doing this for years and probably know what to recommend quickly - I just didn't understand WHY. "It's better" is not enough reason for me to spend twice as much money.

There are lots of different reasons for trusts to exist and lots of different kinds of trusts.

Mostly people think of trusts to avoid cost/hassle/time of probate. Trusts can also be used to retain control over assets (such as a spendthrift trust), protect assets from others actors (Medicaid trust), maintain privacy, obtain estate tax benefits (credit shelter trust), obtain income tax benefits (various charitable remainder trusts), and probably others.

I would think a good practitioner, whether it is in law, tax, medicine, finance, or engineering, would first figure out what the client wants and needs, and then recommend the appropriate tool.

It does seem to me there are a lot of average practitioners who are content to make blanket recommendations to their clients that probably work decently well for many people. It's faster, easier, and in the short term more profitable to do things this way.

It's also true that most clients are unclear what they want and don't understand the field and are trusting and are "sellable". Most of these clients can probably get along just fine with an average practitioner.

And then there are troublemakers like me who think they can and should learn a lot about the subject and understand "why?" and ask annoying questions to get time-consuming explanations, which might reveal that an average practitioner didn't do a great job providing advice in their field. This costs more, because the back-and-forth of questions and explanations and changing recommendations takes time, and most of these types of practitioners charge quite a bit for their time.

[Dash man]

Quote:

Originally Posted by OldShooter I never tried to figure out the rationale, but our attorney is quite casual about smaller things going into our rev trusts. She had us put our two houses in, but just had us list specific beneficiaries on our brokerage account. IIRC the primary beneficiary is the spouse and the backup is the decedent's rev (now irrev) trust.

The problem with not putting your brokerage account in the trust is managing it if you become mentally unable to do it yourself. If you plan on using a POA to deal with that, make sure the brokerage has accepted the POA. They sometimes insist on using their own version.

[OldShooter]

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Originally Posted by Dash man The problem with not putting your brokerage account in the trust is managing it if you become mentally unable to do it yourself. If you plan on using a POA to deal with that, make sure the brokerage has accepted the POA. They sometimes insist on using their own version.

Thanks. I just emailed my Schwab guy to ask about this. Everything is joint except, of course, the IRAs.

[Time2]

I'll just add this about Florida, and I suspect it applies to other states.


https://www.linslawgroup.com/blog/20...e-in-my-trust/


"If your vehicle is owned by the Trust, then your Trust will be a party to the lawsuit. You would not want other people learning the details of your Trust through the litigation process. Another reason not to title your vehicles in your Trust is insurance."


This may depend on the type of trust.