Discussion:Living Trust
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Actionbsns (talk|edits) said: | 7 November 2007 |
| Forgive my posting this here, I am in California, my step brother has suggested to my dad that he have a living trust set up by a friend of his who is an attorney and I need a little guidance. My dad has terminal cancer, I don't know the "friend", and although my step brother is a nice guy, we are not close. I've done some research on the internet and it seems that the only real asset my dad has that could benefit from a transfer to a trust would be his mobile home worth about $65,000. There is a holographic will in place stating that the mobile home be sold at my dad's death and the proceeds divided equally between Step Brother and myself. There are a couple of bank accounts with my name on them and I have no idea of their value although I belive they are less than $100K. I can see some benefit to the trust for the mobile home, but I'm not convinced it's necessary since it's so value is so small. From what I've read, I can't tell if having that asset in the trust would protect it the state should my dad become incapacitated to the point of requiring extended convalescent care. Would it? There would be no estate taxes, either state or federal, but would the will be required to be probated? Kevin, if you are reading, is this something you would recommend to your clients? At this point I haven't seen any documents and I'm not sure if they are boiler plates, which I can't support, or if there will be an actual session with this lawyer, which I would probably support, and I'd like to be named as a co trustee in those documents, how do I do that without seeming to be a shrew? Gotta go, I'm on a library computer and will be checking in later from Starbucks. Thanks for your tolerance. | |
| 7 November 2007 | |
| I'm from Georgia, which has a very advanced probate code, and we have comparatively reasonable costs of probate. I am generally not a fan of living trusts, especially if the settlor (maker) of the trust is relatively young, and in good health. The reason is that they require maintenance to keep them up over the years, and clients forget to do it. Under the facts of your case, and with your father in the condition that he's in, it could be a viable option. They can be especially attractive if the settlor owns property in several states. They can also be helpful if your father starts out as sole trustee, with the ability for a successor trustee to spring up even during life if he becomes mentally disabled. Having said all that, I see some warning signs here. Why not have a real Will made at this point; to take your father's stated intentions in the holograph and have it put in legal language? The lawyer can prepare a good power of attorney for him at that time also, if your father desires one. Perhaps a Health POA and/or living will too. My advice is that Pop choose the lawyer (perhaps a trusted friend with some business experience can suggest one to him), and that neither son meet with dad and lawyer. You can drive him to appointment, and drop him off, pick him up. You're looking at two appointments. I'm sure some Cali. people, and others, will come along and have additional comments. | |
Actionbsns (talk|edits) said: | 7 November 2007 |
| Thanks Crow, I value your comments in this area. I was thinking of suggesting to my dad that he chose his own lawyer (BTW every dollar out of his hand screams in protest, so he's not likely to want to spend much on this which why he has a holographic will), or at the very least, see the lawyer being recommended without the step brother or myself present and all documents are drawn up based on that discussion and are unique to him, his situation and his wishes. I strongly oppose boiler plate docs.
I was trying to find something about a rule I remember from years ago about transferring property within three years of death, in anticipation of death, but couldn't find anything and my memory is hazy on the effect or if it still exists. Any comments? | |
| 7 November 2007 | |
| Well, your dad being that way is not that unusual either! At least have the holographic Will looked over by a lawyer. Regarding your last comment, these type asset transfers (w/o full and adequate consideration paid) are pulled back into the testator's gross estate for estate tax purposes. If Dennis comes along, perhaps he can add to that. That does not sound like it is an issue in this case, BUT you never know with California property, and you never know with some older people just how much money they have. You would not believe the money I've seen turn up in safe deposit boxes, and the like. Good luck with it, and I'm hopeful your dad will have as peaceful an experience as is possible. | |
| 8 November 2007 | |
| A living trust is one made during your lifetime as opposed to one being set up at the direction of your will, or testamentary trus.
Then consider this the living trust can be revocable or irrevocable. A revocable living trust will avoid probate. As far as I know that's the only purpose of it. It does not need a ein. The trustees take over upon death and administer the trust or sell the assets as the trust document states and give the funds to the beneficeries. The other trust is an irrevocable trust. This protects the assets from medcaid. However there is a 5 yr look back going into effect. The assets are transferred immediately to the trust and the trustees administer it, giving the income to the beneficeries. Maybe you should go the the atty with your father to see what type of trust is needed if any at all. | |
| 9 November 2007 | |
| A few additional thoughts:
A revocable living trust may avoid probate in that the probate court does not have jurisdicition over the trust, but it will not necessarily avoid probate fees. For instance, in CT the statutory probate fee is assessed on the gross taxable estate, which includes revocable trust assets. The revocable trust does not need an ein during the lifetime of the grantor, but it will need to obtain an ein when the grantor dies. Even if the trust terminates, it needs an ein during the "administrative" period. Consider gift consequences when transferring assets to an irrevocable trust. | |
| 9 November 2007 | |
| Transfers within three years of death would not apply in this case. Sec. 2035. I personally do not know an attorney who would draft a will with someone besides the principal in the room. While there are states that use non-probate assets as inventory for fee purpose I do not know of a state that requires probate (or fee)absent assets. | |
| 9 November 2007 | |
| Funny thing about CT...For a CT non-taxable estate (currently 2 mil or less) the CT estate return is filed in the probate court; for a CT taxable estate the CT estate return is filed with the DRS and a copy is filed in the probate court. If all assets are non-probate, there is no probate required, but a probate fee is still assessed. | |
| 9 November 2007 | |
| The lawyer referenced in the original post should draft nothing without confering with the principal. Unfortunately, there are unscrupulous lawyers out there who will take advantage of the fear of probate costs to hawk the "living trust" whether it's needed or not; I imagine the intent of the step-brother may be to get that money out of the joint accounts, much as I hate to impute that to him. | |
| 9 November 2007 | |
| CT is indeed fascinating. Haven't done one in a long time. Certification by probate judge for the value of a non-taxable estate.
I stand corrected. | |
| 9 November 2007 | |
| One thing you may want to look into is whether CA respects handwritten wills. Not all states do and if Ca doesn't, he would be considered intestate. | |
Actionbsns (talk|edits) said: | 12 November 2007 |
| Thanks all, I just returned to my office and have read all the information you have been kind enough to offer. I was able to do some additional research and found that California will accept the holographic will if it is properly witnessed and entirely handwritten. Turns out my dad's will would not qualify because it was prepared on a computer and is printed, however it is properly witnessed and signed by him. I'm about 98% sure it would be accepted as well from what I read, however I suggested to my dad that he have it properly drafted by the lawyer, just in case. California does not require probate on estates with a FMV under $100,000, so I think my dad will be hovering at about that amount. He'll either be just under that amount and not require probate or be just over it a little bit and if costs are determined by the value of the estate, they should be minimized.
If long term care is needed, the cash in his bank accounts is at risk to be spent down before the state will pay for care. I don't see a way around that at this point. The look back period is currently 3 years and is changing to five and it doesn't look like we can do much to protect that. It was pretty clear in one article I read that transferring assets to a trust was considered the same as if you spent them - the state doesn't think you should do that and will withhold social benefits for a period of time based on a formula. When I had to do this for my mom, I was able to annuitize her cash and she receives a monthly stipend, but it looked like that loophole is closed or is closing. I tried to leave him with as much information as possible condensed in a simplified manner so he could understand. He doesn't or won't ask questions, so I'm hoping that what I left behind is helpful for him. | |
Actionbsns (talk|edits) said: | 1 December 2007 |
| I'm so upset and have to vent, so be thee warned. Just spoke with my dad and he completed the fact finder to give to the lawyer last evening with the step brother and his wife. I just know this trust is going to be some boiler plate that the lawyer has in his computer, how else can he actually prepare it if he hasn't actually met my dad? More to the point, why is it that the advice of someone who cleans houses and someone who works some kind of tool, is more valued than the advice from someone who has spent years in the financial arena? Guess I'm jealous at one level, but concerned as well. I think my dad is being bamboozled by his "depression mentality" that getting something for free that should cost hundreds of dollars is a good thing. It's so frustrating to try to help. I can't get upset at him, he's so ill and I gon't want to alienate him. Calling the brother in law would probably reduce itself to a major family issue - he actually thanked me for coming to visit MY dad because it meant so much to him (the brother in law). Oh well, this now probably belongs in General Chat. But it is something to watch for with clients as well, all this family stuff and how it affects everyone. | |
