4 Replies Latest reply on Feb 11, 2012 4:00 PM by JerryD

    Establishing  A Trust

    grandpa_mickey
      My wife and I plan to put our home (paid in full) and life insurance policies in a trust, with our adult children as Trustees as well as the benificiaries.
      I am interested in comments regarding how difficicult making changes after the the trust has been established might be as well as related costs.
      Thanks,
      Grandpa Mickey
        • Re: Establishing  A Trust
          jmullin99
          I would suggest that you speak with several firms to get estimates since my experience is that there is a wide variance in cost in addition to the expected variable between simple and complex.  We have homes in GA and FL and found the pricing to be $3-5 thousand in GA  for trust only and $1-2 thousand in FL for a full package (trust, wills, living wills, medical power of attorney, etc).  That is probably due to competition with all the seniors in FL, not difficulty since FL ranks second behind CA in complexity and cost of probate.  When we asked about changes, we were told it would be time-based depending on complexity, but the range they quoted was pretty reasonable.    Hope this helps
           
          "Grandpa" John
            • Re: Establishing  A Trust
              JerryD
              A living trust and all of the bells and whistles like pour over wills and medical durable power of attorney cost us $2400 when we insisted on funding it ourselves (placing IRA's. life insurance, bank accounts, cars,etc. in the trust but NOT the house which we left to lawyer) so as to gain experience on how to do it. It cost an additional $600 recently to change a few fairly simple words on percentage of estate going to charities which we feel the lawyer screwed up. We also felt that since they missed this important point that they also missed the important words to avoid duplicate gift from the total estate and the trust. After some fighting we just paid for the changes with a mental note to avoid this lawyer when events dictate exercising the trust  dictates.
            • Re: Establishing  A Trust
              jkom51
              I'm assuming you are speaking of a Revocable Living Trust (RLT) and not another type of trust. We have an RLT and also help administer my MIL's Survivor RLT.
               
              First of all, I'm surprised by how many have put POD accounts into their trusts. Do you have specific reasons for doing so? Our checking and savings accts are in the trust ONLY for the ability of the Trustee to pay for the Trust's expenses. No other POD accounts are in our trust, such as my life insurance and our IRAs.
               
              POD (payable on death) accounts pass directly to the beneficiaries upon submission of a death certificate. They ARE counted in the worth of the overall estate for estate tax purposes, but will directly bypass any probate by will, or any trust if the POD acct is not assigned to the trust.
               
              We and the very good estate attorney we had could see no reason for putting our insurance and IRAs into the trust. I would appreciate knowing the reasons for others doing so.
               
              Changes to an RLT depend on circumstances:
              1)  A single Trustor/Trust obviously is easy to change; the Trustor doesn't have to consult anyone else and can make any changes s/he wishes. Expense is going to vary according to the complexity of those changes, and depending on what the attorney charges.
               
              However, it's obvious that working with someone you feel you can trust, whose advice is reliable and who produces top quality work, can be more important than the fact they charge a few hundred dollars more than the firm down the block, who does only boilerplate trusts and won't spend more than a hour talking to you without charging you for it.
               
              2)  An RLT with more than one trustee, especially in a state where assets are shared 50/50 between spouses, has different issues:
              - When all Trustors are alive, both have to sign to amend the original Trust. Again, changes depend upon complexity and fee schedules.
               
              - When one Trustor dies, the not-so-fun begins. I live in CA so we'll use that as an example. This is what happens if my DH dies:
               
                -o- The estate must be valued in total as of the day of his death. Precisely 50% of that amount is his. HIS SHARE OF THE ASSETS NOW BECOMES IRREVOCABLE. I cannot emphasize this enough! If we were careless and did not update beneficiaries or successor trustees - tough luck. If children were born afterwards but not included, too bad. If you live in a state where children or spouse cannot be automatically disinherited (CA is one of them), the lawyer has to go to a judge to get approval of the change even if all the heirs play nice with one another and agree completely.
               
              It takes thousands of dollars and a major hassle to make any changes to the new Deceased Irrevocable Trust. Every person listed in the original Trust would have to sign papers to verify they agreed with changing the terms of the Trust after DH's death, and the lawyer has to go to court to get a judge's sign-off. If one person balks, the process dies right there. And yes, even with trusts, heirs have been known to sue one another over real or imagined slights.
               
               -o- There are now two trusts to maintain, two trusts to file taxes for. One is the Decedent's Trust. The other is my own new RLT, called the Survivor's Trust, which I have had my lawyer create. I could have used a will, but I'm childless so I chose a Trust instead. I'm not sharing my assets equally among surviving family, and the trust will save on probate costs.
               
               -o- Much of what I do is dependent upon the terms of the original RLT set up with my DH, the Decedent. Having learned some good lessons from my MIL's trust experience, we set up our original RLT with some very non-standard provisions. For one thing, anyone acting as Trustee is paid standard rates. Administering an estate is a lot of work, and even a family member should be paid for their efforts, IMHO.
               
              More importantly, as the remaining Trustor for our original RLT, I have complete control of ALL assets. I am not restricted to "dividends and interest" and/or "costs for health, education, and maintenance." I can (and probably will) drain all assets from the Decedent's Trust and roll them into my new RLT. All I need do is satisfy any bequests DH made in the Trust document, and then I can end the Decedent's Trust, which will save a bit on legal fees and tax prep/filings.
               
              Standard wording for RLTs do not pay Trustees for time, only for expenses. The beneficiary of the RLT normally cannot access principal - RLTs were, after all, originally designed to pass sizable wealth on to future generations by not allowing the present generation to squander it.
               
              When my MIL was widowed, the attorney she used did a very poor job of explaining the legalities of an RLT to us. She gave us all the information, but much of it got 'lost in the hearing' as she did not spend a lot of time with us. We saw her twice and each time got about 30 min. with her.
               
              By comparison, when we researched and found our own estate attorney, this woman spent over a full day - about 10 hours - spread out over three appointments. It was all flat fee, but what we noticed was that our new attorney was meticulous in explaining the details to us - not just what the legal terms meant, but to also talk about the things that could go wrong and how best to design the trust to do what we wanted it to do, covering all eventualities.
               
              We plan this year to make changes to our Trust, and are prepared to pay full fee. It might be less, but we'd rather plan on more rather than less, LOL. We're making a major change, removing one heir and putting in another, so it will be a good time to make sure everything else is up to date as well.
                • Re: Establishing  A Trust
                  JerryD
                  Whew!!!! As jkom writes, there are some things you need to know about trusts.We too have a RLT with both spouses as trustees and then a progression down the kids after we exit.
                   
                  A couple of points. Totally agree with jkom that payable-on-death assets are not in our RLT. If you have beneficiaries on these assets other than the trust they totally supersede the trust words anyway.  That is so important, let me repeat it. IRA's, life insurance, 401(k)'s, etc. with named beneficiaries go directly without contest to them. This caused some difficulties for us since due to very careful planning those types of assets are a large percentage of our estate. If the trust obligates the trust (or more correctly) the estate to some distributions like charities, it can get real sticky as to where the funds come from. If you are not careful, you can get double payments if you do not release the trust from paying if the non-trust estate pays. Also, to prevent "fire sale" of assets that the kids and other trust beneficiaries might want like the house, cars, etc. you have to provide for a means to pay any large obligations, in our case from retirement assets.
                   
                  Also be aware that leaving assets to the trust changes the nature of the settlement since the trust is NOT a person and these assets must be paid out in 5 years and you have to file tax returns for the trust. If assets are IRA's or Roth's this 5 year limit  severely limits the lifetime "stretch"payouts  that benficiaries can do resulting in very long, tax sheltered payouts over their life expectancies which can be decades for younger beneficiaries.
                   
                   Another point about trustee payment, we realize that this job can be a lot of work. But in our case the last trustee after we pass is one or more of the kids so they are getting the benefit of this work too so we limited the amount that the trustee could receive for this work, a nice sum but not excessive.