a will or living trust question

[woodosgood]

Will or Trust

My basic understanding of wills and trusts indicate that a will does not take effect until you die, while a trust can work for you while you are still alive and also after death.

We have no children, no real estate, no pets. We may have some bequeaths once the last one of us dies, but we also want to leave any remaining assets to whoever (friend or relative) may step in and "take care" of us if we become incapable of handling our own affairs in our final years, either due to an accident, old age, or illness. It would be difficult to name that person today, because we don't know where we'll be or what kind of living arrangements we'll have during our final years. Can something this vague be addressed in a trust, if we name someone (the trustee?) to determine out who that person(s) was and provide them with the remains of our estate?

 

[pb4uski]

No, you can't rely on the trustee to make that judgement for you.... you will need to name a beneficiary, but the grantor of a revocable trust you can change the beneficiary at any time as long as you are competent to do so. YMMV.

 

[CRLLS]

A trust cannot distribute a persons personal property, things owned by them. Only property owned by the trust are controlled by the trust. So if there is a trust, typically there is a will also.

A will can be changed via a codicil without having to rewrite the entire will. Similarly, a trust can be changed via an amendment without rewriting the entire trust document.

Things change. So can documents.

 

[Sunset]

My basic understanding of wills and trusts indicate that a will does not take effect until you die, while a trust can work for you while you are still alive and also after death.

We have no children, no real estate, no pets. We may have some bequeaths once the last one of us dies, but we also want to leave any remaining assets to whoever (friend or relative) may step in and "take care" of us if we become incapable of handling our own affairs in our final years, either due to an accident, old age, or illness. It would be difficult to name that person today, because we don't know where we'll be or what kind of living arrangements we'll have during our final years. Can something this vague be addressed in a trust, if we name someone (the trustee?) to determine out who that person(s) was and provide them with the remains of our estate?

You can also just name whoever you want as TOD/POD beneficiary on your different bank and investment accounts.

And change them as often as you want.
It's free, and avoids probate (unlike Wills).

 

[CRLLS]

You can also just name whoever you want as TOD/POD beneficiary on your different bank and investment accounts.

And change them as often as you want.
It's free, and avoids probate (unlike Wills).

Definitely a good idea. But I would like to say that having a Will does not require going thru Probate. If you do it right, and have the POD's, TOD's, Beneficiaries, Joint accounts WRS, and Trusts, there is little left for the Will to cover. If under 100k in Illinois, avoiding Probate can be done by filing a Small Estate Affidavit. Many other states have this but may have a different amounts.

 

[Sunset]

Definitely a good idea. But I would like to say that having a Will does not require going thru Probate. If you do it right, and have the POD's, TOD's, Beneficiaries, Joint accounts WRS, and Trusts, there is little left for the Will to cover. If under 100k in Illinois, avoiding Probate can be done by filing a Small Estate Affidavit. Many other states have this but may have a different amounts.

True, I was just keeping it simple.

 

[Chuckanut]

I've been following this trust discussion, especially since I would like to buy more Ibonds.

According to my will, all my kids (or their heirs) split everything evenly. There is a small stipend of $10K for the child who does the executor work of managing the paperwork and the payouts after I pass. I think that's fair.

I still want to keep control of my assets until I pass or the children convince a court I am no longer able to handle my affairs. So, it sounds like I need a revocable living trust with children as the beneficiaries. Since I don't know how long I may live, I need to be able to take assets (money) out of the trust if I need them for things like LTC, etc.

Most of what I read talks about putting assets into the trust, but very little talks about taking assets of of the trust while I am still alive and kicking. Can I do that? For example, I purchase an Ibond for $10K, and three years from now I need the money. Can I easily get to it, cash it in, withdraw the money and spend it on whatever I need?

 

[nwsteve]

We are in the midst of getting our arms around DFIL estate. He had a will and Living Trust in which three parcel of real estate. The LT was put in place when he was over 90 and the heirs were in the midst of a major negotiation for a large piece of commercial property. Heirs were concerned he had a risk of cognitive limitation that might disrupted the resolution of repositioning the commercial property.
We have found that administering his last days and estate would have been much simplified had he done a better job with a Financial POA and a Healthcare POA.
Hopefully, the OP will put these essential docs in place regardless of what he does about a will. Hie heirs' lives will be much simplified.

 

[pb4uski]

.... Most of what I read talks about putting assets into the trust, but very little talks about taking assets of of the trust while I am still alive and kicking. Can I do that? For example, I purchase an Ibond for $10K, and three years from now I need the money. Can I easily get to it, cash it in, withdraw the money and spend it on whatever I need?

Yes, because while you are alive you are the grantor, trustee and beneficiary.

 

[CRLLS]

While alive, you treat the living trust as your personal money. You can put money in, take money out with no penalty. Things like cars and real estate that are titled must be filed, of course. You even can file trust income on your personal 1040 tax forms.

 

[pb4uski]

While alive, you treat the living trust as your personal money. You can put money in, take money out with no penalty. Things like cars and real estate that are titled must be filed, of course. You even can file trust income on your personal 1040 tax forms.

And that is why when my revocable living trust bought i-bonds it used my SSN as the tax ID, because the trust doesn't have a TIN... and the money came from our joint savings account because the trust doesn't have a bank account. The trust is sort of like my economic and financial alter ego.

 

[Chuckanut]

While alive, you treat the living trust as your personal money. You can put money in, take money out with no penalty. Things like cars and real estate that are titled must be filed, of course. You even can file trust income on your personal 1040 tax forms.

If one uses software such as Turbo Tax, can I assume the having the revocable trust will not complicate my return to the point where I need to see an accountant? IOW, Turbo Tax will do a good job of handling a revocable trust with only financial assets in it.

I ask because my parents had a family trust and every little thing about it seemed to require legal advice to get right. ($$$!!) Granted, it had a lot more in it such as rental real estate. I don't want any surprises when I file my 2022 tax return.

I do appreciate people sharing their knowledge. This is hardly an area of expertise for me.

 

[cathy63]

If one uses software such as Turbo Tax, can I assume the having the revocable trust will not complicate my return to the point where I need to see an accountant? IOW, Turbo Tax will do a good job of handling a revocable trust with only financial assets in it.

I ask because my parents had a family trust and every little thing about it seemed to require legal advice to get right. ($$$!!) Granted, it had a lot more in it such as rental real estate. I don't want any surprises when I file my 2022 tax return.

I do appreciate people sharing their knowledge. This is hardly an area of expertise for me.

Everything in your revocable living trust goes on your tax return just exactly as if the trust didn't exist. You still report your bank interest on Sched B and you still deduct your property taxes on Sched A even though the deed may say "Chuckanut Family Trust".

 

[CRLLS]

If one uses software such as Turbo Tax, can I assume the having the revocable trust will not complicate my return to the point where I need to see an accountant? IOW, Turbo Tax will do a good job of handling a revocable trust with only financial assets in it.

I ask because my parents had a family trust and every little thing about it seemed to require legal advice to get right. ($$$!!) Granted, it had a lot more in it such as rental real estate. I don't want any surprises when I file my 2022 tax return.

I do appreciate people sharing their knowledge. This is hardly an area of expertise for me.

We became "schooled" last year. I can only share our experience. MIL passed last year with a living trust. Her home was titled to her trust, a piece of income property and a couple of CDs. Shortly before she died, the income property was sold and erroneously put into her bank account. Perfectly acceptable according to both her CPA and the estate attorney we hired. MIL had been using that CPA for filing her taxes for many years and we kept her for filing last year's taxes, so I cannot speak directly about how TT handles it. Up until the day she died, both her personal income and trust income were reported on her personal tax filing. On the day she died, the trust "became" a irrevocable trust and a tax ID needed to be created. A separate tax filing was also made on the trust accounts with income earned after her death. Income taxes on the trust accounts will continue to be paid until that trust is closed.

I hope this helps you understand it a bit better.

 

[Chuckanut]

We became "schooled" last year. I can only share our experience. MIL passed last year with a living trust. Her home was titled to her trust, a piece of income property and a couple of CDs. Shortly before she died, the income property was sold and erroneously put into her bank account. Perfectly acceptable according to both her CPA and the estate attorney we hired. MIL had been using that CPA for filing her taxes for many years and we kept her for filing last year's taxes, so I cannot speak directly about how TT handles it. Up until the day she died, both her personal income and trust income were reported on her personal tax filing. On the day she died, the trust "became" a irrevocable trust and a tax ID needed to be created. A separate tax filing was also made on the trust accounts with income earned after her death. Income taxes on the trust accounts will continue to be paid until that trust is closed.

I hope this helps you understand it a bit better.

Thanks. I am beginning to understand.

I was expecting that some government involvement or special permission from the IRS or a court is needed, or something else to complicate it. I will use the trust simply to stash away some (not all) financial items like I-bonds, CD's and treasury bills. No real estate, stocks, mutual funds or bonds. Frankly it seems almost too simple.

 

[pb4uski]

We became "schooled" last year. I can only share our experience. MIL passed last year with a living trust. Her home was titled to her trust, a piece of income property and a couple of CDs. Shortly before she died, the income property was sold and erroneously put into her bank account. Perfectly acceptable according to both her CPA and the estate attorney we hired. MIL had been using that CPA for filing her taxes for many years and we kept her for filing last year's taxes, so I cannot speak directly about how TT handles it. Up until the day she died, both her personal income and trust income were reported on her personal tax filing. On the day she died, the trust "became" a irrevocable trust and a tax ID needed to be created. A separate tax filing was also made on the trust accounts with income earned after her death. Income taxes on the trust accounts will continue to be paid until that trust is closed.

I hope this helps you understand it a bit better.

What you describe is similar to my dad's living trust which became irrevocable when dad died and at which point mom became the beneficiary. We have a separate tax id and I file a trust tax return each year (about 4 pages and only a minr nuisance). In our case, trust assets are only some Vanguard investments and the income all passes through to mother so the trust gets a deduction equal to its income so the trust has no taxable income and no tax is owed... it is essentially a passthrough.

 

[HarveyS]

According to my will, all my kids (or their heirs) split everything evenly. There is a small stipend of $10K for the child who does the executor work of managing the paperwork and the payouts after I pass. I think that's fair.

I still want to keep control of my assets until I pass or the children convince a court I am no longer able to handle my affairs. So, it sounds like I need a revocable living trust with children as the beneficiaries.

Maybe I am missing something, so, if I am, please help me understand.
Wouldn't your will be sufficient to meet your need stated in 2nd paragraph? The trust can help your heirs avoid probate and can minimize taxes for large estates. Controlling your assets while alive can be done just the way it is now.

 

[Chuckanut]

Maybe I am missing something, so, if I am, please help me understand.
Wouldn't your will be sufficient to meet your need stated in 2nd paragraph? The trust can help your heirs avoid probate and can minimize taxes for large estates. Controlling your assets while alive can be done just the way it is now.

Yes, it will.

I want the trust primarily to buy Ibonds at this time. That's what got me interested in it. I also realize that once it is setup, I may use it for other things in the future. So, I want to make certain the even split between children (or their heirs) is maintained.

I learned a long time ago that one the worst things a parent can do to their children is favor one or the other after the parent's death. There are situations where exceptions are necessary and right, of course.

 

[Chuckanut]

Thanks for the help. My trust is up and running. Next I will feed it an I bond.

 

[tulak]

Thanks for the help. My trust is up and running. Next I will feed it an I bond.

If you don’t mind me asking, how long did it take you to setup the trust? Did you use a lawyer or a DIY package?

I’m starting to think I might do this myself to get an extra 10k of I-Bonds. I’m planning on buying Quicken Willmaker for my will, so I’d get the added bonus of using it for a trust too.

 

[pb4uski]

If you don’t mind me asking, how long did it take you to setup the trust? Did you use a lawyer or a DIY package?

I’m starting to think I might do this myself to get an extra 10k of I-Bonds. I’m planning on buying Quicken Willmaker for my will, so I’d get the added bonus of using it for a trust too.

That is exactly what I did. We were planning on updating our estate planning so I bought a copy of Willmaker for $90.

I created 3 Declarations of Trust... joint (principally for our homes, vehicles), his and her (for i-bonds). Those cost $10 each for the notary.

I funded i-bonds in each of the trusts so our annual limit is now $50k rather than $20k. If I was really greedy I could have established multiple his and multiple her trusts.

I later found out that we might be able to cover off the homes with enhanced life estate deeds (aka Lady Bird deeds) so the joint trust might not end up with much in it other than vehicles and i-bonds.

 

[tulak]

I ordered a copy of Willmaker last night and it'll be here Saturday. Now I have a weekend project. Luckily my credit union will notarize documents for free, so my only cost is the software.

I funded i-bonds in each of the trusts so our annual limit is now $50k rather than $20k. If I was really greedy I could have established multiple his and multiple her trusts.

I've been thinking about this too, but I'm not sure how far I want to go with multiple TD accounts.

 

[Happyras]

I have not seen the new version of Willmaker, but prior versions were very simple. For our trust we used ForeTrust https://foretrustsoftware.com/ They do have a fully functional demo version. I found it to be excellent, it is actually a product that lawyers use. It can be configured to current state laws and is very good at creating more complicated QTIP trust structures specific to state tax laws for those in such states. The cost is not cheap, but you get what you pay for in this case.

 

[pb4uski]

... Luckily my credit union will notarize documents for free, so my only cost is the software. ...

I called our credit union and they notarize as well so we went there and waited 15 minutes to speak with someone where they prompt told us that the bank had a policy where they would not notarize trusts or wills.

 

[Chuckanut]

If you don’t mind me asking, how long did it take you to setup the trust? Did you use a lawyer or a DIY package?

I’m starting to think I might do this myself to get an extra 10k of I-Bonds. I’m planning on buying Quicken Willmaker for my will, so I’d get the added bonus of using it for a trust too.

I used NOLO Quicken Will Maker and Trust software $80.
The UPS store notarized it for $14.

It took me about three hours including the time to install and update the software. Then a trip to the UPS store for the notarization.

I followed this site for tips on how to do a few things. Read it before starting.

https://thefinancebuff.com/buy-more-i-bonds-treasury-direct-trust.html

https://thefinancebuff.com/simple-living-trust-software-i-bonds.html

Check out what notary language you will need ahead of time. It's the part where the notary says you were the one who signed, showed ID, and you did it all of your free will.