Settling A Living Trust

I’m getting a lot of questions on how to settle a Living Trust. People want to know how complicated it is and do they have to get involved with attorneys and courts and all that. Well, the easy answer is...its pretty easy!

When the Trustor, the person who formed the Living Trust dies, if they are married, the spouse simply takes over as the sole Trustee and everything goes on as before until they die. The only exception is that the first deceased spouses half of the A-B Trust becomes irrevocable and at that point the remaining Trustee applies for a tax identification number for the deceased’s trust (very easy to do) and files a final tax return for the deceased. If the deceased spouse has any instructions about distribution of their assets to anyone other than the surviving spouse then the Trustee (surviving spouse) makes those distributions from the Trust.

I recommend that the surviving Trustee open a bank trust account with themselves as the Trustee of the account and place into it any assets of the deceased that are in the Trust. The Successor Trustee must follow any and all of the deceased’s instructions in the Trust to the letter...even if it was a spouse. Changes CANNOT be made by a spouse or any Trustee after the death of the Trustor.

If the deceased Trustor was single and the Trustee duties pass to a grown child, for example, the Successor Trustee should follow the same instructions as above, following the deceased’s wishes and instructions precisely...it is against the law to do anything else. Instructions may include situations where money is to remain in the Trust for years and be distributed under certain conditions or at certain times...this is a common situation and the Successor Trustee is charged with the fiduciary duty to follow those instructions.

An attorney is not needed except for the possibility of probating any assets left out of the Trust and the preparation of Deeds to transfer property to the beneficiaries. The attorney involvement should be minimal. You will need an accountant to file the final tax return for the deceased.

If the Trust contains instructions to keep investments in the Trust and pay earnings from those investments out to beneficiaries over time, you may need to file a 1041 tax return annually to account for the income to the trust from those investments.

When all of the instructions of the deceased have been followed and all the assets in the Trust have been distributed leaving nothing in the Trust, the Trust terminates. An A-B Trust for married couples is usually what we call a “Loving Trust”...that is, when the first spouse dies everything goes to the surviving spouse and when the 2nd spouse dies everything is divided up among the children. In these cases the first to die is considered the B Trust and it terminates when all the instructions have been followed and the deceased spouses half of the assets is distributed to the beneficiaries he or she designated. The A Trust then continues on until the surviving spouse dies. Remember though, the surviving spouse cannot change any of the instructions left by the deceased spouse pertaining to their half of the combined estate.

In estates with very large assets, the QTIP provisions come into play for the surviving spouse but that is a subject for another time.

It is vitally important that all assets be funded into the Living Trust at the beginning of the Trust to avoid Probate, and that the Trustors live out of the Trust...titling any new assets into the name of  the Trust from the beginning of their ownership. When this is done it makes settlement of the Trust very simple and it can be accomplished quickly and efficiently...usually within a few weeks.

If you have questions send them to me by email and we will address them on the blog. If you would like to consult regarding a trust for your family you can call Heritage at 888-437-8778.

Healthcare Concerns....and what else?

Unless you live in a cave you are probably aware that the entire country is in a tizzy over Obama’s Healthcare Reform. We all hate change because we’re comfortable with the way things are and we are uncertain about what’s coming. When the government proposes changes in a major program we know that what they say is not what we are going to get. And the government has such a wonderful record of success in managing all the programs that effect our lives...like Social Security and Medicare...we all know that (right!). Need I say more about feeling stressed when the government gets another bright idea conjured up for our benefit?

My feeling is that Congress should give us the same Carte Blanche healthcare program  THEY enjoy, but there isn’t much chance of that happening is there? I continue to be amazed however, that with all the upheaval going on about healthcare, most people still remain in a total fog on the issue of protecting their family when they die. They buy life insurance and roll the dice thinking that will take care of everything. I’m not really sure what the information gap is all about in this regard but one of the most profound impacts on family financial survival happens at the death of the breadwinner. Unfortunately it effects the family left behind, and they aren’t always old folks waiting out their final years. The deceased is home free, so to speak,... but the surviving family suffers the consequences, both emotionally and financially.

This problem can so easily be eliminated by understanding that dying intestate, or with a Will, is going to involve the family in the gut wrenching costly process called Probate. With Probate the court is in charge of all your assets and you have to get the Probate Courts permission and release before you can sell or liquidate any of your assets or withdraw money to sustain the family... and Probate rarely releases assets for emergencies.

It is so much easier to just be prepared in advance; hold your assets in a Living Trust and eliminate the heartache for your family when you are gone. Its hard enough for them to get over losing YOU, much less the loss of their financial security at the most devastating time in their life.

Revocable or Irrevocable...what's the difference

I keep hearing references to “Irrevocable Living Trusts" and I think its time to define the differences. The more common form of Living Trust...called an intervivos revocable trust...is an entity that can be terminated or changed at anytime by its creator (The Trustor). This type of trust is what I refer to as being transparent...that is, it has no unique tax identity of its own (until the creators death) and exists primarily as a legal entity for holding assets and defining its creators wishes regarding healthcare and distribution of assets and property at death. It provides no lawsuit or liability protection for assets funded into it because it is completely under the creators control and the creator is not separated from the ownership of the assets funded into it. If someone wins a lawsuit against you they can take the assets in the trust because the assets are presumed to be yours. This type of trust is the wise and preferred replacement for a Will because it eliminates the Probate process at death. There are rare and extraordinary circumstances where a Will and Probate would be advisable but as I said, they are rare and it should be done with the advise and consent of a special attorney or advisor who knows what he is doing when it comes to Trusts vs Wills. 

The Irrevocable Trust is similar but is used when the Trustor (Creator) wants to hold assets under separate ownership and outside of his control. Such circumstances might include holding a money gift for a child or a grandchild for the future with no possibility of ever taking it back or allowing a parent of that child to access it. That gift could be safe from any lawsuit as well because legally the giver does not own the money in that trust...the trust owns it and it can't be taken back. Irrevocable trusts are useful for special circumstances but do not translate into an advisable way to hold personal property or assets where the Trustor wants to maintain control or influence over those assets. Some have suggested that an Irrevocable Trust is a good way to provide asset protection for their assets against lawsuits and creditors. Remember that when you place your assets into an Irrevocable Trust you lose control over them because you cannot be the Trustee. A Trustee must be appointed who is independent from you and cannot be related to you by blood, marriage, or employment. That Trustee can control, buy, sell, or invest your assets in any way they see fit so long as they believe it is better for the trust...even if you disagree with what they are doing. Their first loyalty is to the Trust not to you necessarily. Quite often people will appoint the lawyer who created the Trust to be the Trustee but there are a lot of horror stories related to that idea. There are other more suitable ways to structure your assets in entities that you can manage that will give you the lawsuit protection you desire. I will be happy to discuss them with you if that is your interest.

For a free consultation on this subject contact me at 888-437-8778

Our website is

www.heritagelivingtrust.com

Choose A Professional...Choose Carefully

Folks, this is a BIGGY. Probably the BIGGEST BIGGY of all. There is an old adage that people buy the salesman not the product. Now it may be true that you want or need the product but search your own memory... have you ever walked away from buying something because the sales person put you off? Have you ever vowed not to go back to a restaurant because you got poor service from the waitperson? On the other hand, have you ever chosen to buy something from a certain company because you were treated well by a representative or salesperson? We have all had these experiences and what it boils down to is we all like doing business with a company or a salesperson that we feel good about and feel we will get great service from. 

It also applies to Trusts. You have to believe somebody sometime. Its the nature of our world. Nobody gets an iron clad guarantee and we get lied to all the time. So choose someone to buy from that you feel you can trust. Can you trust most attorney’s? Oh I don’t know...I get criticized all the time for ragging on attorneys but unless you know the attorney and you are positive that he/she is a person of unquestionable integrity then I say beware. Shakespeare said, “first kill all the lawyers”.  This morning as I visited with one of our best representatives she related the story of one of her friends and clients who had an attorney set them up in a Trust and he created an irrevocable trust, put all their assets into it and made himself the Trustee giving him irreversable total control over their assets. I hear this kind of thing every day and it never fails to anger me. Those people lost all control of their assets with the Attorney in full charge and able to do whatever he wanted to with their assets. And there was no need for it. It could have been done so that they managed their own assets and still had them safely contained in appropriate entities. 

The best way to choose a qualified professional is through personal recommendation from someone who has already dealt with that professional or through a professional referral service who has no bias. Then check the person out with the Better Business Bureau, and if you are going to choose an attorney then call the local Bar Association and see if there have been any complaints against that attorney. Finally do business with a lawyer or organization who is a specialist in Living Trusts. One who has the training, education, and credentials to do this specific kind of work. You wouldn't go to a foot surgeon to take out a brain tumor...why handle your financial and legal work in that fashion?  So much harm is done by people (attorneys) who claim to be experts when they really don’t know what they are doing. The burden of proof is on you. I recommend that you choose an organization like Heritage Living Trust who has been doing nothing but trusts for 20 years...and its all they do. Their product and service are extraordinary and they have an A+ rating with BBB (with not one client complaint) and 24 years of specialized experience. You can reach them at 888-437-8778

If you would like to discuss this or any issue relating to these topics you may contact me at 888-437-8778

How Difficult Is It To Do A Living Trust

Today I want to talk a little bit about the process of actually accomplishing the task of doing a Living Trust. The thought of it can be a bit intimidating for some people but I want to assure you that it really is quite simple. Let me take you through it.

The first thing that must happen is for you to sit down with your spouse and/or your children and consider how you want to leave your assets and who you want as power of attorneys, conservator, and successor trustees. Usually this is easy because in most cases those duties will be filled by your spouse. But you need to consider who will do the job if your spouse predeceases you. One or more of your children? A best friend?  Sister or Brother? All of these are possible because virtually anyone you trust can fill any one of those positions. You need to consider geographical proximity however, because you shouldn’t give the healthcare power of attorney to someone who lives across the country for instance. Trust of the person you are appointing is the most important consideration. Who do you trust with your very life... and your life’s savings? As I mentioned...your spouse and/or your most trusted child or children are the most common and best choice. Once you have made up your mind on those issues you go to the next easy step.

The interview with the preparer of your trust is the next step and in this interview, which can be by telephone or in person, you will be asked questions that are important in determining how your Living Trust is set up. This process is painless and takes less than an hour. Once the needed information is collected by the preparer you can set back and relax for four to six weeks while your trust is being prepared.

The next step is when your Living Trust arrives. Your local representative, if you worked with one, will either bring the Trust to you or make an appointment to meet with you soon after the Trust is delivered to you. You will need to have a notary and two witnesses (not related to you by blood) to execute the trust. So, bake a pie and put on the coffee pot and have some friends (to act as witnesses) over for a Trust signing party. Signing, witnessing and notarizing the Trust is what you accomplish at this step (execution of the trust) and it is very important because your Trust has no effect until this step is accomplished. It will take about an hour out of your evening. Once this step is done you have what amounts to a Will in Trust form. If you stop here all your assets will still go through Probate because they have not yet been placed into the Trust. The next step is the most important of all.

To avoid Probate and realize the full benefit from your Trust you need to “Fund” it. That means you need to place all your asset and personal property into the Trust. This is done by changing the name on all your assets that have a public title...like your home, your cars, your stocks and bonds, your bank accounts and so forth. None of this is difficult to do. You take your executed Trust down to your bank and tell them you want to place your accounts in the Trust. They know what to do and will take care of it for you. You are now the Trustee on your bank accounts. You do what you have always done when you sign a check except you put “Trustee” behind your name.  Itemize and write a description of your "personal property"...things of significant value to you...into your Trust to show your intention of placing them in the Trust. You change the name on your stock account to the name of the Trust and have new stock certificates (if you hold actual stock certificates) issued in the name of the Trust. This takes a little time but its not hard and you get full and complete instructions in your Trust package on how to accomplish all this. Once you have completed the funding step you are pretty much done. Everything you funded into the Trust or listed in the Trust is now protected from Probate. Anything leave outside the trust may go through Probate so be careful to place all your assets of value into the Trust.

You will want to put your Living Trust in a safe place and give your successor trustee the provided copy of the power of attorneys, and healthcare directives so they can act on your behalf in an emergency without having to go to your home and search for your Trust. I discourage putting your Trust in a bank safety deposit box because your loved ones may not be able to gain access to the box without your signature.

You’re done! Not hard, not complicated, easy to accomplish. The main thing is to be diligent in the task until it is completed. Now you can rest assured that everything is taken care of. Delaying in preparing a Living Trust is a “strike one, your out” situation. Too late is too late. Once that accident or illness or death occurs you can’t go back and do a Trust. The best approach is do it now while you are thinking about it so that you can rest easy knowing that you will never be caught unprepared at a time when you are grieving your loved one or needing assistance yourself.

If you would like to consult regarding this process or your situation, please feel free to contact us at 888-437-8778

A recorded Living Trust Presentation is available by telephone at:
866-927-8552

Our website
www.heritagelivingtrust.com


Until Next Time...