Another money thread: When does it make sense to have a Living Trust?

[baseballmom]

Both of my attorneys, (one for legal matters and one for real estate), from different law firms, shrugged off a discussion of us setting up a Living Trust. I couldn’t help but think that dealing with estates post-death must be a money-maker for law firms.

I can’t think of a reason not to have one.

[3bm103]

I can’t think of a reason to have one and we don’t.

[ClaremontMom]

Do you have kids? Do you want to be able to specify when (i.e. what age) they get the money? Do you want to gradually give them the money over time? Or do you want to specify what they can spend the money on? Are they married? Do you want to protect the money in case of divorce? Any of these may be reasons to do so. I’m sure there are others and hopefully others will chime in.

[rosered55]

Living trusts have uses but I think that more than the standard will-equivalent trust is needed to accomplish the purposes identified in post #2. I think that to accomplish these goals, one needs something called a “testamentary trust,” which is a trust created under a will and which doesn’t come into existence until the person bequeathing the property dies.

[TatinG]

For simple estates in which assets are with brokerage houses or bank accounts, a POD is a simple way to avoid probate. “Payable on death” with the payees designated. On the death of the account holder the designated person or persons have the account transferred to them.

[ClaremontMom]

Do a google search and you’ll find plenty of articles.

This one http://www.calbar.ca.gov/Public/Pamphlets/LivingTrust.aspx has a lot of information a few highlights (as they relate to your question)

It is a written legal document that partially substitutes for a will. With a living trust, your assets (your home, bank accounts and stocks, for example) are put into the trust, administered for your benefit during your lifetime, and then transferred to your beneficiaries when you die.
Most people name themselves as the trustee in charge of managing their trust’s assets. This way, even though your assets have been put into the trust, you can remain in control of your assets during your lifetime. You can also name a successor trustee (a person or an institution) who will manage the trust’s assets if you ever become unable or unwilling to do so yourself.

What can a living trust do for me?
It can help ensure that your assets will be managed according to your wishes — even if you become unable to manage them yourself.
In setting up your living trust, you may serve as its trustee initially or you may choose someone else to do so. You can name a trustee to take over the trust’s management for your benefit if you ever become unable or unwilling to manage it yourself. And at your death, the trustee — similar to the executor of a will — would then gather your assets, pay any debts, claims and taxes, and distribute your assets according to your instructions. Unlike a will, however, this can all be done without court supervision or approval.

Should everyone have a living trust?
No. Whether or not to create a trust is a personal decision. Young married couples without significant assets and without children, who intend to leave their assets to each other when the first one of them dies do not necessarily need a living trust. However, if the couple should die in a common accident, or shortly after each other, without a trust their estate(s) may be subject to a probate. (See discussion below.) Other persons who do not have significant assets (less than $150,000) and have very simple estate plans also do not need a living trust. Finally, anyone who believes that court supervision over the administration of his or her estate would be beneficial should not have a living trust. The greater the value of your assets (particularly if you own real estate), the greater the benefits of a living trust. Having a living trust could be important in the event of an accident or sudden illness.

[BunsenBurner]

POD and wills are tools that allow you to pass money and valuables after your death. A living trust allows someone else (as a trustee) to step in and handle your finances for your benefit while you are still alive if you have a terminal illness that will render you unable to handle finances. For example, this Nolo article says:

Living trusts. A revocable living trust, like a will, lets you leave your assets to whomever you choose. The advantage of a trust is that after your death, your beneficiaries don’t have to conduct a probate court proceeding before wrapping up your affairs. A trust can also help with planning for dementia, because your successor trustee (the person you name to take over the trust after your death) can take control of trust assets if you become incapacitated. The trustee’s authority extends only to assets held in the name of the trust, however.

http://www.nolo.com/legal-encyclopedia/estate-planning-when-you-re-concerned-about-dementia.html

Is it possible that you have other instruments already in place that can do the same thing? Because it is too much hassle to retitle everything?

http://m.kiplinger.com/article/saving/T021-C000-S002-why-you-do-not-need-a-living-trust.html

I am not a lawyer, so take my words with a grain of salt and ask your attorneys WHY.

[somemom]

I think if you own a house it is quite nice to have a living trust. I put my parents house in a trust before Dad died and everything is pretty easy with me as trustee and will continue the same after the 2nd death. Maybe it’s not a huge deal, but anything to make life easier on the executor/trustee at a stressful time is nice.

[ClassicRockerDad]

Some states have Uniform Probate Code which greatly simplifies everything making it unnecessary.

We have a living trust. We made it over 20 years ago initially to be the beneficiary of our life insurance so that the Guardian/Custodian/Trustee/Executor (same person) would have immediate liquidity. We put one mutual fund in it to give it life and transferred the household goods in our home to it so that none of that has to go through probate. Later, we bought some vacation property out of state and titled it to the trust so that our heirs wouldn’t have to do multi-state probate.

Now that we’re done paying for college and have enough resources, are close to dropping our life insurance altogether, and live in a state (MASS) that recently adopted the Uniform Probate Code, we’re going to shortly revisit the issue of whether we still need the trust.

[Delicate_Arch]

We both have them. Once you go through the hassle of setting them up, there are no downsides.

1. they do not complicate your taxes as opposed to regular trusts that require their own tax filings.
2. after someone dies the person who is then the trustee can pay bills etc without the delay of probate
3. real estate is much easier to deal with after someone dies if it is held in a living trust as the “owner” is still there and you don’t have to go through tons of paperwork if the title is in the deceased name
4. any money we inherited from our parents that we didn’t give to the kids went into our individual trusts (it came too late to help with college!). It just seemed cleaner that way.

Having dealt with both may parents death’s, the trust made things so much easier. Why not have them?

[busyparent]

Is this the same thing as a trust to keep from paying state taxes when the second person dies?

[baseballmom]

The real estate ramifications are appealing in that there is no transfer of ownership once the grantor(s) dies, and, thus no cost for a real estate transfer, which, in the absence of a living trust, could be as much $10,000 per property. I’m not positive about this cost, though, and it must vary by state.

Has anyone transferred real estate that is mortgaged into a living trust? I’m wondering about costs of doing this. How do banks deal with this? What about title insurance, etc? I’d hate to pay closing costs all over again just to have a ownership transferred to the trust.

Another appealing part of the living trust is that, since it avoids probate, the list of assets never becomes public. There doesn’t seem to be a downside.

[ClaremontMom]

Has anyone transferred real estate that is mortgaged into a living trust? I’m wondering about costs of doing this. How do banks deal with this? What about title insurance, etc? I’d hate to pay closing costs all over again just to have a ownership transferred to the trust.

We did but it’s been so long I can’t remember the details. But I don’t think there was anything significant in terms of effort or costs (if there were, I probably would remember!)

[BunsenBurner]

If you and you spouse own your RE in JTWROS (as it is usually the case with married couples), upon one spouse’s death, the RE will pass to the other spouse outside probate. Then the surviving spouse can set up a living trust/pour over will to hand the RE to the beneficiaries upon that spouse’s death. Again, check with your LOCAL attorney to see what fees etc. it will involve.

[Sweetbeet]

The pros and cons differ greatly, depending on what state you live in, whether you own any property in another state, and whether you have any concerns about your heirs getting their inheritance immediately with no strings attached. Do you have minor children? Children or other heirs or beneficiaries with special needs, drug or gambling or spending problems, or who are receiving government benefits? Beneficiaries who might find themselves in a messy divorce? What are the divorce laws in your (or their) state? What are the estate tax provisions in your state? How big is your estate?

You really need to sit down with an experienced estate planning attorney - ideally one who doesn’t think everyone needs a trust, though in some states, such as CA, that may be reasonable advice for most people - and ask them some of these questions. JTWROS has its own problems, as do POD accounts. There is a federal law that prohibits a lender from calling your mortgage due when you put the property into a revocable living trust, so that’s not a problem.

I can’t go through everything but there is a lot of misinformation out there (and on here), both for and against trusts. Take it from an experienced trust and estate lawyer, there is no substitute for an actual, detailed, personalized evaluation of YOUR circumstances, concerns and goals.

[somemom]

Usually putting the house into the trust is just a simple quit claim deed and not treated as a taxable transfer by the county, at least in the west.

[zoeydoggie]

We recently met with an attorney to have a new will drawn up. Our last one was written before our first child was born and she is now 30. D2 had a friend in law school who went into trust and estate planning and was looking for clients so we went to her. After listening to the pros and cons a trust made more sense to us. The cost was higher but not outrageous. I agree that to understand what you need you should to talk to someone who really knows the law for your state.

[ENsMom]

Sweetbeet lists a lot of the important questions that should be addressed when discussing your estate planning. Keep in mind that a good estate planning attorney will discuss not only your wishes for distribution of your estate after your death (which is the one and only purpose of a will), but also documents that you should have to assist you during your life should you or your spouse become incapacitated (durable powers of attorney, health care directives).

Also, keep in mind that if a married couple utilizes primarily JTWROS and POD designations as a means to pass the estate to the surviving spouse, then the surviving spouse must go through the whole process again to transfer the estate to the next generation at his/her death. At an advanced age, that could be quite an undertaking, and of course who that surviving spouse leaves all the $$$ to (or not!!!). is entirely up to them!

[lookingforward]

First, you educate yourself to the various terms. There are different sorts of trusts, different practices, different state laws. Usually you can Google for a guide and basic advice.

Then, as said, you work with an estate planning attorney, a specialist. Most (at least here) will give a free consultation to check your current arrangements. In your state, for your assets, your wishes, you may not need a trust. Or you may have other options.

[baseballmom]

It’s pretty clear that we need professional help. :)) Thank you for the advice.