Estate Planning and the Fool
Re: Do I need a revocable living trust?

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By 2gifts
February 10, 2005

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There are a growing number of ways to transfer assets to inheritors free of probate within weeks or, at most, months of death. These include making gifts before death, adding a pay-on-death designation to a bank account, holding your house in joint tenancy with right of survivorship with your spouse or partner, and naming a beneficiary for life insurance and retirement accounts.

You should do what you feel most comfortable with. The fact is that we had wills done when we got married at 25, updated them when my dad gave my brother and me his house and before we had the kids when I was around 30 though we did include provisions for children as we were trying to have them, and then again when I was 36, but that time, we went from simple wills to having the trusts because of the various issues, not the least of which is what to do about assets we're leaving to the kids and estate taxes.

That said, the problem I have with the above-quoted paragraph is that I simply do not know when or how I will die. If I knew that, then planning would be a piece of cake. But death comes on its own schedule.

Living trusts do have a downside. Compared to wills, living trusts are considerably more time-consuming to establish, involve more ongoing maintenance and are more trouble to modify.

Here, we may just be using a different threshold for what is too time-consuming. It took about the same time with our attorney to do the work for the trusts as it had for the previous two wills, but I did know exactly what I wanted done and how things should be distributed including a few really odd things that we needed to address. So I didn't find it time-consuming at all. I also did all the legwork for putting our assets in trust, and with all the brokerage accounts, bank accounts, and DRP's, it still probably only took me a couple of hours to type and mail letters. This is below my threshold for a time-consuming activity.

The only on-going maintenance that we have had is to review the trust documents every 5 years, but you should do that whether you have a will or trust documents. We made some minor modifications with most of those taking place in the wills because we changed back-up executors on our wills and we changed my DH's back-up on his health care proxy. We did make a minor change to the trust, and was just done as an attached modification, and didn't seem much different to me than if we'd done a codicil on the will. There is no other maintenance required for the trust. Because it's a living trust, all the accounts use one of our SSN's, and we have to pay the taxes on any income generated.

Living trusts make a lot less sense for most middle-income people in decent health who are under age 55 or 60. Remember, a living trust does nothing for you during your life. It follows that there is usually little reason for a 45-year-old to worry about probate costs for many years. In the meantime, a serviceable will, which is easier to establish and live with, will do a fine job of transferring your property to your loved ones in the highly unlikely event that you die without warning.

Again, I don't think people should wait until they are older to have a reasonable estate plan. I knew in my early 30's that we needed to be worried about estate taxes because at the rate we were saving, they were going to become an issue eventually. So I shopped around for a lawyer for a few years until I found someone who I felt comfortable with, and had him do our trusts. We've now had those trusts and that estate plan in place for about 11 years, and though we've reviewed it, we've only made one minor change.

As I said above, I also simply do not know when I will die. I know that just because I am healthy now, that does not mean that I will live to a ripe, old age, so being young and healthy has never entered into my criteria for estate planning. That's because I have an aunt and a cousin who were each widowed in their early 20's and left with 2 children under the age of 4. Both of their young and healthy husbands were killed in auto accidents. So instead of using healthy and young as my criteria for having what I feel is a good estate plan for me, I used criteria around ensuring that my assets would pass to my heirs in a way that lowered the tax impact somewhat, by-passed probate so they wouldn't have to wait years to get the assets, and left everything to who I wanted in the way that I wanted.

I am almost 47, and I already know that I will most likely move my assets into an irrevocable trust to minimize estate taxes even more, but I know that I won't do that until I'm around 70. But that's already in my plan.

To be honest, if I did not have children, I would not have bothered with the trust because I wouldn't have cared how long or costly probate was nor how much was paid in estate taxes since our assets would have been a very nice windfall to our siblings. With children, however, I do care about those things, and that has been the driving factor in determining what we would do for an estate plan, with living trusts fitting right into that strategy.

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