@CT1417, the thread that @doschicos linked is where talk is happening related to the issues that come up before parents are deceased and the things their adult children can do to make the process smoother as their parents get older. Your Trust question is one I have as well bc I don’t understand all the different kinds of Trusts either. Maybe ask about it in the other thread.
I do think CA people pursue trusts due to complexities and costs of probate and in some states probate may be quite simple. The main reason I had my parents create a living trust is the ease of transferring assets. The trust owns their home, Dad died, the trust still owns their home, Mom dies, the trust still owns their home. Only the trustee changed, from Dad to me.
I won’t have to mess with probate at all, one less complicated thing to do. It was simple and instant. I submitted the death certificate for Dad and was trustee with the banks etc. I have been able to continue to rent the house and deal with any legalities without hassle.
I think for me it’s the hassle factor, deaths and estates are a hassle at an emotional time and often there were emotional and stressful weeks or months or years leading up to that death. It’s nice to have something be simple and easy.
Quick lesson on Trusts 101:
The two main types of trusts are “revocable” and “irrevocable”. There are fancier ones, that are really subsets of these two. The typical trust most people come in contact with is “revocable” – which means… the person making it (“trustor” or “settlor”) can revoke it. Or amend it. That’s the one people mainly used for run of the mill estate planning.
I think you can guess what I am going to say next: “Irrevocable” means…it can’t be revoked or changed. Usually the fancier trusts used for shielding or protecting assets are irrevocable because they permanently put assets outside of the control of the settlor or the beneficiary.
Here’s the part that get confusing. When the settlor dies, a revocable trust becomes irrevocable. Its name stays the same – even if the name is “The Smith Family Revocable Trust”. So don’t name your trust that.
I can’t speak to any other states’ probate laws, but in California most commonly trusts are used to avoid probate, primarily because of the high cost of California real estate. They also have use with second marriages and other complicated family situations, when the post-death distributions are complicated. It is pretty rare these days to need to do fancy trust planning for tax purposes.
A trust is the only estate planning document that is in play before AND after you die. So it can be really handy to have some financial account in a trust so the successor trustee can have immediate access to funds for making sure bills get paid. Sometimes banks freeze accounts when someone dies. It is less likely they will do so if the funds are in a trust, so long as you have the paperwork showing the original trustee has passed away and you are the proper person to take over.
Don’t confuse a will with a trust. People do that all the time. The executor is not the same thing as the trustee. The trust/trustee deals only with assets in the trust. A will/executor deals with assets that aren’t in the trust, only after the person dies. And btw – a DPOA also only deals with assets outside of the trust, too – but unlike a will is in effect only while the person is still alive. You have to know which document to use with the banks, and that depends upon how the asset is titled (in/out of trust, before/after death). It gets really fun when the documents name different people to be in charge.
“It took a few weeks to obtain the EIN that allowed me to open an estate account,”
You probably don’t know that you can get an EIN by yourself on line at the IRS official website, free of charge, within a hour. Once you fill out the form online, they will email you the EIN. There are literally 100’s of third party online services will lure you to file an EIN application with a fee. And the lawyers will charge you a good penny to “help” you to get one in DAYS, just make you think it is difficult to get.
^ FREE of charge. So many people get suckered by those scam websites. Make sure you are on the actual IRS website. If you know whether you have a revocable or irrevocable trust (see prior post), and when it was established, or if you are dealing with a probate the date of death, you should be able to get through it in 15 minutes. Those are the only tricky questions.
I don’t know any attorneys who pretend it is hard or charge “a good penny” for it. Bashing attorneys can be great fun, but most of us do really care about our clients and want to provide value to them.
Sorry about bashing lawyers. But they do serve a purpose for those who don’t know the difference of living and residual trust or LLC vs Scorp. Before they screw it up, pay some one to do it is the best policy.
Thank you all for the info, and a huge thanks to @CateCAParent for the Trust 101 Lesson. I am going to save that somewhere.
Based on what you wrote, the lawyer’s advice was correct due to how relatively uncomplicated my mother’s estate was. If I had not been a joint owner on her checking account, my siblings and I would have needed to use our own funds to pay funeral & house expenses, so I can see the advantage of the trust for situations where that may not have been possible.
Thanks also for your comment that a will is not a trust. I remember when I rewrote my will a few years ago, the lawyer included reference to a Family Trust for Descendants, but that was only because my children were still in high school/college. I don’t think that I don’t have a ‘Trust’, per se.
@artloversplus --No, I did not know that I could have obtained the EIN online, but I also didn’t know that I needed to open an estate bank account. The lawyer’s fee was under $1000 for the probate process and advice on selling the house, and that didn’t strike me as unrealistic in the NY metro area.
@doschicos – Yes, the privacy issue! The home was the only thing that needed to go through probate. The unsolicited offers to purchase it started before I even realized the lawyer had filed with the court, and continue today, months after I closed on the sale of the house.
Florida probate is a nightmare which is why my parents put everything in a trust.
Just a quick comment on trusts…they are definitely helpful for streamlining dealing with assets, avoiding probate and providing liquidity after someone passes away but they don’t protect those assets from estate or inheritance taxes if the trust is revocable even if it becomes irrevocable after death.
@CateCAParent So glad you are here! As I said before, even if we understand ‘everything’ while the lawyer is explaining it, a day later it become muddled. A normal person does not speak in terms of grantor, trustor, trustee, successor trustee, their issue…etc.
One thing I’d like to add to your comments on the irrevocability of the bypass (dead persons) trust while there is a surviving person.
The current inheritance tax exemption is high - just speaking on the Federal level. We were able to petition the court for a ‘reformation of trust based on a change of circumstances’. This allowed us to take properties in the bypass trust (deceased father’s trust) and move them to my mother’s survivors trust. The benefit is a stepped up basis upon the death of mom.
Oh the EIN scam. Yes, you can easily get one online in a matter of an hour. However, the official IRS website is not the top hit on a web search. There are some iffy sites. I almost went down the path on one of the sketchy sites. Luckily H walked in and looked over my shoulder and caught the problem. Your mind really is not at its best when grieving.
OP, just catching up here, but don’t assume you’re the personal representative (or executor) until you’ve seen the latest will and initiated the probate process, which is mandatory in most states if there’s a will. The will can nominate a PR, but the probate court must make the appointment and issue letters testamentary before you can take any official action on behalf of the estate. And someone nominated in the will isn’t required to accept appointment as PR, so if two people are nominated, one can simply decline in order to simplify the process.
Probate can be costly and complicated in some states (like California, which is why everyone there does a trust). But in many states it’s inexpensive and relatively painless, especially for small estates. My brother was PR for our mother’s estate in Michigan and my wife was PR for her mother’s estate in Minnesota. In both cases the probate court provided clear instructions allowing them to wind up the estate in just a few months without a lawyer and with low filing fees. . Lots of paperwork, to be sure, but all financial institutions were pretty cooperative once they saw death certificates and letters testamentary.
Sorry for your loss. In my Fathers last few years I had been on and off his bank account a few times. When I questioned donations, etc he would take me off. Lesson learned don’t question the little stuff. My brother was on there for a while, then he passed away suddenly. I made my father add me back onto his bank account, which was a good thing, because he passed away 3 months later. It just made things so much easier. We are going through this with my MIL right now. She might live another 10 years, or maybe 10 months, but she hates anyone “knowing her business”. arrggh. The ironic thing is she has recently started living in assisted living that cost almost 4K more than she has coming in. The family will make up the difference, and while we want her to buy and spend what she wants to, she can’t be spending frivolously if I am not only paying for college but helping with her assisted living. But, I definitely understand her POV. I have had to hound my husband to make sure I know all his accounts and passwords.