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Thinking about a living trust

February 28th, 2007 at 03:21 pm

I asked some friends for recommendations for a wills and trusts lawyer. I called one of the names given to me, and he seems really good. He's both a lawyer and a CPA, charges a flat fee for the documents, and future changes are free. We talked for about 40 minutes. He said that if all I wanted to do was change the executor and guardian, that it was probably going to be cheaper to go back to my original lawyer. On the other hand, my original living trust was established when I was single, and he would recommend gutting it and converting it to a "double trust" where it is joint between DH and I. He very strongly recommended putting our house into such a trust in order to avoid probate, and naming the trust as beneficiary to all life insurance and retirement vehicles. He pointed out that if DH and I both die, my existing trust has provisions to prevent our children from inheriting and blowing all the money at a young age, but our retirement money currently would go to them immediately. His normal fee for a single trust is $1400 and for a double trust is $1800, but he said he'd do it for half that since I already have a trust in place.

Still, $900 is a lot of money right now -- either our laptop or vacation fund. How awful is probate anyway? Do we really need a trust at this point?

The existing trust has a bit of bad history behind it. When we got engaged I had a bunch of stock options that were going to hit it big (yeah right -- we all know how well that one turned out) and we compromised by putting my assets in a trust instead of drawing up a prenup. So now the stock options are a net loss, but this trust is sitting out there with about $300k of mututal funds in it and the wrong successor Trustees on it. DH hates to talk about the "what-if" details you need to go into when planning life insurance, wills, etc., so getting all this straightened out is not going to be fun.

In other news the 400 point drop in the market yesterday dropped my portfolio value about $15k-$20k. I didn't even think to check until other people mentioned how it affected their portfolios. I don't watch my investments much -- I tend to err on the side of inaction. Happily I can still call myself a millionaire because I'm just over $1M. I'm ok with being 100% invested in stocks because these kinds of drops don't bother me and because I have enough of a nest egg that even with a big correction it's still a good amount. DH will be happy -- he's got $55k sitting in cash in a rollover IRA, so it's a good time to invest.

4 Responses to “Thinking about a living trust”

  1. debtfreeme Says:

    yes you need a trust, do not put your family through probate it could take years depending on the circumstances.

    ask him if he will take payments for several months.

  2. monkeymama Says:

    Personally, I think you would really want to avoid probate. You have a lot of assets. Your house is probably the main one (Assume a lot of your other assets are in your retirement). The difference between my clients who have living trusts when they pass, and those who don't, it's just night and day. Not only can you avoid probate fees, but can structure things to avoid estate taxes as well.

    If nothing else your heirs will thank you, your child will be well provided for (instead of assets being tied up in court). Even with community property it can get sticky without trust.

    I would be careful about naming a trust benefeciary of retirement funds. IT could have tax issues. I can't remember what my lawyer said about it - glossed over. For your spouse - better off being direct beneficiary I believe. Depends on the vehicle. Hmmmm, I will have to ask about the kids. Our lawyer was kind of vague on this, but that it was better not to involve the assets in trust. We have a little bit of everything too (401k, IRAs, pension). I think I am going to call her because I am really confused now. Probably glossed over because we don't have much in them now, our smallest assets. But I Am thinking ahead now.

    I think in your case it would be $900 well spent. What a deal!

  3. monkeymama Says:

    Oh gosh my curiosity piqued and I was looking up what to do with retirement - very mixed suggestions and I know congress just passed some law to make it more beneficial to pass on IRAs to non-spouses. I think I need to do some homework, my lawyer was clearly against even leaving the trust as beneficiary to any retirement money. I am wondering if ROTHS matter (since not taxed). I would ask your lawyer a lot of questions on that topic. Seems this answer may change often over time, with all these changes.

  4. Michael Says:

    If you use proper language you can leave IRA's to a trust, although you would want to work with an expert because a mistake could be costly.

    Keep in mind there is more to avoiding probate than the Money Savings. Probate is a Court Process, do you want your loved ones to be involved with the court should you pass?

    even If probate were free, would you still want an inventory of you assets at passing recorded at the court house?

    These are the more important questions when deciding on a trust.

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