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

[pb4uski]

.... 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]

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]

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]

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.

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]

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]

^^^ 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]

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]

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]

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]

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]

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]

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/2016/05/in-florida-should-i-title-my-vehicle-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.

 

[nwsteve]

One "Watch Out" on living trusts. Because of concern over potential loss of cognitive issues, we had DW's dad put his 3 pieces of real estate including a commercial piece that had a maturing long-term lease for which he was the primary lessor as well as the tract that had his sheet metal shop on it in a revocable (aka living trust). Package included a pour over will and Health POA.
DFIL was then in mid 90s and was very reluctant to do such "fancy" stuff but we "sold" it telling him unless we had Trustee powers and he became hospitalized or impaired, we would not be able keep his business or other affairs operating. Simply put, we can manage, or the State will do it. We were not however successful in getting him to include any financial accounts in it. Fortunately, he did agree to put DW on one of his household checking accounts.
The "Watch Out" came when we learned after he passed that none of his small town banks would open up a trust checking accounts for his trust. The banks refused to recognize the terms of the pour over will and trust (now irrevocable) and declined to open up a checking account so we could utilize the assets. Fortunately, his checking account which had DW was a cosigner allow us to meet his interim and final expenses after he passed. We went to four banks who each declined and three had his business accounts. None would act unless we had a Letter of Testamentary from Probate court. We had successfully kept the estate from needing probate but with the court order, no bank would take on the Trust checking account.
As a last ditch effort, I convinced our personal bank to open the trust account for the estate.
If you have a Living Trust, I suggest you be sure there is at least one active checking account included in the trust. It was a key lesson we took from the experience. We have since verified our DD will not experienced this issue from our Living Trust.

 

[SecondCor521]

One "Watch Out" on living trusts. Because of concern over potential loss of cognitive issues, we had DW's dad put his 3 pieces of real estate including a commercial piece that had a maturing long-term lease for which he was the primary lessor as well as the tract that had his sheet metal shop on it in a revocable (aka living trust). Package included a pour over will and Health POA.
DFIL was then in mid 90s and was very reluctant to do such "fancy" stuff but we "sold" it telling him unless we had Trustee powers and he became hospitalized or impaired, we would not be able keep his business or other affairs operating. Simply put, we can manage, or the State will do it. We were not however successful in getting him to include any financial accounts in it. Fortunately, he did agree to put DW on one of his household checking accounts.

A general durable POA can also do similar things without a RLT. My Dad has me as his POA, and we've set it up with most of his financial institutions, so that has been making things easy since he is slowly losing interest and ability to manage his finances.

Before you do a POA, it's also nice to simplify and automate. I do use the POA occasionally, but mostly his finances run on autopilot.

The "Watch Out" came when we learned after he passed that none of his small town banks would open up a trust checking accounts for his trust. The banks refused to recognize the terms of the pour over will and trust (now irrevocable) and declined to open up a checking account so we could utilize the assets. Fortunately, his checking account which had DW was a cosigner allow us to meet his interim and final expenses after he passed. We went to four banks who each declined and three had his business accounts. None would act unless we had a Letter of Testamentary from Probate court. We had successfully kept the estate from needing probate but with the court order, no bank would take on the Trust checking account.
As a last ditch effort, I convinced our personal bank to open the trust account for the estate.
If you have a Living Trust, I suggest you be sure there is at least one active checking account included in the trust. It was a key lesson we took from the experience. We have since verified our DD will not experienced this issue from our Living Trust.

In my state, one can open an estate account with a small estate affidavit (and an EIN, of course). Letters Testamentary are not required.

 

[Spock]

One "Watch Out" on living trusts. Because of concern over potential loss of cognitive issues, we had DW's dad put his 3 pieces of real estate including a commercial piece that had a maturing long-term lease for which he was the primary lessor as well as the tract that had his sheet metal shop on it in a revocable (aka living trust). Package included a pour over will and Health POA.
DFIL was then in mid 90s and was very reluctant to do such "fancy" stuff but we "sold" it telling him unless we had Trustee powers and he became hospitalized or impaired, we would not be able keep his business or other affairs operating. Simply put, we can manage, or the State will do it. We were not however successful in getting him to include any financial accounts in it. Fortunately, he did agree to put DW on one of his household checking accounts.
The "Watch Out" came when we learned after he passed that none of his small town banks would open up a trust checking accounts for his trust. The banks refused to recognize the terms of the pour over will and trust (now irrevocable) and declined to open up a checking account so we could utilize the assets. Fortunately, his checking account which had DW was a cosigner allow us to meet his interim and final expenses after he passed. We went to four banks who each declined and three had his business accounts. None would act unless we had a Letter of Testamentary from Probate court. We had successfully kept the estate from needing probate but with the court order, no bank would take on the Trust checking account.
As a last ditch effort, I convinced our personal bank to open the trust account for the estate.
If you have a Living Trust, I suggest you be sure there is at least one active checking account included in the trust. It was a key lesson we took from the experience. We have since verified our DD will not experienced this issue from our Living Trust.

I think it's more that banks will decline to open any account that requires their legal dept to review "court" documents.


We're having the same issue opening conservator accounts. I went to 3 institutions trying to open a simple conservator checking account (via the drive-up window in the early days of c*vid) and all refused. I managed to get Wells Fargo to open one as Dad and I already had accounts there (same person at the bank had called me when Dad attempted to withdraw all of his funds and give it to some guy in the parking lot for safe keeping).
Later, when conservatorship was moved to a 3rd party temporary conservator, Wells Fargo refused to open a conservator checking account for them and the had to get a court order to force Wells Fargo to open the account.


Now Discover Bank is giving a big run around to move the trust savings account from the temp conservator to the permanent conservator. I'm 8 phone calls, 8 weeks, and 13 document uploads into the process.

 

[pb4uski]

... Now Discover Bank is giving a big run around to move the trust savings account from the temp conservator to the permanent conservator. I'm 8 phone calls, 8 weeks, and 13 document uploads into the process.

I'm confused by the above. If the trust has a savings account, the named trustees would control the account, not a conservator. The trustees would be named in the trust document and may change upon the death of the grantor.

For example, for DM's living trust she is the grantor, beneficiary and trustee when the trust was written. When she got to a certain age, we amended the trust to name me, DSister and DM as three co-trustees, with that action of any of the two of us sufficient to act on behalf of the trust... so DSister and I and manage the trust on DM's behalf. When DM dies, then DSister and I will be co-trustees and will dispose of the assets in accordance with the terms of the trust. There is no conservator involved and never will be.

 

[Spock]

I'm confused by the above. If the trust has a savings account, the named trustees would control the account, not a conservator. The trustees would be named in the trust document and may change upon the death of the grantor.

For example, for DM's living trust she is the grantor, beneficiary and trustee when the trust was written. When she got to a certain age, we amended the trust to name me, DSister and DM as three co-trustees, with that action of any of the two of us sufficient to act on behalf of the trust... so DSister and I and manage the trust on DM's behalf. When DM dies, then DSister and I will be co-trustees and will dispose of the assets in accordance with the terms of the trust. There is no conservator involved and never will be.

I mis-typed. The sole successor trustee and the conservator are the same person now... but yes I should've been clear on the terms. Discover Bank is refusing to acknowledge the new successor trustee for the trust account despite court docs stating the previous temp conservator and successor trustee has been terminated and replaced.

 

[Happyras]

"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.

This is a big issue I learned from my insurance agent, which I avoided. I am not a fan of trusts, but in WA state our estate tax starts at a very low amount and the only way I found to avoid some of it is to have a RLT written to serve both preservation of our state as well as the Federal estate tax exemptions for each spouse. It does not help with IRA funds, but if other assets are significant it it works.

The only work around I know of that would address this preservation of exemption, involves the use of an IDGT, yet it is a trust again. My friends use such intentionally defective grantor trusts to hold assets which remain personally taxable to the grantor, but irrevocably gifted to the beneficiaries. The advantage is that the trust can hold rental property, generate and distribute income and is not taxed as trust for Fed taxes while the grantor lives.

To another comment earlier, yes you can have a IRA Beneficiary Trust, we both do. This is one way maintain some stretch, but the concern is tax paid by the trust itself. I am not convinced it is worth the complication to enable such a trust.

As for the benefit of avoiding probate alone, I would not go there. It is not worth the pain. My FIL past while living in FL. His shister, I mean lawyer, sold him a trust, but put himself as estate executor in the pour over will and when FIL died, he probated this very small estate to collect his rightful % of the estate. The estate was so small it not only did not need a trust, it would not meet the min in WA to require probate.

 

[Happyras]

Since we still have step up basis, gifting of depreciable properties looses that advantage. However, when we do loose that loop hole, I will likely resolve to do IDGT's or full out gifts to our kids and live off that wonderful SS while staying our kids recently gifted homes.

 

[OldShooter]

Since we still have step up basis, gifting of depreciable properties looses that advantage. However, when we do loose that loop hole, I will likely resolve to do IDGT's or full out gifts to our kids and live off that wonderful SS while staying our kids recently gifted homes.

I don't think you have anything to worry about. Political pressure to keep the loophole would be overwhelming. It benefits too many people. And the elderly, especially, vote -- evoking fear in congresscritters.

 

[pb4uski]

I mis-typed. The sole successor trustee and the conservator are the same person now... but yes I should've been clear on the terms. Discover Bank is refusing to acknowledge the new successor trustee for the trust account despite court docs stating the previous temp conservator and successor trustee has been terminated and replaced.

I'm still confused. I assume that Discover Bank was provided with the relevant pages of the trust when the account was opened. If the original trustee died they woudl be replaced by the successor trustee named in the trust document, so if you provide Discover Bank with the death certificate of the original trustee they shouldn't need anything further.

Now if the successor trustee changed between when the account was established and now, I can see that they would need more documentation.

It sounds like perhaps the named successor trustee was replaced. If they won't accept a court document stating that the successor trustee was replaced by the trust or by the court, what is it that they are demanding in order to accept the replacement successor trustee?

 

[nwsteve]

I'm still confused. I assume that Discover Bank was provided with the relevant pages of the trust when the account was opened. If the original trustee died they woudl be replaced by the successor trustee named in the trust document, so if you provide Discover Bank with the death certificate of the original trustee they shouldn't need anything further.

This is similiar to the insanity we ran into when trying to establish a new account. No explanation of what the bank did not like, just silence. I tried to arrange a call between banks' lawyers and our lawyer. Banks refused.
Incredibly frustrating especially when you have statutory deadlines to be dealt with from the state regarding the estate of the deceased.