Pros and Cons of having a Trust

[BubbaChris]

I heard second hand that a friend in our RV resort is stressed and hamstrung because she has to go through probate after her husband died last year.

My first-hand experience with a trust makes me grateful DW and I created ours shortly after guiding mom through the process.

One benefit I experienced, but may not have been mentioned, is the executor (me) becoming the sole trustee as mom's vascular dementia progressed. When we were co-trustees she never truly enjoyed me taking her to various institutions to open or close accounts, etc. This likely stems from me having to quickly get some of those steps taken right after my father died. I needed to be put on all the accounts as she didn't have the desire or capability to take over her finances.

Once I was sole trustee (with my sister as successor) day-to-day activities didn't feel much different from managing my own finances. And once mom passed, there was a very minimal amount of administrative work to be done.

Kind regards,
Chris

 

[robnplunder]

We have POD’s or TOD’s or beneficiaries on all our stuff and are in the process of changing our deed to a TOD since it just became legal in NH this past year.

Just one heir so no need for a trust.

We also have just one kid and I already have done all the TODs. I was considering doing a trust in addition. Would you like to share why you think there is no need? Anyone else has opinions on our situation?

 

[Out of Steam]

My wife and I have only joint bank accounts with each other, and our retirement accounts have our daughter (only child of either of us) as a contingent beneficiary. When we did our wills five years ago, our attorney thought that we did not need a trust at that time. Our only real estate is the house we live in.

Until our daughter turns 30 fairly soon, our contingent executor in the event of both of us dying is my wife's niece. I have wondered whether, in the short term, we would have better financial flexibility if each of us opened an individual bank account with enough money to manage our affairs short-term that would transfer to our daughter on death. One issue is that Virginia law appears unfriendly to having an executor who is not a state resident, in practicality requiring an attorney to be the executor.

We appear to be coming up on the need to review our wills, probably before we take an extended trip outside the US next year.

 

[OldShooter]

... we did our wills five years ago, our attorney thought that we did not need a trust at that time. ... We appear to be coming up on the need to review our wills ...

Five year's isn't bad. I'd guess we are at three or four. Stuff happens. Financial. Minors become adults. Grands graduate college. Houses get bought and sold. Our ideas change. ... So it goes.

 

[imnontrad]

Not all trusts are the same and some may not protect your assets like you think. Listen to The 5 Types of Trusts (and when they are used)

 

[yclipse]

Whether you rely on a will or a trust to handle the transfer of your assets to your children, there is a risk involved. We frequently see reports of children whose parents or grandparents recently died, and someone at a distance (often "my uncle") is said to be in charge of the transition. They do not receive copies of any court filings (for an estate), information from the fiduciary, or any reports of any kind. This happens both with executors and trustees.

If the fiduciary is in the process of making off with the assets, it is easier for it to be done with a trust. A trust does not involve any filings with a court at the outset, which gives the trustee a head start if he has larcenous intent.

 

[street]

We need to get in and talk to an estate attorney. We have been talking about it for a few years now.

We do have a will and beneficiaries assigned to all assets except that ranch.

Does anyone know if the ranch could have a TOD for real estate?

 

[OldShooter]

We need to get in and talk to an estate attorney. We have been talking about it for a few years now.

No rush at all on this. Like the computer backup, all you have to do is to get it done the night before the fire.

 

[street]

True!!! Lol

 

[qwerty3656]

Is probate really any more inconvenient than the heirs having to engage a lawyer to decipher the trust? I thought about a trust, but I can't imagine my kids being comfortable enough to disperse everything w/o engaging a lawyer at the time. I have 3 kids and my will just says split 3 ways.

 

[OldShooter]

Is probate really any more inconvenient than the heirs having to engage a lawyer to decipher the trust?

Ideally the lawyer that wrote the trust or someone from his/her firm will be around when the need arises. Our lawyer is (deliberately) quite a bit younger than we are and we have also met her backup. Part of their added value will be the understanding of our objectives and the reasons for certain decisions.

Cheapskates (like me) tend to stiffen up when legal fees become the topic of conversation but I'd guess that in most cases they will be a tiny fraction of the estate value. The payoff is getting it all the way we want it and getting it right when the time comes.

 

[SecretlyFI]

Trust protects from long term care taking your assets, at least in my state.

That requires setting up an irrevocable trust, and transferring assets, and waiting 5 years before applying for Medicaid to cover LTC (there are some limited exceptions to that timeframe)

+1. And an irrevocable trust results in heirs not getting a step up in basis, I believe. That's the rub. The reason it works this way is because an irrevocable trust takes the assets out of your name - thus shielding them from LTC including them in "your assets" so enabling Medicaid to start paying LTC.
However, because the heirs are not inheriting directly from you, they don't get the step up in basis. Step up is only with revocable trusts, but those leave the assets in your name and accessible to LTC.
For us, I am not concerned about LTC because:
1. I'm self-insuring
2. I have little interest in ending up in a Medicaid facility
However, we do not see the need for a revocable trust either, since, similar to Meleana below, we have just one heir and he's the POD/TOD on all our financial assets and even the cars. Our state does not have TOD deeds on houses, so that is the only asset that would have to be probated. I'm not concerned about "privacy" of this probate, since the value of houses is public record and then some, these days, with Zillow, etc.
When our estate attorney prepared all our documents, including wills, durable power of attorneys, advanced directives, health care POA, he said in our situation, the effort and expense of setting up a trust would outweigh any benefits.

We have POD’s or TOD’s or beneficiaries on all our stuff and are in the process of changing our deed to a TOD since it just became legal in NH this past year.

Just one heir so no need for a trust.

 

[Piper20]

We are in the same boat, one heir. Living in PA you go thru probate. Tax man wants his inheritance tax. Probate in PA isn’t a big deal.

 

[pb4uski]

We need to get in and talk to an estate attorney. We have been talking about it for a few years now.

We do have a will and beneficiaries assigned to all assets except that ranch.

Does anyone know if the ranch could have a TOD for real estate?

I don't see why not if it is allowed in your state it would generally apply to all read property.

 

[pb4uski]

Is probate really any more inconvenient than the heirs having to engage a lawyer to decipher the trust? ...

In my experience, yes; which is exactly why so.many go the trust route. Also, probate is a public process.

 

[street]

I don't see why not if it is allowed in your state it would generally apply to all read property.

Thanks. I did check and real property is a legal action to use TOD.

 

[misanman]

Is probate really any more inconvenient than the heirs having to engage a lawyer to decipher the trust? ...

I think it depends on your situation in your state. I have been the personal representative (in Michigan) for two estates, one probated and one a trust. I didn't find the probate process to be onerous. There is court supervision, though, as opposed to the trust, where I felt like I could get away with a lot and no one would know. We have discussed our situation with our lawyer and he concurs that a trust isn't really indicated for us at this time. Whoever survives will need to revisit this when one of us dies. Also, I proposed purchasing a piece of land from my brother and he was open to idea but apparently it is in his wife's trust (who has passed on) and therefore there would be some legal process that he thinks would be a roadblock.

 

[OldShooter]

... there would be some legal process that he thinks would be a roadblock.

Mostly dependent on the trust document but also dependent on the trustee. For example, we have a trust for family to take over our lake home when we and DS have died. That document specifies that the trustees can decide to sell the lake home but that 100% of the net will go to the local community foundation. This is to prevent the trustees from deciding to sell and distribute the proceeds to themselves or other family.

So, step 1 is to study the trust document, especially anything pertaining to distribution or sale of assets. Get legal help if necessary. Once that is done, if there is a path, then talk to the trustee and see what their attitude on the proposed deal might be.

 

[qwerty3656]

I have been the personal representative (in Michigan) for two estates, one probated and one a trust...

"Michigan" - what do you do about your house? The one issue I have is Michigan does not allow you to split the inheritance of your house. I have 3 sons that I am splitting everything evenly with, but don't have an easy solution for the house. I've seen references to a Ladybird deed, but it seems like a headache to deal with.

 

[MrEd]

I have not read anything about saving federal or state imposed estate taxes. Use of an ab trust both revocalbe and irrevocalbe takes roughly 26 or 27 million dollars out of your estate on the federal side, this will not apply to most people, and depending on the state let's say NY will take roughly $14 million dollars out of your estate. An ab trust is portable meaning if one spouse dies the other gets the full $14 million dollar estate exemption. Without that portablility anything over the $7 million dollar threshold would be taxed at NY estate rates.

This is why a lot of people in NY retire to Florida which has no estate tax.

 

[PatrickA5]

Is probate really any more inconvenient than the heirs having to engage a lawyer to decipher the trust? I thought about a trust, but I can't imagine my kids being comfortable enough to disperse everything w/o engaging a lawyer at the time. I have 3 kids and my will just says split 3 ways.

I've only been through one probate (FIL). It wasn't hard, but only one asset ended up having to be probated (IBonds). It cost us $4,000 in attorney fees to probate that one asset. If FIL had changed beneficiaries (like I asked him to), there wouldn't have been a probate.

As far as the second part of your thoughts regarding kids being comfortable with a trust, well, it was one of the main reasons we decided not to do a trust. Of our 3 kids, only one would probably do what was necessary to administer the trust properly - avoiding trust taxes, etc. Since, 80%+ of our estate are retirement accounts that will pass through TOD, we didn't thing the remaining 20% would be worth the hassle to them by putting those assets (house, taxable account) into a trust. We have POD/TOD on those remaining assets.

 

[RetMD21]

.......I used RLTs (I was co-trustee, not successor) with a couple of relatives for whom I was primary caregiver once they were diagnosed with their respective, terminal illnesses, because it made it easier to manage their affairs.

The RLTs made it easy to transfer any assets remaining to the beneficiaries.

I think the problem of needing help is quite common. A trust is a good solution.

 

[LakeRat1]

Update -- Your Thoughts?
We met with an estate attorney - The scope of our thinking included our primary home in Florida, a 2nd home in Kansas, two vehicles, then our checking/savings/retirement portfolio all with Fidelity. Our Fidelity accounts are setup with the 3 kids as beneficiaries.... Create a irrevocable trust, transfer the Florida home into the trust. I would transfer the 2nd home in Kansas into the trust as well this summer..... We are in good health, 63 & 70.... New wills, power of attorney, etc are all being written up..... Thoughts? Everything is to be split evenly between the three kids after our passing..... Should one be deceased before us, then the other two would split our Assets after death .... As part of placing the homes in the trust, remove our daughters name from the deed..... Should one of us need to go to assisted living, what would happen to our Assets ? - Finally, the law firm is charging 3k for this service.... Is this a fair price, low, or high ??

 

[pb4uski]

$3k isn't bad, my uncle paid a little more for estate planning a few months ago.

Ypu don't necessarily need the trust. Florida allows enhanced life estate deeds on properties and Kansas allows TOD deeds and both of these function similiar to benefaries.

Your daughters definitely should NOT be on the deed. If they get sued and lose then your properties are at risk.

Nothing happens to your assets if you go into assisted living. Many competent seniors go into assisted living for convenience... they can still handle their finances but prefer to have their meals made for them. I think your question is more what happens to your assets if you become incapacitated and unable to manage your financial affairs. The trust is a bit better if you are incapacitated because you can have provisions for your co-trustee to take over if you can no longer handle your financial affairs. That is why for my uncle we put not only his property but also his taxable brokerage account into trust. He and I are co-trustees. He has the wheel on managing his finances until he can't... at which point I step in and manage the assets for him.

 

[Earl E Retyre]

Update -- Your Thoughts?
We met with an estate attorney - The scope of our thinking included our primary home in Florida, a 2nd home in Kansas, two vehicles, then our checking/savings/retirement portfolio all with Fidelity. Our Fidelity accounts are setup with the 3 kids as beneficiaries.... Create a irrevocable trust, transfer the Florida home into the trust. I would transfer the 2nd home in Kansas into the trust as well this summer..... We are in good health, 63 & 70.... New wills, power of attorney, etc are all being written up..... Thoughts? Everything is to be split evenly between the three kids after our passing..... Should one be deceased before us, then the other two would split our Assets after death .... As part of placing the homes in the trust, remove our daughters name from the deed..... Should one of us need to go to assisted living, what would happen to our Assets ? - Finally, the law firm is charging 3k for this service.... Is this a fair price, low, or high ??

$3k sounds like a good price. We paid more than $3k but ours were a little more complicated.