Set up a will may be a living trust

azmomDecember 21, 2010

Have a few questions regarding the subject,

1. How do we know if we need a will, or we also need some kind of Trust? Are there guidelines in making this decision?

2. Should we see a lawyer (in what field s/he specializes?) or a financial planner? Or both? or a team with both type of expertise?

3. What type of preparation we need to do before seeing one?

4. We each had a few assets when we got married years ago; we never had a pre-nup done. Over the years we keep these assets under the same ownership, and build our joint assets.

5. We have a happy marriage and never have any financial issues between us or us and our children. Our children are young professionals and are self sufficient. Someone said we would need a post-nup, we are not sure what are the reasons for having one.

We want to do things right and are willing to pay for it; but we don't want to make things unnecessarily complicate. Your advice and suggestions would be truly appreciated.

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sushipup1

See an attorney who specializes in trusts and estates. Ask friends for recommendations. The new tax law can make a huge difference for some people, but it is a 2-yr law, so best understand the differences.

What you'll need: probably not any real statements, but be prepared with a list of your assets, and values. After you set up a trust, you will retitle your accounts int he name of the trust. Doesn't matter what the account numbers are, but you will fund the trust. Know the value of any real estate that you own. Write things down so you will have a complete list, and not forget anything.

This is time at which you'll make note of who gets what. An example, my mother directed that her bank accounts be divided among the 4 of us, with one brother giving $5000 divided to the other three, because he got mother's car when she stopped driving. There was a promissory note, so that was mentioned. Then the sentimental things: items related to Dad's business career to one brother, his military career to another brother, etc. In our case, the remainder household, furniture and jewelry went to me, the only daughter. Usually spouses of the children are not mentioned. If you have a substantial estate, you may want to trust that will skip generations to grandchildren, and include "spendthrift" clauses.

But your attorney will know all that. I can't see that you need a pre-nup. But if one of you dies and the other remarries, does the new spouse get the assets of the non-deceased spouse? This is when you'll discuss that.

So in short, you need an attorney who specializes in trusts and estates (and taxes) and a good idea of what your assets are. Statements will not be necessary, but the $ value is. Anything else your attorney needs, he/she will ask for. No need to take everything to the meeting.

Good luck with your planning! It will set your mind at ease.

    Bookmark   December 21, 2010 at 11:49AM
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duluthinbloomz4

For a basic overview - look on the internet for info on Revocable Living Trusts - simply to familiarize yourself as to what they are and what they can do for you. Should help in starting to form thoughts if you need one in addition to and in conjunction with a will.

One of the best things about a trust is that it makes settling an state relatively simple and avoids probate - and probate can be a real drawn out process. And with a Revocable Living Trust, you're still in control to manage, buy and sell assets, etc. So it's often best not to specifically will someone something you might not have at the end. (Example: my elderly neighbor promised her very large, highly appraised diamond. Sadly it turned up missing after an emergency hospital stay. On her death, other assets had to be juggled to compensate the intended recipient for the "lost" diamond.) It's often a good idea to give promised personal/household items to your intended recipients while you're still alive and leave them out of the will/trust. Listing every doo-dad in a home doesn't make sense - much of it would probably be sold, auctioned off, etc. and the proceeds put in the estate account. These are things an attorney should discuss with you - and should answer any questions you might have no matter how insignificant you might think they are.

And yes, see a good attorney who specializes in estates, wills and trusts. Money extremely well spent. Peace of mind - priceless.

Of course, there are things you can't use to fund a trust - pensions, Social Security. Everyone is different with regards to dealing with their estates; different circumstances with heirs - so it's always best to go to the professionals. Many of us here have trusts, were executors of trusts, were beneficiaries of trusts... estate planning is never a one size fits all. What we're familiar with may not suit you at all.

    Bookmark   December 21, 2010 at 1:18PM
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sushipup1

To clarify, my parents wrote the items to go to each child as a separate paper from the will. By the time my mother died at almost 96, almost all items had been distributed, But we did send the paper to all the children as soon as it was written. That way the sisters in law got over their feelings of being 'left out' on Mother's jewelry (and no items were individually described, just "household effects, furniture and jewelry") well before she died. Two of the brothers had already been thru messy divorces, and Mother didn't feel like leaving anything to anyone of the in-laws. ;-o

    Bookmark   December 21, 2010 at 2:19PM
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duluthinbloomz4

There is a personal bequest page that can be added to wills, etc. where you would list special items. I was an elderly aunt's personal financial POA - she had me with her when the lawyer came to update her will and TRY to get her to do the end of life directives. She didn't even give listing things a second thought - too much trouble. She was pretty much beyond caring about anything more than the equal distribution of her estate between surviving siblings.

The problem I'm personally going to have with "things" is I have no children. My only hope is that my nephews eventually have girls so I have someone to pass a few selected things on to - not interested in family things going to my nephews' wives. I may well have an estate auction well in advance (hopefully) of my demise.

Much to consider, azmom, but trusts and wills can be updated, changed, whatever at any time when circumstances warrant and while you're of sound mind.

    Bookmark   December 21, 2010 at 3:21PM
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jkom51

There are a few disadvantages to trusts that you need to be aware of:

1) The standard wording to Revocable Trusts do not pay the Trustee for their work. This is not a big problem if the Trustee is also a beneficiary. But if the Trustee or successor trustees are not beneficiaries, it's rather unfair, I think, because although having a trust negates going through probate, there is still work to be done and it takes time and energy.

Our trust has wording that allows the Trustee to be paid an hourly wage, whatever the county standard is, for their time.

2) Be aware that when a couple sets up an RLT, and one spouse dies, that part of the Trust assets becomes IRREVOCABLE. You now have two trusts: the survivor sets up a new RLT, and the deceased has their half of the assets in a legal entity that cannot be changed or altered.

Income tax returns must be filed separately for each trust. When the survivor dies, then both trusts come to an end.

3) Standard wording in an RLT does not allow the surviving spouse to necessarily do anything s/he wants with the assets. The trust has to be written so that they DO have permission to freely sell or dispose of assets in the now-Irrevocable trust of the deceased. In fact, it is standard wording that the survivor can only access the interest and dividends from the deceased's trust, and not access the principal!

A lot of people don't realize this, and there are way too many widows who find themselves strapped for cash because they aren't allowed to break into the other half of those jointly-owned assets. It's possible to make a case for changing the terms of an Irrevocable trust, but why pay thousands of $$$ to an attorney that could have been avoided if you'd gotten a trust truly customized to your needs? As our estate attorney says, any time she has to show up before a judge, it's a minimum $2K billing.

4) If you do a trust, out here most lawyers make it a package deal. One price for the RLT, a pour-over will (VERY important, this handles assets not mentioned or assigned to the trust), durable healthcare power of attorney and financial power of attorney.

The important criteria for a good estate attorney is that they will talk to you to find out what you want, and clarify potential legal issues in handling your estate. Our lawyer spent quite a few hours with us to determine precisely what we wanted, who we wanted it to go to and who we didn't, and drew up the RLT documents accordingly.

It was not quick because she was very thorough. We did my MIL's new RLT at the same time we did ours, and the lawyer probably spent more than 7 hours talking with the three of us, both separately and together.

******

Probate in some states is simple and fast. In others, like CA, it's a nightmare of bureaucracy that takes a minimum of 12-18 months. You need to find out what's applicable to your state of domicile. There's little reason to do a trust if a will will suffice.

I'll give 2 pieces of advice whether you do a will or a trust.

First, never assume your heirs are going to play nicely with one another. People handle grief differently, and it can magnify old resentments. It is best to be very clear about what you want. If your largest asset is a house, for example, and you have 4 kids but nobody's going to be able to afford to buy out the other three to live in it, be sensible and instruct your Executor or Trustee to liquidate the assets and divide the monies accordingly.

Believe it or not, I have seen an entire estate held up because there were three siblings, and one of them insisted that an account that held $xxxxx.17 MUST be divided equally into thirds. She wouldn't sign any papers until this was done...which happened to be impossible. After six months of waiting (nothing else could be distributed until this issue was settled), her two siblings got disgusted and just gave her the whole 17 cents - but they also don't talk to her any longer.

Second - really, really think about who is going to be your Agent for the will or trust. Because it's the Agent (trustee or executor) who's going to have to pay the bills to maintain your estate until it can be distributed, probate or no probate.

Yes, they can be reimbursed for expenses on the estate's behalf. BUT, all of that is dependent upon obtaining the certificate of death. What if (Heaven forbid but it does happen), there's an issue about the death or deaths? If there's any kind of official delay in issuing the death certificate, the Agent has all the expenses of somebody else's estate to maintain, without being able to sell any assets or access the estate's cash in the interim.

When I was the executor of my sister's estate, it came at a time when the entire family was strapped for cash. She had no home, but her apartment rent was high and she had an expensive car payment. Arranging the funeral and all the attendant details had to be paid up front, by me. I had to pay for everything from the certified copies of the death certificate to professional appraisals on the estate assets.

It was a painful scramble for two months until I got confirmed by the courts and was able to obtain reimbursement for expenses. So don't underestimate what it costs to be the Agent, and burden someone who's going to stagger under the initial expenses.

    Bookmark   December 22, 2010 at 1:14AM
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randy427

A recommendation regarding real estate:
Don't state that it will pass, jointly, to your survivors, even if it is the family homestead or a vacation home with much sentimental value.
Too often some, but not all, of the survivors will sooner or later want, or need, to sell the property but cannot do so because one or more do not want to, nor can they afford to buy out those who want to sell.

    Bookmark   December 22, 2010 at 3:27PM
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dreamgarden

"2) Be aware that when a couple sets up an RLT, and one spouse dies, that part of the Trust assets becomes IRREVOCABLE. You now have two trusts: the survivor sets up a new RLT, and the deceased has their half of the assets in a legal entity that cannot be changed or altered."

Good point. Same thing can happen with a Generation Skipping Trust. That is why it is so important to put language in ANY trust saying the beneficiary has the right to change the trustee/bank/etc if they aren't happy with them.

Some trustees need to be replaced. Like the ones who want to treat your money like its theirs. Even if your have a legitimate need, they make you beg for every cent. They ask you for all kinds of proof of need and then use a revolving door of advisors to thwart you when you try to speak to them again. One of the persons assigned to our account told us the rep we spoke with during our previous conversation had left the company. The next time we called, she answered the phone.

You don't want to give them help skimming your inheritance because grandma/pa didn't say they couldn't.

Also, if there is a dispute in the way the trust is being handled the trustee(s) can and will use YOUR money to fight you in court so they can play with your slush fund as long as possible before you get it.

There is plenty to know about trusts. We had some helpful assistance from the estate planning CPA our family used. They are in a good position to advise you regarding tax implications. Especially with the inheritance tax laws that are set to change next year.

Estate Tax Rate and Limits

"On January 1st, 2011, the estate tax rate will return to its pre-Bush levels. Practically speaking, this means the difference between dying on December 31, 2010 and January 1, 2011 can mean 55 percent of your estate if you are person of means!"

A link that might be useful:

beginnersinvest.about.com/od/estatetax/f/estatetaxrate.htm

    Bookmark   December 22, 2010 at 5:05PM
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emma

My husband and I did not need one because everything was in both names with right of survivor ship. He has past away and I had control of every thing, no glitches of any kind. Just had to notify his company so his retirement could be transferred to me.

This post was edited by EmmaR on Wed, Feb 20, 13 at 15:50

    Bookmark   February 20, 2013 at 12:38PM
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sushipup1

Emma, what would have happened had you and your husband died together in an accident? And what happens to your assets when you die, now that your husband has died?

    Bookmark   February 21, 2013 at 12:14AM
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emma

My kids would have gotten half and his kids half and they would have lost a lot of it paying lawyers and waited on it for a long time. We didn't really care, none were worth of it.

The truth of it was my husband would not discuss wills or final arrangements.

    Bookmark   February 21, 2013 at 5:05PM
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sushipup1

Ah, the ultimate revenge on family. Yes, I can see where the idea is tempting. Better still, just spend all the money before you die, or at least have a really good time trying it!

    Bookmark   February 21, 2013 at 9:21PM
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emma

Sushi, That is exactly my plan. Been to Africa twice, Peru and the rain forest twice, lots of bus tours in the USA, cruise the Panama Canal, Alaska land and cruise and a cruise of the British Isles. I would be still be traveling but cruises are boring unless it is to exotic places and I don't care for big cities. There are still a couple of places I would like to go and just check in a hotel and stay there for a week, San Antonio for one.

    Bookmark   February 23, 2013 at 6:21PM
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sushipup1

Good for you, Emma!

Come on out to the Monterey area and we'll show you the sights! Seriously, it's a world class destination.

I think that having some control of your life is the best pleasure of all! And you are doing a good job!

    Bookmark   February 23, 2013 at 11:36PM
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emma

I am not sure where Monterey is, have been to all 3 Carmels and found a lovely place on the coast there that used to be a school for young women that is now a lodge. I also saw the home of the best housekeeper in the US.....Mrs. Clint Eastwood. LOL

    Bookmark   February 24, 2013 at 8:45AM
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sushipup1

Yes, Monterey is right by Carmel-By-The-Sea, where Clint was once the mayor. The Eastwoods now live in Pebble Beach, which is between Carmel and Monterey. Asilomar was designed by Julia Morgan, originally as a Girl Scout Camp.

Here is a link that might be useful: Asilomar

    Bookmark   February 24, 2013 at 10:25AM
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emma

The place I saw that I would like to go back to was about a block from the beach was originally a school for young ladies to prepare them for life, according to the step on guide. He said a woman designed it. It taught single women how to get a job, live alone and take care of themselves, back when women didn't live alone. Later they opened it to the public. I asked about the rates and it was around $80. a night. Someone said at those rates it may be dormitories, instead of private rooms. It would be fun to stay a few days, rent a bike and explore that area.

    Bookmark   February 24, 2013 at 7:00PM
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sushipup1

Yes, that's Asilomar. Some rooms are set up for up to 4 people. It's been a while since I was there for a conference (whoa---20 years!), but rates did include meals. It's across the road from a wonderful beach.

Don't know about the school part, but it was part of the YWCA, which certainly had those same goals that you mentioned.

We are about 20 miles from there.

    Bookmark   February 24, 2013 at 7:05PM
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emma

I thought it would be a good place to relax and explore new places. I have a problem when I travel to new places...I don't want to go home. I am so desperate to do something or go someplace I am thinking of doing a mini vacation at the new Drury Inn downtown. It is a remodeled very old hotel and it would be fun to stay a couple of nights and look around at the change. I could have a margarita without driving home. LOL

    Bookmark   February 25, 2013 at 11:32PM
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