Estate Planning that includes a trust
- Thread starter SunnyOne
- Start date
My opinion....its more complicated. In states that have a death tax, the purpose of the trust is to avoid BOTH probate AND allocate assets to preserve state specific exemptions from the death tax that would be otherwise lost on the death of the first spouse ETC.....so in this case, you must have all substantial titled assets in the Living Trust so that QTIP trust structure can work, preferably with a Clayton provision. if you do not understand what I just wrote, you need to do some reading.....
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Yes. And when you are done reading, find an expert attorney to turn your wishes into documents.
There are many on the internet who will confidently tell you what a great DIY job they did on their estate plans. The distinguishing characteristic is that they are still alive and no one has tried to execute on the plans. The people who have screwed something up won't be posting about it because they are dead.
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I can say there is nothing wrong drafting the whole estate plan and then have a family law attorney review for final issue. There are so many simple documents involved, there is no reason you can't draft the basic POA docs, State Specific -Health Care Directives, Durable Power of Attorney for Health Care, Last Will and Testament (pour over wills), Final Disposition Authorization and Instructions etc.
Those documents are typically the written extras an attorney will add on to complete an estate plan with the Trust documents, for a complete estate plan. They can add a significant cost to a request for a RLT package. The boiler plate is pretty simple and state specific with the right software. The trust, however, can have many nuances and options which you can walk through in a draft and confirm with an attorney who knows state laws.
An honest attorney would review for a fee your draft trust and use it to create a final notarized issue. However, most will just use the data to re-create the entire document in their own canned software like Fore! Trust. Which, BTW, is available ....hint hint...
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
The value of an experience attorney is not in getting the clerical work done or checked. It is in the experience that causes him/her to review all the client's options in making the plan; what-ifs, questions and uncertainties that experience has taught to be important. Issues with trustees, trustee accounting, trustee resignation, trustee removal, minor beneficiaries reaching adulthood. deaths of beneficiaries before and after the death of the grantor, tax strategies to avoid paying trust tax rates, avoidance of gifting appreciated assets, war stories of families torn apart by family-member trustees having discretion over payments to other family members, HEMS provisions and their pitfalls, special needs trusts dos and don'ts, perpetual trusts dos and don'ts, ... and the list goes on. So we differ on this. DIY "Drafting the whole estate plan" without the benefit of real-world experience just begs for mistakes big and small as well as overlooked opportunities big and small. And the happy DIY-er will never know what problems or shortcomings his internet education has not protected him from. All he knows is that he has saved a tiny percentage of his estate value by skipping the attorney piece.
I am a DIY kind of guy with a garage and basement full of tools and a graduate technical degree. DW was in the trusts and estates business for decades and has all the alphabet soup after her name, yet we chose to use a top-rated attorney to develop and document out plans. We also, with her, revise it from time to time in order to reflect changes in the family, in our intentions, or in federal and state laws.
Even simple estates can have issues, one of the most common is losing the basis step-up on Grandma's appreciated home.
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
That sounds sensible, but good luck.
It takes more work for the attorney to try to proofread your documents for errors than entering the info into their canned software to spit out a document. And then they are on the hook for omissions/mistakes, vs the company that provided the software.
I doubt you will find someone to review your plan for less than they charge for their plan. But if you do, PM me their contact info!
-ERD50
"That sounds sensible, but good luck." My attorney actual did so for no cost, but I used her and her firm for other contract and tenant issues. I moved our Sub S shares into that trust prior to a corporate sale and this needed review as part of that sale. My "draft" followed our intent clearly and it so happened I used a very good software, the same as she uses.....Too much detail to go into at this level.
Well, in my defense, a person walking in cold to an attorney will take a lot more time than someone who has thought it through and created a draft with all the names, addresses, list of all assets, intended heirs, account numbers, an finer details in hand to create the trust docs. I did not suggest writing the trust docs, but being prepared with a draft and thought out answers to the basic questions saves a lot of time. If you do a draft, you will go in with at least a stronger basis of your intent without wasting a lot of time on basics.
My other point is concerning the ESTATE plan, which includes all the simple docs I listed
that anyone should be able to think through on their own with a little guidance from some software. I would not walk into an attorney's office to create a Final Disposition Authorization, but someone who does as suggested will certainly pay for it. I guess on the comments here, we should wait and let the attorney pound through the options of cremation versus burial. I would rather the heirs spend that on the wake!
When we sold our business we did not simply run to an attorney to create the contracts and leases, we first worked through what we intended and then sought review and support for final negotiations. We created an LOI, like a draft contract. Believe me, I did this for mega corp all the time. When it came down to the short strokes our team of attorneys worked with me to finalize agreements with the clients based on the intended scope and terms. Put an attorney up front first, and you could kiss the contract a slow death. You have to get the intent down first.
I have seen some of the worst behavior by attorneys who led un-educated folks down the path to creating wills and trusts. My DW father was one, who had no need of any trust and not even probate, but since her brother was trustee and the trust was so written, they had to pay the FL attorney to unwind the trust and file probate for a $100k estate. He got a good chunk.
Another example comes to mind from my friends father who had significant wealth and a trust. Again the attorney created their own job as trustee in the trust which is still taking years to settle due to poorly addressed distribution to heirs who are dragging it through court. The attorney is making a fortune churning this. My point being, any trust can be a mess, and I have seen the worst from those done from scratch by the attorney rather than created from some well thought out basis.
Going through my mom's things I recently came across my great uncle's probate and will. Another example of an attorney who was either an idiot or intentionally biased. The estate went through probate, my mom executor and the term per stirpes was explained to my mother as an error by the attorney who meant to say per stripes, by individuals not sides. Since my mom was the only heir on the uncle's side, but my uncles wife who had passed prior had many "individuals", my mom only received a fraction instead of 1/2 of the estate. The intent was clear, the terms of the will was clear, but since the attorney was local to the other side and written into the will for control, the will was really worthless.
All that said, our plan is to someday terminate the RLT. The sole purpose is to avoid excessive WA estate taxes when we both pass. The trust serves this for now, but we hope to be able to reduce everything to gifts if they eliminate the step up basis rules. If we gift all the major assets, then the IRA's can pass with a lower estate tax impact and gifting those as we age will take that down as well. The only issue prior is conservation of the state exemption if one passes sooner.
Well, in my defense, a person walking in cold to an attorney will take a lot more time than someone who has thought it through and created a draft with all the names, addresses, list of all assets, intended heirs, account numbers, an finer details in hand to create the trust docs. I did not suggest writing the trust docs, but being prepared with a draft and thought out answers to the basic questions saves a lot of time. If you do a draft, you will go in with at least a stronger basis of your intent without wasting a lot of time on basics.
My other point is concerning the ESTATE plan, which includes all the simple docs I listed
that anyone should be able to think through on their own with a little guidance from some software. I would not walk into an attorney's office to create a Final Disposition Authorization, but someone who does as suggested will certainly pay for it. I guess on the comments here, we should wait and let the attorney pound through the options of cremation versus burial. I would rather the heirs spend that on the wake!
When we sold our business we did not simply run to an attorney to create the contracts and leases, we first worked through what we intended and then sought review and support for final negotiations. We created an LOI, like a draft contract. Believe me, I did this for mega corp all the time. When it came down to the short strokes our team of attorneys worked with me to finalize agreements with the clients based on the intended scope and terms. Put an attorney up front first, and you could kiss the contract a slow death. You have to get the intent down first.
I have seen some of the worst behavior by attorneys who led un-educated folks down the path to creating wills and trusts. My DW father was one, who had no need of any trust and not even probate, but since her brother was trustee and the trust was so written, they had to pay the FL attorney to unwind the trust and file probate for a $100k estate. He got a good chunk.
Another example comes to mind from my friends father who had significant wealth and a trust. Again the attorney created their own job as trustee in the trust which is still taking years to settle due to poorly addressed distribution to heirs who are dragging it through court. The attorney is making a fortune churning this. My point being, any trust can be a mess, and I have seen the worst from those done from scratch by the attorney rather than created from some well thought out basis.
Going through my mom's things I recently came across my great uncle's probate and will. Another example of an attorney who was either an idiot or intentionally biased. The estate went through probate, my mom executor and the term per stirpes was explained to my mother as an error by the attorney who meant to say per stripes, by individuals not sides. Since my mom was the only heir on the uncle's side, but my uncles wife who had passed prior had many "individuals", my mom only received a fraction instead of 1/2 of the estate. The intent was clear, the terms of the will was clear, but since the attorney was local to the other side and written into the will for control, the will was really worthless.
All that said, our plan is to someday terminate the RLT. The sole purpose is to avoid excessive WA estate taxes when we both pass. The trust serves this for now, but we hope to be able to reduce everything to gifts if they eliminate the step up basis rules. If we gift all the major assets, then the IRA's can pass with a lower estate tax impact and gifting those as we age will take that down as well. The only issue prior is conservation of the state exemption if one passes sooner.
So, back to your point, one course is an Intentionally Defective Grantor Trust.
https://www.commonwealth.com/insights/estate-planning-with-intentionally-defective-grantor-trusts
An IDGT is an irrevocable trust most often established for the benefit of the grantor’s spouse or descendants. The trust is irrevocable by design in order to remove the underlying trust assets from the grantor’s estate. It should be established with a non-interested party as trustee to avoid its accidental inclusion in the grantor’s estate.
Also, in order for the grantor to maintain income tax liability, the trust instrument must contain one grantor trust provision from IRC sections 671–679, making it tax “effective” for estate tax purposes but tax “defective” for income tax purposes; in other words, the trust income will be taxed at the grantor level, rather than the trust level.
Has any of those lawyers you have seen even mentioned this? I have many friends who use this strategy, but then it depends.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
@happyras I think we get it that you have taught yourself a lot about trusts, but are you now saying that you know more than any lawyer? Really, it's good that you and your friends are happy with what you have done but you have to be dead before anyone will know whether it is optimum or seriously flawed.
It's still true, though, that many of us do not think DIY estate plans are a good idea.
Wow, what a slap in the face.
Why are you so aggressive against my opinion, I did not attack yours and NO I am a far cry from a lawyer, but I am also not a bottom licking scum sucKer either. But I like fish anyway.Nope, not an expert, I have my lawyer and I sent my dying friend to her to set up their trust, but they have no grandkids or such. However, they did go in prepared as I suggested and were extremely happy with both the trust, her, and the cost.
If you go into a lawyer and ask for an estate plan, they will sell you their stock plan unless you are prepared enough to state why you are different.
I only suggested the IDGT as for some, this is a better option than RLT, but most do not consider it.
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So true, as I pointed out in my examples. The lawyers can screw it up, and have more times than I have seen it work correctly as designed.
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Glad you can speak for many of us. I’d say it’s true that many of us think DIY estate plans are just fine. Having seen the end result, I doubt my estate created by WillMaker will have any issues.
And you don’t know that your plan will work when your dead, but since you paid good money for it, it must be a 100%, right?
