Trust?

[corn18]

I finally got around to setting up a meeting with an estate planner (thanks Jim Ohio). That was very informative. I have none of the documents in place that I need to have (I knew that, but didn't know the depth of my malaise). On track to get all that taken care of.

But the topic of setting up a trust came up. Seems to make sense as I do not want my 18 yo or 15 yo to all of a sudden find themselves millionaires. So I think I want to set up a revocable trust into which all of my assets are assigned when my wife and me are gone. Figure we would assign a trustee to manage it until the girls are 25 and then hand the remainder over to the kids.

Anyone have any thoughts and lessons learned for a revocable trust?

Thanks,

Tom

[Retired To Win]

I have a "trust pak" from Suze Orman that covers all that stuff and is enabled to allow you to do the forms online and update them all AT ONCE as the need arises. I got it a little while back. You might want to look into it, since it might save you a goodly number of dollars.

[corn18]

$30 for that vs. $1,300 to have a lawyer do it? Hmmm.... am I missing something?

I looked up this pack on Google and there are lots of estate planners saying that using an estate planner is the way to go (go figure). Kit wills are bad. They have defended kit wills many times and they are not good. Blah, blah, blah.

Then I read the reviews from the people using the kit and they like it a lot. Saved boatloads. Easy to use. Could get help if required. But no feedback on how they held up in court.

For $30, I think I can take a look at Suze' kit and see if it spits out a reasonable document. At least I will have a better idea on what's what with all these POA's, DPA's, living wills, DNR's etc... Then if I am not comfortable, I can spend $1300 to get the lawyer to do it. Potential ROI of 4480%. Anything is better than what I have now which is nothing.

Thanks for the info.

My estate right now is mostly life insurance ($2.1M) so not a complicated estate. Only debt is house and it is slightly positive value to loan.

Tom

[MonkeyMama]

Tom - Trusts done by a professional are the way to go. In general, you pay very little up front to avoid legal fees and troubles for the long-run future. So doing it yourself is extremely penny-wise and pound foolish, in my opinion.

You can afford a professional. I would do so. I would not go cheap due to the ramification to your heirs.

I am a tax professional and so I just get to see all the messes left behind. Well done trusts are generally a complete legal non-issue, and very inexpensive legally after you pass. Everything else tends to be a mess. I don't think anyone cares about the costs and the money, either (legal fees after death $$$$$). IT's a lot of stress to deal with while grieving, to tend to prolonged legal issues. That is what my takeaway of what is really the worst of it. Every single year I have literally at least one client crying in my office about legal estate issues.

In general, if you have kids or a house, you need a trust. Most of the nasty battles are fairly middle class stuff. (My wealthy clients don't go cheap on their wills and trusts, so I have not seen any real estate problems with anyone with any real money. IT does happen, of course. But just to say it's not necessarily a "wealth" problem. Simply owning a house can create a lot of legal issues).

[corn18]

I think I am going to tackle this in stages because I want to practice my new budget approach of not spending money I don't currently have.

Status now: no documents, not even a will.
Step 1: Suze Orman kit. Get a set of documents in place. If I wrote something on a napkin, it would be better than what I have now.
Step 3: Hire the lawyer and get it all reviewed and and made better. I'll do this when I have $1,300 saved up to pay for it. I could put it on a credit card now and pay for it as the money became available, but that was the old me. I actually have plenty in the EF fund, but I don't see this as an emergency. Not if I can do step 2 first.

Tom

[corn18]

Well, I found a coupon code and bought the Suze package for $18.01. It asked a few questions and spit out a bunch of .pdf's. They had many official sounding words and looked very legal. Here's my problem: the list of additional tasks required to make a trust and will work properly together is quite long. She provides a good checklist to follow. There are many steps and additional forms to get everything into the trust. This is not a simple task. While I believe that if I follow all of her instructions perfectly, I will end up with good documents, the only way to find out if I made a mistake is to die. Or hire a lawyer to review all of them, in which case I should just hire a lawyer to do them in the first place.

So I'm going to go with the lawyer. Worth $18.01 and to find this out.

Tom

[MonkeyMama]

If I wrote something on a napkin, it would be better than what I have now.

Tom

I don't know if that is necessarily true. Not if you unintentionally really screw things up.

But, yeah. Glad you are seeing a lawyer. I hope you are making it a major priority to get it taken care of. Don't procrastinate!

[LizfromtheBronx]

In general, if you have kids or a house, you need a trust. Most of the nasty battles are fairly middle class stuff. (My wealthy clients don't go cheap on their wills and trusts, so I have not seen any real estate problems with anyone with any real money. IT does happen, of course. But just to say it's not necessarily a "wealth" problem. Simply owning a house can create a lot of legal issues).

Sorry to threadjack, MM, but this grabbed my attention. Mom will be doing her estate planning this summer, so it's relevant. When you say kids, do you mean children who are still minors? Just curious if this would be her best way to go - there are 3 of us, but all adult (I'm the baby and just turned 35 ). Total estate is worth less than $1m, probably even less depending on what debts she has at the time. She is planning on dividing everything evenly between the 3 of us.

[corn18]

I'll tell you what I have learned. Lawyers love probate. They get paid from the estate as long as it is I probate. So while I'm sure they are motivated to resolve probate as quickly as possible, maybe they aren't.

A properly set up trust along with proper designation of beneficiaries on certain accounts and proper designation of transfer on death for other things (titles and deeds) will ensure that there is no probate and that everyone gets what you intended for them to get. That alone makes it worth it to me. Keep the estate out of probate. The lawyers can still fight over a trust but that is different because they cannot suck money out of the trust while they are fighting over it. It's a winner take all at the end vs. Pay as you fight. I like that.

Tom

[MonkeyMama]

Sorry to threadjack, MM, but this grabbed my attention. Mom will be doing her estate planning this summer, so it's relevant. When you say kids, do you mean children who are still minors? Just curious if this would be her best way to go - there are 3 of us, but all adult (I'm the baby and just turned 35 ). Total estate is worth less than $1m, probably even less depending on what debts she has at the time. She is planning on dividing everything evenly between the 3 of us.

A trust is extra important if you have minor children, permanently disabled children, step children/remarriage, etc. When you want a say in how that money is handled and invested and spent if you pass prematurely.

It is not as critical for capable adult children.

I have heard that trusts are more important in my state - California. This may or may not be so true in other states, so it would still be worth paying for some legal advice. Find a trusted lawyer and get an opinion based on your state and specific situation. In your state, there may not be much advantage to having a trust. In our state it is such that pretty much just about everyone would save a lot of time and hassle if there is a trust. But minimum asset levels (for probate) may be more appropriate in other states. Meaning, maybe easier to avoid if you have a simple estate. Or the probate courts might not be so expensive or back logged. (California has the most ridiculously expensive probate costs).

[corn18]

Just finished some more research. Probate is mandatory in Ohio for all estates valued at over $35,000. And guess what, there is a fee for just going to probate of 1% to 4%. That's if everything goes well. Even if you have a will, if my estate is valued over $35,000, it goes to probate. That's not nearly as bad as the estate tax of 55% on everything over $1M. That means a $2M estate would be worth $1.45M the day I die. Holy crap. Most of my estate at this point is life insurance so I may set up an Irrevocable Life Insurance Trust to avoid most of that.

For those who save their whole life to build up a multi-million dollar nest egg, doesn't it frustrate you to know that the IRS will take 55% of everything over $1M? Makes me wonder why the goal isn't to die with less than $1M.

There are many ways to put assets into irrevocable trusts that prevent the massive estate tax, but man, they are complicated.

Tom

[MonkeyMama]

For those who save their whole life to build up a multi-million dollar nest egg, doesn't it frustrate you to know that the IRS will take 55% of everything over $1M? Makes me wonder why the goal isn't to die with less than $1M.

Tom

That is out-dated information. The estate exemption is currently $5,340,000, and is indexed for inflation. A simple estate plan doubles that for a married couple.

[corn18]

That is out-dated information. The estate exemption is currently $5,340,000, and is indexed for inflation. A simple estate plan doubles that for a married couple.

Awesome. This makes me happy.

[LizfromtheBronx]

Thank you both! Our main concern is making sure that things go as smoothly and painlessly as possibly at a time when we are grieving - nothing like dealing with the loss of a beloved parent while some court is trying to jerk you around. She already has a lawyer, so I'll tell her to float the idea by him to see if he thinks that's the best direction for her situation, and in our state (New York). Her estate will consist of the house, bank/retirement/investment accounts, and modest life insurance. We're the beneficiaries on everything already (anything that has a beneficiary, anyway).

Random question - she still has my father (deceased) listed as her primary beneficiary, and the 3 of us listed as her secondary. Would it behoove her to update this, or does it not really matter? I think there's an emotional component of removing him, so if there's no real reason why she should, then I won't mention it again (I have a time or two and she gets very stubborn).

Again, sorry to threadjack

[snafu]

Tom, in order to complete all the documents for a revokable trust, the lawyer will ask you all the questions on the Orman pdf file. In order to prepare for the legal visits at $ X.00 per hour it's helpful to have the information you need. I think you can 'fill in the blanks' with a bit of thought, a dictionary for unfamiliar terms and even Google. I think the Orman introduction has a 1-800 number to help you.

I bought a sheaf of forms on-line for our province when DSs were tykes, filled them out and took them to the family lawyer for review, correction, and notary witness. I was shocked to learn it was excellent and had two phrases added, initialled, for longevity plus a codicil which could have additions if needed. The one thing I've discovered was the bank's reluctance to accept our legal Power of Attorney prepared for DS2 to use during our absence on our PR China adventure. The bank wants clients to use their own POA which is more formal, more pages but not really different. When we returned and questioned the bank, taking their remarks to our family lawyer, we got a letter of apology from HQ. There was no money involved, merely inconvenience.