Revocable Trust Questions

... The Pearl E Retyre Trust will fall under Pearl’s social security number since she is the sole beneficiary of that trust so no K1 or 1041’s are required!! ....
That's great. I have never heard of that idea before.

... and good job getting yourself educated before getting the legal $ meter started!
 
Sounds good to me!

So, is the Pearl trust a revocable trust (or irrevocable)? I guess it really doesn't matter since she could empty the trust at any time anyway.

What about IRA's? How are your retirement accounts handled?
 
My understanding is that the Pearl trust will be irrevocable but yes she could empty any time so it doesn’t matter. That is what was verbally explained. I haven’t seen yet how all this is worded. Will see in about a week.

IRAs will continue to be TOD. So still no probate. And protected somewhat from comingling since Pearl would have to transfer that IRA into a Pearl IRA account.
 
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Did they make the other beneficiaries wait until everybody had an account? I am hoping that this won't happen with MIL's 6 beneficiary "plan."
No, the beneficiary that had an account got their transfer of $$ and stock, the others that did nothing had to be reminded by me to set up an account.
 
My understanding is that the Pearl trust will be irrevocable but yes she could empty any time so it doesn’t matter.
Hmm... So how does this protect your money from the husband? I thought that was a goal. Can't he persuade her to draw money from the trust at her discretion and put it into their joint checking account? Or go after half of it in a divorce proceeding?
 
Yes, he could do that. But I trust both my daughter to not be persuaded and her husband who is an honest guy. I wanted to protect her from unknowingly comingling but not from being persuaded and then ripped off. I doubt that would happen but if it did, I could live with that. Not literally.
 
No, the beneficiary that had an account got their transfer of $$ and stock, the others that did nothing had to be reminded by me to set up an account.
That's nice. Sadly MIL isn't doing well. DW will be one of multiple beneficiaries. My job will be to remind the others.
 
Yes, he could do that. But I trust both my daughter to not be persuaded and her husband who is an honest guy. I wanted to protect her from unknowingly comingling but not from being persuaded and then ripped off. I doubt that would happen but if it did, I could live with that. Not literally.
Your situation is exactly what I was looking at also. Basically, segregating our money that goes to the kids in a way that would make it difficult for spouses (or creditors) of our kids to ultimately end up with the money. I "think" the only way to do that would be, once inherited, an Irrevocable trust be set up using an independent trustee in charge. Of course, that opens up a bunch of other issues.

I do think that doing what you're doing, the money is a little more segregated being in the trust vs. being in her name only. Less of a chance of getting comingled with spouse.
 
FWIW I asked DW, who has decades in the trust business what she thought:

"Worse yet if Husband has a power of attorney he can probably withdraw all the money."
 
Your situation is exactly what I was looking at also. Basically, segregating our money that goes to the kids in a way that would make it difficult for spouses (or creditors) of our kids to ultimately end up with the money. I "think" the only way to do that would be, once inherited, an Irrevocable trust be set up using an independent trustee in charge. Of course, that opens up a bunch of other issues.

I do think that doing what you're doing, the money is a little more segregated being in the trust vs. being in her name only. Less of a chance of getting comingled with spouse.
Yes, I think we seem to be in a similar situation. Someone once gave me the expression to not manage from the grave. I am certainly not trying to do that. I want to give her freedom to make her own choices. I trust her and her spouse. Just trying to make it easier on her to not commingle accidentally in case for some reason they do get divorced. I think this is the right balance. They are inherently frugal and I think will have a hard time blowing the dough. If they do, that’s fine. But I am 99.9% sure they won’t.
 
Hmm... So how does this protect your money from the husband? I thought that was a goal. Can't he persuade her to draw money from the trust at her discretion and put it into their joint checking account? Or go after half of it in a divorce proceeding?
I understand your point. I think Calikid was suggesting that the trust structure makes it easier for the daughter to rebuff suggestions from a spouse about co-mingling. Often, inheritances are not considered marital property but everything depends on state laws which vary. I noticed that Fidelity has trust services at .45% up to 2 million with additional investment advisor fees. Vanguard has a fee of .55% of assets up to 5 million which includes both. Both firms have breakpoints for larger trusts. I wonder if this would be a relatively cost effective way to provide an obstacle to co-mingling. Of course beneficiaries can often replace trustees and a determined and persuasive spouse could still get access one way or another.
 
FWIW I asked DW, who has decades in the trust business what she thought:

"Worse yet if Husband has a power of attorney he can probably withdraw all the money."
Actually, if the money is in a trust the daughter/trustee/ beneficiary can't designate the husband to act on behalf of the trust using a POA unless the trust provides for that, which would be unusual.
 
Actually, if the money is in a trust the daughter/trustee/ beneficiary can't designate the husband to act on behalf of the trust using a POA unless the trust provides for that, which would be unusual.
I dunno. Maybe it varies from state to state. DW retired as a SVP in Megabank Investments and Trust and she has all the alphabet soup credentials. Probably 25+ years in the business. Regardless, it sounds like this is a don't-care for the OP.
 
If using her personal SS it doesn't sound like it actually would be an irrevocable trust.
 
I'm not really sure what the difference is between a revocable trust vs an Irrevocable trust in which the trustee and beneficiary are the same. The trustee could basically distribute the assets which would for the most part dissolve the trust.

For OP's purposes, it sounds like this arrangement is all that is needed to make more of a firewall between daughter and spouse.

I'm not sure about the requirements of using SSN vs Trust (1041, etc). I remember my next door neighbor (estate attorney) telling me that his is set up with his kids using their SSN, so I know it's possible. I remember I was surprised because the lawyers I talked to implied there would be a separate trust using 1041, K1s, etc).
 
FWIW, my dad had a revocable living trust. While he was alive, income from the trusts assets were reported under his SSN, as if he held them in his name. When he died, the trust became irrevocable and we got an EIN and the income from the trusts assets were reported under the trusts EIN and we did a 1041 and K-1 for the beneficiary each year.
 
What I do know: Earl Trust is revocable while I am alive and reported under my social. When I die, Earl Trust becomes irrevocable and would normally require a 1041 and K1 with an EIN. But when the Pearl and Merl Trusts are created, these come under their social security numbers and do not require 1041/K1s.

What I am not sure of is whether the Pearl and Merl trusts are revocable or irrevocable. I think they are irrevocable but not completely sure. As you say, it doesn't much matter. But when I pick up the paperwork, I should know the answer to that.
 
Correct me if I'm wrong but this is my experience with a trust. I set up a trust with an Attorney when my kids were young as I was a single parent. The first Attorney said "put everything in the trust" and we sat there and I signed everything needed to name all my assets except my car as the trust. My kids got older, more responsible, assets grew and I bought a second home. A discussion with friends led to trusts and I said my Attorney wanted everything in the trust. Someone said, "of course he does, because when you die, he's going to take a percentage of all your assets". So, that kind of upset me, so I gradually removed my bank accounts and investment accounts including IRAs and just did transfer on death to both my sons. I decided to get a 2nd opinion and now only had 2 homes in the trust. That Attorney said if I trusted my kids to do OK inheriting a large lump sum, then the TOD is OK, but keep the houses in the trust since they are in 2 different states. Well, I went to sell one of the homes and since it was in the trust, the sale required my lawyer, which was an added cost that I was never told would be the case. I have since sold the 2nd home, also requiring lawyer and then purchased a new home in Ohio. Ohio allows TOD of your home so I filled out everything necessary for that and submitted to the County Clerk. So now, nothing is in my trust. Both my sons are responsible. One will be executor of estate and he knows he will need to have the trust closed for another fee. So it seems in my situation, the trust was a gift that keeps on giving....to the attorneys. They say it keeps you out of probate which is expensive, but they did not share the ongoing fees required to make changes, like selling an asset and the final costs when you die. The initial cost of the trust is expensive. But likely dealing with the trust at death will be expensive too.
 
I assume you and your wife are on the same page about your son. Whatever is in the joint a/b trust will be binding in the irrevocable trust that happens when the first person dies.

My parents had an a/b trust. When mom died, 1/2 the assets when into the irrevocable trust, though my father still had access to the funds. The original trust (and so the binding one for my mom's side) included my brother as an heir. Dad and my brother had a significant falling out... not just a squabble, but a full on falling out. Dad modified his revokable trust (that had the other half of the assets) to disinherit my brother. When my dad died my brother *did* inherit from mom's side of the trust. But not from dad's. It was all kind of moot since my brother passed 3 months after my dad did. Brother's trust gave everything to his church.
 
Correct me if I'm wrong but this is my experience with a trust. … when you die, he's going to take a percentage of all your assets
I do not think this is the case … but am hoping one of the others with expertise in trusts can answer. We do not sign paperwork until Monday but sure hope you are wrong.
 
I assume you and your wife are on the same page about your son. Whatever is in the joint a/b trust will be binding in the irrevocable trust that happens when the first person dies.

My parents had an a/b trust. When mom died, 1/2 the assets when into the irrevocable trust, though my father still had access to the funds. The original trust (and so the binding one for my mom's side) included my brother as an heir. Dad and my brother had a significant falling out... not just a squabble, but a full on falling out. Dad modified his revokable trust (that had the other half of the assets) to disinherit my brother. When my dad died my brother *did* inherit from mom's side of the trust. But not from dad's. It was all kind of moot since my brother passed 3 months after my dad did. Brother's trust gave everything to his church.
Yes, wife and I are on the same page.

I did not know the trust worked that way.

But what I don’t understand from your scenario is, since father still had access to the funds, why couldn’t he just withdraw everything from the trust leaving nothing for brother?
 
I confess I didn't read all four pages of comments. I offer this summary of how assets can get transferred at death.

1. Anything with a beneficiary goes to the beneficiary. Trust or will makes no difference, it's automatic. All you need is a death certificate. All of our Vanguard and Fidelity IRAs are like this, and even our one Fidelity non-retirement joint account. Also life insurance policies.
2. Many assets can have a "transfer on death" or TOD title. Bank accounts for sure. In Indiana, vehicles and at least residential real estate. In California, residential real estate can go this route but not commercial property. Texas apparently has TOD deeds
3. Anything left can go into a trust, or be bequeathed via will. If the value of "what's left" is small enough, you may not need probate. In Texas, it's apparently $75k.
4. We really made no provision for the "stuff" in the house, so it falls under the will's coverage for "what's left."

So we got a trust from a lawyer who's just as old as us, for about $1000. The only things in it are our California office condo and a timeshare in Hawaii (to avoid other-state probate). Everything else should be automatic and fast.
 
Correct me if I'm wrong but this is my experience with a trust. I set up a trust with an Attorney when my kids were young as I was a single parent. The first Attorney said "put everything in the trust" and we sat there and I signed everything needed to name all my assets except my car as the trust. My kids got older, more responsible, assets grew and I bought a second home. A discussion with friends led to trusts and I said my Attorney wanted everything in the trust. Someone said, "of course he does, because when you die, he's going to take a percentage of all your assets". So, that kind of upset me, so I gradually removed my bank accounts and investment accounts including IRAs and just did transfer on death to both my sons. I decided to get a 2nd opinion and now only had 2 homes in the trust. That Attorney said if I trusted my kids to do OK inheriting a large lump sum, then the TOD is OK, but keep the houses in the trust since they are in 2 different states. Well, I went to sell one of the homes and since it was in the trust, the sale required my lawyer, which was an added cost that I was never told would be the case. I have since sold the 2nd home, also requiring lawyer and then purchased a new home in Ohio. Ohio allows TOD of your home so I filled out everything necessary for that and submitted to the County Clerk. So now, nothing is in my trust. Both my sons are responsible. One will be executor of estate and he knows he will need to have the trust closed for another fee. So it seems in my situation, the trust was a gift that keeps on giving....to the attorneys. They say it keeps you out of probate which is expensive, but they did not share the ongoing fees required to make changes, like selling an asset and the final costs when you die. The initial cost of the trust is expensive. But likely dealing with the trust at death will be expensive too.
I think it depends on your state and your lawyer.

We have a trust. We set it up when TOD wasn't as common as it is today, and our child was a minor, so TOD wasn't a good option for us then anyway. It is not an a/b trust that becomes half irrevocable when one of us dies. We live in a community property state and all our assets were acquired after we married, so when one of us dies the other one already owns 100% of everything. As I understand it, there would literally be nothing to put into an irrevocable a/b trust unless we did something to divide our marital property while we're both mentally fit. It can be done, but we didn't because even if the estate tax exemption shrinks, the survivor will elect portability of the exemption when the first one of us passes and the second one is likely to still be below the threshold where the tax kicks in. Our state has no estate tax.

We signed quit-claim deeds to transfer our home and our rental property to our trust and the attorney who drew up the trust recorded those for us. We paid him a nominal fee to do that. We sent copies of the trust paperwork to our brokerages and had those accounts retitled at no charge.

Since that time, we have sold a property that was in the trust and purchased a new property that was titled to the trust during the escrow process. There was no extra cost for either transaction over what we would have paid if they were in our own names. We don't use lawyers for residential real estate transactions in my state. We've also opened and closed various brokerage accounts in the trust with no trouble and no extra fees.

When we die, there's no reason at all why the attorney who drew up the trust would be involved and he's not going to get paid anything from our estate unless our daughter hires him for some kind of legal work. I can't see why she would need to do that though. She's the successor trustee and successor beneficiary, so she can transfer the funds out, sell the real estate, and dissolve the trust whenever she wants.

In our state, probate is estimated to cost over $200K for an estate the size of ours. We paid much, much less than that for the trust, so for us it was worth it.
 
I do not think this is the case … but am hoping one of the others with expertise in trusts can answer. We do not sign paperwork until Monday but sure hope you are wrong.
He is wrong. My sister and I (mostly me) have administered both of my parents trusts and it hasn't cost us a cent. In fact, the lawyer who wrote the trusts in 1991 has been dead for a long time now.
 
Yes, wife and I are on the same page.

I did not know the trust worked that way.

But what I don’t understand from your scenario is, since father still had access to the funds, why couldn’t he just withdraw everything from the trust leaving nothing for brother?
The trustee has a fiduciary duty to all beneficiaries to honor the provisions of the trust so whether the father could do what you suggest depends on how the trust was worded.

The circuit breaker on the father doing what you suggest is that other beneficiaries that are screwed by the father/trustee's breach of the trusts provisions could sue the father/trustee, just like heirs can sue and executor who doesn't settle an estate consistent with a will.

Now the practical reality is the beneficiaries might not even know that they are beneficiaries, might not know what they are entitled to or may believe that the father can do whatever he wishes with mom's irrevocable trust money so in many cases father could get away with it.

I think that typically, once mom dies and her trust becomes irrevocable that money can be used for Dad's care if needed but not absconded with to further feather dad's nest. My parents' trusts protected against this my naming 3 of us as co-trustees upon death... the surviving spouse, me and my sister with 2 of 3 needing to take actions on behalf of the trust.
 
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