<p>I went to school a few decades back, when revocable living trusts were the great way to minimize taxes. I have heard that currently, these trusts are no longer needed, as there are no estate taxes and why tie your estate up in unnecessary knots?</p>
<p>I’m trying belatedly to do my will, durable power of attorney, medical power of attorney and whatever documents make sense. Would appreciate any thoughts on this matter. My kids are no longer minors, so I don’t have to appoint a guardian any more. We do have assets–mostly real estate and shares in a family company. </p>
<p>Any thoughts would be GREATLY appreciated, before I go back to keeping my head in the sand as I have for the past few decades.</p>
<p>Revocable living trusts don’t have any effect at all on estate taxes as they are part of the estate. They are considered will substitutes. What they do is avoid probate and that is all. Irrevocable trusts, those are different.</p>
<p>There is no substitute for consulting a wills and trust attorney in your jurisdiction as there are state as well as federal estate issues.</p>
<p>A revocable living will makes it easy for your family to administer your estate, it is really as simple as giving them signature power over your assets, giving the banks, etc permission for that person to handle your finances rather than having to petition a court for that right.</p>
<p>An irrevocable trust does take items out of your estate if you are concerned about estate taxes, and yes there are no estate taxes in 2010, but it is set to be a big tax again in 2011, though no one knows how things will change.</p>
<p>We had a trust done in the 1980s by an expensive private attorney and we did one recently using legalzoom; I am currently administering a legal zoom trust and ahve had no problems at all. If your needs are simple, it should be fine.</p>
<p>Thanks–should start looking into all of this, as I would prefer things to be neater than messier and no one can tell what the future holds. Appreciate these insights and would prefer not to have my kids deal with probate unnecessarily.</p>
<p>Should start asking around on estate planning attorneys–hopefully ones who will be around after hubby & I may not be (tho since my family lives so many decades, it’s tough to know how long that may be).</p>
<p>OK, will get my head out of the sand & work on this.</p>
<p>IMHO, finding an Wills & Trusts attorney you can communicate with would be Job #1. As others have pointed out, subtleties matter. There’s a huge (administrative) difference between leaving $10,000 to an heir, versus leaving 10% of a $100,000 asset … in my state at least. </p>
<p>Good luck with this … it’s worth doing right!</p>
<p>My wife and I put together a trust a decade or so ago. When I contacted the attorney to update it earlier this year, he suggested waiting until next year when “Those idiots in Washington finally make up their mind”. </p>
<p>There is a huge change coming in a few weeks when the zero estate tax expires and the rates revert back to a $1M exemption and up to a 55% tax rate. I haven’t seen anything to suggest that Congress is ready to act but plan on meeting with the attorney in the new year anyway…</p>
<p>Confirming other advice: A revocable trust is a device for avoiding complications in the state probate process when someone dies, and in some cases for preserving privacy, not a device for minimizing taxes. (The one exception to that was that there used to be a personal property tax in Florida that people could avoid entirely with revocable trusts. It was really scandalous: a stupid tax that could be avoided altogether with a transparent sham.)</p>
<p>There ARE trust structures that are very powerful in minimizing estate taxes, and that’s something you should look into if your family wealth exceeds $4-5 million and you have a bunch of assets other than your home and retirement accounts.</p>
<p>scualum: I think dealing with estate taxes will be part of the bill extending the other Bush tax cuts. Although it is little appreciated what a fraud that was: the Bush “cuts” actually increased total death taxes on many people who died between 2001 and 2005. In 2001, the marginal rate was 55%, but there was a credit for state taxes, so that 55% was the all-in rate, with the feds getting 41.25% and the states getting 13.75%. Bush lowered the top rate to 50%, and ultimately to 45%, but turned the state tax credit into a deduction. To protect their revenues, all but a handful of states kept their 13.75% taxes (and most didn’t raise the exemption amounts, either). So when the federal tax went to 50%, the net rate most taxable estates paid was 56.38%. The effective top rate didn’t go below 55% until 2005, and even in 2009 it was over 52.5%. Of course, the exemption increase from $1 million to $3.5 million over the course of 8 years was a meaningful, real tax cut, and one that let middle-class people with nice homes and retirement savings avoid a lot of current estate-planning expense. (Or at least it would have if it had been permanent.)</p>
<p>This is huge. I would suggest avoiding probate if at all possible.
My MIL’s only assets were cash in the bank, about $300,000. Everything had been sold prior to her death and she was in a nursing home. She had a simple will that said her estate should be spilt equally between her 4 children.
It took and entire YEAR for this to move through probate in NH. In the meantime, no one could have any of their money.
Just because you have a will does not mean your beneficiaries will get their goods immediately.</p>
<p>Thanks–will start sleuthing around for a good estate planning attorney & meet with them as soon as things are finalized. No sense trying to do things that will be undone with changes in the tax law, especially since things are likely to happen one way or another in DC in 2011 regarding the matter.</p>
<p>It may take a bit of time to ID the right attorney/firm anyway. My FIL’s estate still has not completely wound down & he died in 1995! His attorney was recently disbarred.</p>
<p>I had read that avoiding probate was a good thing, but when I asked the trusts and wills attorney about this years ago when he was doing our wills, he said that probate wasn’t a problem. Is there any good reason to say this, or was he trying to preserve future legal fees?</p>
<p>Privacy is one reason many prefer to avoid probate. I believe probate records are available for public inspection, so anyone can read about your assets post mortem. I believe avoiding probate also avoids the legal fees of having things go through probate and having assets tied up in probate–makes liquidity a problem. Might be worthwhile getting a 2nd opinion–most attorneys do NOT charge for an initial consultation.</p>
<p>Probate does take time. And I would commend the mother in law in a prior post who sold everything before she died and just had cash. A few years ago, H’s uncle died intestate (without a will) but had property in three different states. Probates had to be set up in each, attorneys and real estate people in each to sell the real property and settle the estate. A major headache.</p>
<p>We will be meeting with our neighbor who is an estate planning attorney next weekend to start thinking about all of this and get the wheels in motion. Appreciate all the thoughts on the topic.</p>
<p>For eighty-percent of Estates, I suppose Probate isn’t a big deal. But there are many cautionary tales from the other twenty-percent. Things happened in my Mom’s Estate that would be laughable in another context. (I paid Estate expenses out my own pocket for nearly four months because it took that long for the Probate Court to sign the standard Executor Appointment document! “NewHope33 is assigned Executor for the Estate of NewHope33’s Mom … [signed] Clerk of the Court” FOUR MONTHS @$4,500/Month … you can do the math.)</p>
<p>It depends on the state. It seems that everyone I know in California is advised to set up a trust – that’s what I was told as well, & all my California relatives have them – but my dad’s a probate lawyer in Texas and says it is hardly ever done there. (He also says that Texas has more “modern” probate laws that are more streamlined – I really don’t know the ins an outs of that, simply that my Texas-lawyer-father would have his clients do wills and not trusts, but he didn’t bat an eye when I told him my Calif. lawyer advised setting up a trust). </p>
<p>So its one of those things where it is really worthwhile to get good legal advice. </p>
<p>There may be nuances that apply in particular situations, such as the size of the estate or types of property held, that could also influence the outcome.</p>
<p>We did this some time ago. Our aTtorney thought of a lot of things we hadn’t considered. For instance trust distributions to our adult children are staggered based on divorced statistics, they get the bulk at 30 because statistically they are more likely to stay married at that age. The attorney should charge a flat fee and it should include details on power of attorney, living will, medical directive,etc.</p>
<p>When we were working on our will a few years ago, our attorney said the same thing. He said it depends on states. He named NY, CA, FL places to avoid. Otherwise, he said it’s an unnecessary expense.</p>
<p>Please look at the long term implications for the beneficiaries of any kind of trust. I know too many well meaning grandparents who set up a trust of some kind that really put the kabosh on their grandkids being eligible for financial aid. One family put a home in an irrevocable trust years ago…a vacation home that’s value has swelled to well over a million dollars. Their kids now have to list the value of this trust on the FAFSA. The value for EACH kid is over $300,000…needless to say, they are not getting need based aid (and their incomes would support this at the very generous schools some of them attend).</p>
<p>Answering for Igloo: I know in NY and CA, probate can be an involved, slow, and expensive process. That’s just not true where I work. So it’s very common for wealthy people in NY or CA to hold a substantial portion of their assets in revocable trusts, so that they don’t have to go through probate, but around here it’s fairly unusual, because even though the expense of creating and maintaining a revocable trust isn’t that great, most people conclude that there’s no reason to do that. I’m not certain about the issues in FL. Until a few years ago, revocable trusts were practically universal there because of the personal property tax. I think they also remain popular because Florida requires that your executor (who handles your probate estate) be a Florida resident, and lots of people who expect to die as Florida residents would prefer that their affairs be handled by a child or children or trusted advisors who live elsewhere. (And the trusted advisors who live elsewhere certainly encourage that.)</p>