Has Anybody Set Up a Trust?

[Fishindude77]

We are getting to the point 65 & 62 YO where we need to get our act together and set up a plan for our assets in the event of death, loss of cognitive or physical ability, etc.
We have pretty significant assets in real estate that I'd like to keep at least some of in the family, cash, stock in a company I'm close with, an IRA and all of our homes, buildings, equipment, vehicles, etc.
Also intend to get our funerals paid for and arranged to take that burden off the family.

I'm curious if anyone has done a trust -vs- a will and the pros and cons. Also any recommendations.
Open for discussion.

Thanks

[Jluke]

Consider giving with a warm hand.

feels like a lot of your wealth will be taxed when the time comes to distribute to your heirs.

real estate can be put into a trust if I understand correctly.

definitely advantages for how things are setup. I just don’t know the specifics.

for couples I don’t know the right terms to use but for joint accounts I think they need to be designated something like transfer on death so it doesn’t get locked or whatever.

Hopefully disneysteve can clarify as I think he ran into these kinds of things with his late cousin.

sorry if there is any bad information above.

[EasyMoney00]

We had a will set up less than a year ago. Just a basic last wishes if both parents die and out only child survives, and also a scenario that all 3 of us die at once. We wanted to set up a trust but lawyer said its pointless due to our age. I disagreed since tomorrow is not guaranteed. We will look into a trust at a later point.

We recently had a trust done for my FIL. Irrevocable trust, cant be changed. The only thing in it is his house. Once house is in trust, you no longer own it, the trust does. Just think of a trust as another entity. Within the trust a trustee is listed, and a backup trustee. My wife is the trustee. Trustee makes all decisions of whatever you stick in trust.

According to the trust lawyer, you can stick cash, brokerage accounts within the trust (most people do not.) He specifically said my wife, as the trustee, could withdraw cash, sell stocks and use that money for anything that is beneficial to the trust. She couldnt cash it out and go on a shopping spree. She could, however, remove money from trust and use it on lets say a vacation, if its for FIL. Everything I read only said things like bills, medical expenses, property tax, etc. We asked repeatedly about this and he said you absolutely could. Maybe it varies by state...I doubt it though.

Also, a trust will protect his house in case he ends up in nursing home. I believe it has to be in 5 or 7 years first. Thats the big thing. Protecting what you have from nursing homes or any other care.

His trust cost $4k to write up.

[EasyMoney00]

Also, talking with my account. Dont gift your property to your kids, if you can help it. If you do, they wont get a step up in basis. The issue with that, is if child eventually wants to sell home, they could potentially get crushed in taxes. Since there was never a step up, they would be responsible for the difference between original purchase price and what the home sells for. Just an fyi.

Also, brokerage accounts also receive step up in basis. Not sure if most people know this.

[disneysteve]

Hopefully disneysteve can clarify as I think he ran into these kinds of things with his late cousin.

I did deal with it to some extent but his estate was relatively easy since I was the executor and sole beneficiary. No matter what happened, it was all coming to me.

He had a will. He did not have a trust but when I met with his attorney after his death, the attorney told me he had strongly recommended a trust but my cousin didn't want to spend the $1,000 or $2,000 it would have cost to set up. In hindsight, my job would have been so much easier had he done so. Instead, I had to deal with a lot of his assets going through probate that could have been largely or entirely avoided with a trust. As a result, I spent thousands in legal fees (which was worth every penny as the lawyer was fantastic, but I would still have preferred not to have needed it) and it took about 15 months before the estate was completely settled. It would have been way quicker and easier with a trust.

All of that said, we have not set up a trust yet but we really need to.

At the very bare minimum, make sure you have a will and make sure that as many of your assets as possible have a designated beneficiary or are titled as Payable on Death to the person of your choosing. But from what little I know, a trust can make things considerably easier for your heirs after you're gone.

[myrdale]

I've had a will for about 10 years now. EVERYONE over 18 needs a will, medical power of attorney, and advanced health care directive. All three of these costed me a total of about $450.

Even if you think "oh if I die, my wife or kids will get everything so it's fine" get one anyway!!

And make sure you have up to date beneficiaries listed on all of your bank accounts, and retirement accounts.

Make sure the people you list in the will (and where appropriate the people you don't list) are well aware of what the situation is while you're still alive. It shouldn't be a secret and it will save them all so much head ache if they are aware now rather than later.

As for the trust, I really don't understand where or why you'd want one.

[disneysteve]

As for the trust, I really don't understand where or why you'd want one.

Here's a good article that breaks down wills and trusts and when each is appropriate.

https://www.nerdwallet.com/article/investing/estate-planning/will-vs-trust

[cypher1]

Everyone's needs or situations can vary, but the main take-a-way for a will is basically just legal document outlining or instructions on what to do with your assets after your death. That is where a personal representative or executor role follows those fiduciary steps to the heirs. While a trust is another legal entity for putting certain assets like title of a home or other assets to avoid probate court (also not on public record) for providing to beneficiaries. Revocable trust are more common and can be modified/updated over time as things change. Irrevocable trust cannot be changed or altered by anyone once established, to protect assets, like for charities or other organizations for beneficiaries. If you had disabled individuals or family members with that require further medical assistance like SSI or medicaid, a supplemental needs trust (SNT) would protect the assets or inheritance from government taking them.

A trust is more expensive to setup but is not always complicated. I only have a house but I'm planning to complete my revocable trust with my estate lawyer later next month. I was quoted 1600 to complete everything, which I really just need to get a copy of my deed from my county and complete my beneficiaries list. Keep in mind my financial situation is pretty simple, as I'm 44, single, no kids or any dependents. I think my sister and her husband were quoted about $4000 for both of them, since they have kids and multiple properties.

I am no expert in this subject and left a lot out, but I have become more familiar with estate planning. As last year I became my parents attorney-in-fact for their power of attorney (POA) document and have maintaining their finances (another mess and thread for another time), along with executor. As my oldest sibling manages our parents and our youngest sister with special needs as the healthcare agents for all three. I will say it was huge relief to get everything writing, even though they ended up going with only a will given their simpler financial situation, and they both may be in assisted living memory care within the next 12-24 months unfortunately. The goal with youngest with special needs is for my two oldest siblings to split guardianship and conservator roles for her. This personal example is simply how that plan or situation can start getting more complicated.

The last thing I'd add is if you have a lot of assets to protect and pass down to avoid probate court based on your list (titles for vehicles don't typically go in them), a trust is most likely your direction, along with the will. I'm assuming you have a good idea of who will fulfil attorney-in-fact, personal representative, healthcare agent, along with advance care directives (don't forget having a back up for each role just in case). Having a good organization of lists of accounts to manage will save those roles some headache too. I always tell those around me to get started on their estate planning sooner than later. Like everything else for expenses, I expect the costs to only go up over time.

[EasyMoney00]

I have several coworkers in their late 50s that do not have a trust or will. I don't get it. Well, I do get it. They're cheap and aren't into finances.

People on here or other financial forums who do care about their finances, makes no sense to me why they wouldn't have it. I think some people would rather not plan for a life without them in it, meaning planning for death. It makes them feel old or like they're on the way out.

[disneysteve]

I have several coworkers in their late 50s that do not have a trust or will. I don't get it. Well, I do get it. They're cheap and aren't into finances.

People on here or other financial forums who do care about their finances, makes no sense to me why they wouldn't have it. I think some people would rather not plan for a life without them in it, meaning planning for death. It makes them feel old or like they're on the way out.

I think you hit a couple of important points.

People think getting a will is expensive. It's not assuming you're situation is pretty basic. You can do it online, maybe even for free.

And yes, people don't like confronting their own mortality. They think they will live forever. It's the same reason why so many die without life insurance.

I get so annoyed every time something pops up online about someone dying and a fundraiser being organized to help the family. My first question is "what about their life insurance?" As long as you are youngish and in good health, term insurance is dirt cheap, like the cost of one fast food meal out a month. People blow a lot more than that on beer and lottery tickets.

[LivingAlmostLarge]

Okay so we have a will, and two trusts. We did ours about 5 years ago. What we did most people don't need to do or waste money doing. And most people don't necessarily need a trust. It is state dependent. I'll explain my mom and our situation.

A trust helps bypass probate. If you have nothing what's the point? Depending on what you have and how you have it titled there is no point.

My mom widowed one year ago has one kid me. I am the executor of her estate in her newly made will. My kids get everything if she does before they are 30 in about 15 years.

Only thing in her trust in Hawaii is her condo and house. It is a revocable trust and CAN be touched by Medicaid. For those trying to avoid paying for welfare for a nursing home your house and assets have to go into a irrevocable trust. A revocable trust can have a lien placed on it. Honestly use your damn house to pay for a nicer place than welfare. My grandma has Medicaid welfare but she has no money literally. Social security of $900 a month.

My mom has her IRA, Roth IRA, and brokerage account titled to split as tod or transfer on death beneficiary to my two kids. So it'll avoid probate. If she gets sick I'll sell the homes and use her IRA or brokerage to pay and give the kids the house money. She is not trying to go on welfare so no irrevocable trust. Irrevocable means you can't change it. My mom did it in December and it cost $5k for it all. But it includes all the retitling of the property and accounts since my dad died.

As for me? We have a will and irrevocable and removable trust. Our irrevocable trust is for our kids to have some stock that we had no idea if it would be worth anything. Then we have a testamentary trust that goes into effect if one of us dies. I believe at that time we also do a spousal lifetime access trust to preserve the assets 50/50 for the kids and give the remaining spouse access.

For us there are complexities we had that required some planning both as a couple and for our kids. I think it was $10k at that time. I don't not think most people need it. We were and are hopeful to exceed the estate tax.

Trusts do not avoid taxes. Everyone thinks they do. They do not. Trusts when they earn income and have to file taxes owe a high rate of taxes. But people do them for many reasons.

The biggest reason? They think like financial planners they need professional help for something they don't. I do think a trust helps especially when you are not married anymore. But my parents didn't have one and we had it all transferred within 30 days with jtwros and beneficiary and tod. No probate nothing.

My parents had a useless trust which much like their financial planner of years ago was unnecessary.

We only got my mom a trust because you are required to go to probate in Hawaii if the real property or real estate is not in a trust. My parents house and condo were not but the tod title meant no probate. We did not title the house and condo from my mom to me so we can gain if needed the stepped up basis.

[srblanco7]

We set up a revocable trust last year on the recommendation of our estate planning attorney. We've moved our brokerage account and house into the trust. The trust will become an irrevocable trust once DW and I both have died. As I understand it, the main benefits of establishing the trust include:

1. Avoiding probate (which has the added benefit of providing a level of privacy related to the details of our estate).
2. Having a trusted third party manage the distributions from the trust to our children (who at this point are in their early twenties) until they reach a more mature age (35 yo as I recollect).

There are other machinations and variations on what happens or can happen to the trust related to the estate tax, incapacitation, etc. So having the trust in place now gives us some flexibility as we move forward.

[myrdale]

People think getting a will is expensive. It's not assuming you're situation is pretty basic. You can do it online, maybe even for free.

I had purchased a will kit from Staple's for around $20. I thumbed through it, then it sat on the corner of my desk for a year.

I bit the bullet and went to a local lawyer, cut a check for $450 and a week later I had the will, and associated documents.

Personally I am against DYI when it comes to this. Every state has different requirements. It'd be a shame to do it for free or on the cheap, only for your family to find out after the fact that you didn't get something noterized, or filed properly, or didn't sign on the dotted line, or witnessed.

As soon as you have any amount of net worth, it is worth doing it right.

[Fishindude77]

Thanks for lots of good feedback.
I've got an appointment scheduled with an attorney a friend was pretty happy with in a couple weeks.

[disneysteve]

Personally I am against DYI when it comes to this. Every state has different requirements. It'd be a shame to do it for free or on the cheap, only for your family to find out after the fact that you didn't get something noterized, or filed properly, or didn't sign on the dotted line, or witnessed.

I tend to agree, but I also say that as someone who can easily afford to pay an attorney a few hundred or thousand to do it officially. For those who can't, I think the current DIY methods are okay. You just need to be sure you read and understand and follow all of the instructions to the letter.