Set up a Living Trust years ago, but never Funded it

[qwerty3656]

Years ago, we "purchased" time with a lawyer at a charity auction to set up a Living Trust. We got the basic document, but never followed through with funding it.

We have since set up a simple Will and Living Will (heath care) and don't consider the Living Trust as active. We never formally did anything to "inactivate" the Living Trust. Do we need to do something? It's not filed anywhere is it? If it's not funded does it have any effect?

To be clear, we are not talking about a large estate where people are going to come out of the woodwork to contest it.

 

[MichaelB]

Don’t worry about it, and you don’t need to do anything. A trust only governs the assets you transfer to it. Everything outside the trust is governed by your wills.

 

[Dash man]

We haven’t funded our trusts, but our wills pour everything into the trust for the other spouse.

 

[rk911]

we also have pour over wills but have re-titled all of our major assets into our trust. our retirement accounts (roth, tIRA and 457s) have their own beneficiaies. our older vehicles, personal property, etc. have not been re-titled and will "pour over" upon the second death.

 

[ERD50]

We haven’t funded our trusts, but our wills pour everything into the trust for the other spouse.

Just wondering, but with a funded trust, a successor trustee usually has powers to manage and care for the trustee if they are unable. Seems your approach would only come into play at death.

But if you have no one to act as successor trustee other than your spouse (and vice-versa), I suppose this is about the same?

-ERD50

 

[Dash man]

Just wondering, but with a funded trust, a successor trustee usually has powers to manage and care for the trustee if they are unable. Seems your approach would only come into play at death.



But if you have no one to act as successor trustee other than your spouse (and vice-versa), I suppose this is about the same?



-ERD50

We have POAs for my wife/son to manage our finances should we become unable to manage things.

Also, the plan is when the first of us dies, all assets will be moved into the trust of the surviving spouse.

 

[ERD50]

We have POAs for my wife/son to manage our finances should we become unable to manage things.

Also, the plan is when the first of us dies, all assets will be moved into the trust of the surviving spouse.

I see, thanks. I guess I'm thinking the trusts I see sort of wrap the POA along with it or something. But like I said, these things seem to be more complicated than necessary.

-ERD50

 

[Ready]

There can be some benefits to a living trust that vary by state. We moved most of our assets into a trust, including our home, at the direction of our attorney. If either one of us dies, the survivor inherits the house at the fully stepped up basis, thus avoiding capital gains taxes when selling. There may be other benefits like this as well that an attorney can explain to you.

 

[Koolau]

Years ago, we "purchased" time with a lawyer at a charity auction to set up a Living Trust. We got the basic document, but never followed through with funding it.

We have since set up a simple Will and Living Will (heath care) and don't consider the Living Trust as active. We never formally did anything to "inactivate" the Living Trust. Do we need to do something? It's not filed anywhere is it? If it's not funded does it have any effect?

To be clear, we are not talking about a large estate where people are going to come out of the woodwork to contest it.

You've heard the expression about litigants arguing over pocket lint? I think avoiding probate might be the best reason for a trust. I'm still mulling that. Oh, by the way, I had an empl*yee who ended up in court with his ex over the rounding of one cent in favor of one of the former spouses. He swore this happened and from his behavior as my direct report, I tend to believe it.

But, why set up the trust and NOT fund it? I ask because i'm struggling with whether to set up a trust and how to make it work for both of us and then after we are both gone.

 

[Koolau]

we also have pour over wills but have re-titled all of our major assets into our trust. our retirement accounts (roth, tIRA and 457s) have their own beneficiaies. our older vehicles, personal property, etc. have not been re-titled and will "pour over" upon the second death.

For my info, how difficult was the retitling process?

Also, are you comfortable sharing how you handle the final trustee (either you or spouse) dying? Have you found a trustee to handle things once both are gone? That's my biggest hangup since we don't have a "trusted" trustee at this point once we're gone. Thanks.

 

[qwerty3656]

But, why set up the trust and NOT fund it? I ask because i'm struggling with whether to set up a trust and how to make it work for both of us and then after we are both gone.

I guess I concluded it was more trouble than it's worth. Most of our assets have designated beneficiaries and our kids are grown.

It wasn't like we were in the market for a living trust it was a spur of the moment charity auction purchase.

 

[cathy63]

There can be some benefits to a living trust that vary by state. We moved most of our assets into a trust, including our home, at the direction of our attorney. If either one of us dies, the survivor inherits the house at the fully stepped up basis, thus avoiding capital gains taxes when selling. There may be other benefits like this as well that an attorney can explain to you.

If the house is in California or one of the other eight community-property states, you don't need a trust to get a stepped up basis. All jointly owned assets will automatically get a stepped up basis on their full value when the first spouse passes. A trust has other benefits that can simplify handing the estate and avoid probate, but it doesn't give you any additional step-up in basis.

 

[cathy63]

For my info, how difficult was the retitling process?

Also, are you comfortable sharing how you handle the final trustee (either you or spouse) dying? Have you found a trustee to handle things once both are gone? That's my biggest hangup since we don't have a "trusted" trustee at this point once we're gone. Thanks.

For us, retitling took about 5 minutes. The attorney who did our trust prepared the deeds for our real estate and we signed everything at the same time. They also took care of recording them. Brokerage accounts required a phone call to our broker and signing of more forms. I can't remember if notaries were needed, but both the attorney and our broker have them on staff.

We don't own anything else that needs to be in the trust. Retirement accounts have beneficiaries. Our cars and everyday checking account are what's left, and the total value is less than $100K.

Once the first of us passes, the surviving spouse should revisit the estate plan with an attorney and our daughter who is now an adult. Originally, we had named a sibling who is an attorney as the trustee for our minor daughter in the event that we both died before she reached age 25. Now, I expect that DD would be both the trustee and beneficiary until the assets could be transferred and the trust could be dissolved.

 

[Koolau]

For us, retitling took about 5 minutes. The attorney who did our trust prepared the deeds for our real estate and we signed everything at the same time. They also took care of recording them. Brokerage accounts required a phone call to our broker and signing of more forms. I can't remember if notaries were needed, but both the attorney and our broker have them on staff.

We don't own anything else that needs to be in the trust. Retirement accounts have beneficiaries. Our cars and everyday checking account are what's left, and the total value is less than $100K.

Once the first of us passes, the surviving spouse should revisit the estate plan with an attorney and our daughter who is now an adult. Originally, we had named a sibling who is an attorney as the trustee for our minor daughter in the event that we both died before she reached age 25. Now, I expect that DD would be both the trustee and beneficiary until the assets could be transferred and the trust could be dissolved.

Thanks for the info. I'm most concerned about the trustee that handles things after we're both gone.

 

[cathy63]

Thanks for the info. I'm most concerned about the trustee that handles things after we're both gone.

Can you name one of your heirs as the trustee? Usually that person's job is just to distribute the assets and dissolve the trust, but perhaps you are looking at a trust that would be more long-lasting or complex.

 

[Koolau]

Can you name one of your heirs as the trustee? Usually that person's job is just to distribute the assets and dissolve the trust, but perhaps you are looking at a trust that would be more long-lasting or complex.

One certainly can name an heir as trustee, but that might create a conflict of interest. YMMV