If you have a revocable living trust...

[Deleted]

Tell me why you went that route over a will.

[saywhatnow]

We have both.

[cjeanette]

We have one and a pour over will. Avoids probate. Makes it cleaner in general. Dealing with clients investment accounts I have learned the benefits of a good estate plan.

Sent from my SPH-L710 using proboards

[moolarkey]

My parents had a joint revocable trust. When my dad died it became a sole revocable trust in my mom's name. When my mom died it split to 2 separates trusts, one for me and one for my brother.

My parents had put everything in their trust - house, land, vehicles, savings accounts, motor home, boats, stock, checking accounts, lots of CDs. My mom couldn't put her very large IRA in the trust as you can't put an IRA in a trust. My brother and I split that and had to pay taxes on it. We both took 5 year payouts and paid taxes each year on the amounts we received. The other thing they missed was a canoe they owned and something else, like a motorcycle or something.

We only had to probate a VERY small amount of "stuff" under $2,000. By everything being in the trust, the minute my mom died we owned all of those things. We didn't have to do anything, they were ours.

I can't tell you how easy this made it for me. I was the executor and handled everything for us. I could have taken money out to cover my phone calls, trips to my hometown etc but I didn't (when my grandfather died my uncle that was the executor billed everything to the penny - to each their own, it was not what I chose to do).

As the CDs matured I was able to cash them out and split the money between my brother and I. I split one checking account between us. The other checking account and 1 savings account I kept open until I was sure all bills were paid and then I split those.

One surprise we had, I found papers for an insurance account for my mom that my grandparents bought for her when she was a young teenager. I figured it couldn't be worth anything but the trust attorney encouraged me to send a claim in, it only cost me a postage stamp and an envelope. It wasn't HUGE but it was about 5K and we split that too.

I need to get on the stick and do this for H and I. I just made everything so much easier and faster to wrap up when my mom died. It didn't cost them much either. My mom did a lot of the leg work, by that I mean she actually went to the court house and got the real estate transferred in to the trust, she went to the BMV and got all the vehicles and "toys" transferred in. She could have had the attorney do it but she saved a lot by doing it herself. I think they paid either $1500 or $1800.

When my mom died I think my brother and I paid the attorney another $1500 to help us wrap everything up. Because the trust was so well set up I really just needed her to confirm I was doing the right things and not screwing something up. I really appreciate her help and to me, it was $1500 well spent and I know my brother agrees. We were in such shock that just having her to say yes, that's right meant a lot.

My mom had set up 3 binders. One for the two of them and one each for my brother and I. It had copies of all of the trust paperwork, the stocks, power of attorney, medical power of attorney, living wills - everything. My mom was such an organized and detailed person. I still have my binder, don't need a thing in it any more but I still have it.

I've seen what some of my friends have been through when their parents didn't have trusts set up and it has taken a few of them 4-5 years to wrap everything up. We were done in between 6 and 9 months, including selling the house some other things.

For years my mom and dad wanted to tell my brother and I what we would inherit and neither of us would let them. We didn't care, we didn't earn it and just didn't want to know. I kept even forgetting where the binders were stored, they wanted my brother and I to each take our binders home and we wouldn't. I know that probably doesn't make sense to some people but we just felt it was their money and we didn't need to know what they had and what they were doing with it. As long as they were ok and not having money problems then it wasn't our business.

[Marmee]

We each have a will and each have a trust. Mainly for easy of transfer of our assets when we die. We changed the beneficiary of our life insurance, ect to our trusts, property, vehicles, ourselves (still working on some) like PP mentioned. Ours was $1200 & we just did it last year. Our lawyer probably gave us a deal since we did ours with my MIL & was referred to him by a mutual friend who is an attorney (personal injury) too.

[House4Me]

Jan 6, 2014 23:27:30 GMT -5 moolarkey said:

My mom had set up 3 binders. One for the two of them and one each for my brother and I. It had copies of all of the trust paperwork, the stocks, power of attorney, medical power of attorney, living wills - everything. My mom was such an organized and detailed person. I still have my binder, don't need a thing in it any more but I still have it.

Great post! We also have a revocable living trust set up/ I never thought about the binder idea for each kid but it's a great idea for down the road. I couldn't agree more about putting everything of value in the name of the Trust. I think we paid around $1800 for ours to be set up and it was/has been worth every penny. I remember at the time it was a pain to change over the account names to the trust but now that it's all behind us, everything moving forward is a breeze. 

Ours is set up the same way that if one spouse dies the other gets the remaining trust. If both spouses die, it's split between all our kids equally... what I don't recall is it going automatically into a new trust name for each kid.... did your mom have to set this up specifically or did you and your brother just assume ownership of the trust name as trustees?

[marathon55]

Moo - may i ask why you didn't do an inherited ira with your parents IRA? The reason I ask is my mother has terminal cancer and will be passing in the next few months and I will be receiving a portion of her IRA and have been told the best thing to do is turn it into an inherited ira so you can let it grow and take out less per year until you are 82ish.

The other reason this is important is I have a totally disabled sister and a supplemental needs trust was created and we are hoping to have her portion of the ira money placed into that. Trusts are taxed very high so the inherited ira is the way to go for her especially.

[moolarkey]

We did inherit the IRA. The IRA wasn't in the trust. You can't put an IRA in a trust. You don't pay taxes on what you get in the trust because you own it- and you don't probate the trust.

Marathon55
The IRA was inherited and taxable. Do you see the difference between what we got IN the trust and what we inherited? Maybe this helps - you take ownership of the trust. You inherit the IRA.

As far as I'm aware, IRAs still cannot be put in a trust. Possibly your sister's situation makes that different but my mom could not put the IRA in the trust.

We met with the family banker in my hometown and he gave my brother and I our options. Take it all at once or take it over 5 years and we could choose differently from each other. We both chose 5 year pay-out.

Maxwell
We didn't do anything, everything just moved for us. We met with the trust attorney several times, initially to understand what we were receiving. What things we had to pay. My dad became ill when I was 12 and bought a funeral policy then. He outlived their predictions so many times it was amazing. When we knew the end was near we went to the funeral home, picked out everything - he asked us to do this. We took pictures, etc home for him to see and he liked everything we did. I know this wouldn't work for probably most people. It gave him peace of mind that he knew what was going to happen and that my brother and I went with my mom. That alone was a huge comfort to him.

Because he lived so much longer than expected, there was 1/2 the money left in the policy. A few weeks later my mom decided, on her own, to just drop by the funeral home and pick out their joint grave marked and all of her own funeral arrangements - actually she chose the exact same things we had for dad except a different colored liner for her casket. My mom was so practical and down-to-earth, this was her way of dealing with things. So that was all paid for. The only thing we paid for as far as the funeral was flowers, she told us (she was being funny) we could at least get her some flowers. We had red roses everywhere.

Another off topic but funny thing and my mom would have loved it After her service and everyone but immediate family was gone, we were sitting in my parents great room and the phone rang, it was the funeral director. His engraver for the markers was in town the next day, would he mind if he had him go ahead and put my mom's death date on their marker. A very common-sense decision that my mom would have loved and said HELL YES.

When we would meet with the attorney I'd take a list in of things I had done, things to do. They had accounts at a couple of banks, with one being their main bank but I had to close out all of those accounts, etc. Cash out CDs. Just stuff. She helped me be sure i wasn't missing anything.

I spent an afternoon just calling and cancelling appointments (hair, eye, annual dermatologist), cancelling credit cards. The only thing she owed was $54 for Easy Spirit tennis shoes to Macy's. She hadn't worn them, I returned them. She had no debt at all. As I cancelled her cards I'd ask what the limit was. The woman could have charged up to 1.5 million. I about croaked myself.

Another off topic but may be useful, when someone dies. Get several copies of the death certificate. Some places will accept photocopies or scanned copies but others required the real thing. I live 60 miles away, I called her Verizon store to cancel her phone. Idiot told me I had to come in, in person and bring a death certificate. I offered to mail or fax an original. He insisted I had to up there, in person with certificate in hand. I contacted their national VP of customer service and complained. That person cancelled it for me and apologized.

Usually the funeral home will or can order these for you as I believe they have to have one for their records and I don't recall why but in Ohio it's faster/cheaper to order them all at once. Possibly the state responds faster to a funeral home than to a person? I just don't recall but the funeral home is the one that told me to be sure I ordered extras and not just one or two.

So more than anyone asked about!

[tripleshot]

Jan 7, 2014 11:57:08 GMT -5 farmvillelover said:

Jan 7, 2014 6:25:14 GMT -5 marathon55 said:

Moo - may i ask why you didn't do an inherited ira with your parents IRA? The reason I ask is my mother has terminal cancer and will be passing in the next few months and I will be receiving a portion of her IRA and have been told the best thing to do is turn it into an inherited ira so you can let it grow and take out less per year until you are 82ish.

The other reason this is important is I have a totally disabled sister and a supplemental needs trust was created and we are hoping to have her portion of the ira money placed into that. Trusts are taxed very high so the inherited ira is the way to go for her especially.

I'm sorry about your mother. Whoever drafted your moms documents should have drafted in "look through" provisions into the trust so that any iras or retirement plans made payable to the trust on her death can absolutely be stretched out over the lifetime of each specific beneficiary. This takes 1) an attorney who knows what they are doing 2) an Ira custodian who knows what they are doing and possibly 3) a well informed beneficiary

I have had small and large ($5mil+) iras where the primary benefiCiary was a revocable living trust and beneficiaries were able to use their life expectancy to calculate payout.

Unfortunately, the 5-year payout rule on iras upon death is the default when an attorney and/or advisor didn't have the sophistication to know the alternative

So you can  make trusts beneficiaries on Roth IRAs?  I just set up a Vanguard Roth IRA and it wouldn't let me make my trust the secondary beneficiary (DH is primary).

[SJ]

We deal with many revocable living trusts, but I have usually seen them working in tandem with a will, not in replacement of a will.

As far as the inherited IRA's, it depends on many factors (age of beneficiaries, size of IRA, etc.) but we often recommend that our clients take their required distributions over their own lifetime. This stretches out the tax deferred growth and minimizes the tax burden.

With certain types of annuities, this is not always a feasible or logical option, but for the vast majority of inherited IRA's in normal investments it would be our first choice.

ETA: We can also have the ability to name trusts as the primary or secondary beneficiary of retirement accounts, but oftentimes the estate lawyers or accountants recommend to have it go directly to the beneficiaries. That is not a call we make.

[marathon55]

Jan 7, 2014 11:17:55 GMT -5 moolarkey said:

We did inherit the IRA. The IRA wasn't in the trust. You can't put an IRA in a trust. You don't pay taxes on what you get in the trust because you own it- and you don't probate the trust.

Marathon55
The IRA was inherited and taxable. Do you see the difference between what we got IN the trust and what we inherited? Maybe this helps - you take ownership of the trust. You inherit the IRA.

As far as I'm aware, IRAs still cannot be put in a trust. Possibly your sister's situation makes that different but my mom could not put the IRA in the trust.

Moo - I understood you inheriated and I know a normal trust can't have an inheriated IRA in it but I have been researching what happens when you get a IRA of a deceased parent and you have the option of paying the taxes within 5 years or doing what I think it called a stretch IRA.  That way the IRA is now attached to your life till ~82 and you only have to take minimum distributions.  The result is it grows much larger and you can stretch the tax payments out over time.  Just wonder if you looked into this?

[marathon55]

Jan 7, 2014 11:57:08 GMT -5 farmvillelover said:

Jan 7, 2014 6:25:14 GMT -5 marathon55 said:

Moo - may i ask why you didn't do an inherited ira with your parents IRA? The reason I ask is my mother has terminal cancer and will be passing in the next few months and I will be receiving a portion of her IRA and have been told the best thing to do is turn it into an inherited ira so you can let it grow and take out less per year until you are 82ish.

The other reason this is important is I have a totally disabled sister and a supplemental needs trust was created and we are hoping to have her portion of the ira money placed into that. Trusts are taxed very high so the inherited ira is the way to go for her especially.

I'm sorry about your mother. Whoever drafted your moms documents should have drafted in "look through" provisions into the trust so that any iras or retirement plans made payable to the trust on her death can absolutely be stretched out over the lifetime of each specific beneficiary. This takes 1) an attorney who knows what they are doing 2) an Ira custodian who knows what they are doing and possibly 3) a well informed beneficiary

I have had small and large ($5mil+) iras where the primary benefiCiary was a revocable living trust and beneficiaries were able to use their life expectancy to calculate payout.

Unfortunately, the 5-year payout rule on iras upon death is the default when an attorney and/or advisor didn't have the sophistication to know the alternative

Thanks for the insights.  It's so weird planning for a person's death when they are still around but we know it's going to happen sooner than later. Combined with the fact that my sister is totally disabled and I'm going to be the guardian and trustee for her supplimental needs trust it makes things more complicated.

I think the stretch IRA will be straight foward for my brother and I because we aren't dealing with any trusts.  However, for my sister we are trying to work with an attorney (expensive at that) to try to make sure the trust is written correctly so that money can be stretched out.  This will be the primary funding for her needs trust and the last thing I want is the pay ~40% taxes the first few years. 

Luckily, we have a slightly different option in WI, called WisPACT where an organization will run the trust for ~1.75% annual fee but they are experts in disability laws and understand how strech IRAs can be placed in a trust.

[dbsk8dance]

Children. It makes it easier for the living to deal with everything.

[doobeedoo]

Jan 7, 2014 12:32:03 GMT -5 RockNVoll said:

Jan 7, 2014 11:57:08 GMT -5 farmvillelover said:

I'm sorry about your mother. Whoever drafted your moms documents should have drafted in "look through" provisions into the trust so that any iras or retirement plans made payable to the trust on her death can absolutely be stretched out over the lifetime of each specific beneficiary. This takes 1) an attorney who knows what they are doing 2) an Ira custodian who knows what they are doing and possibly 3) a well informed beneficiary

I have had small and large ($5mil+) iras where the primary benefiCiary was a revocable living trust and beneficiaries were able to use their life expectancy to calculate payout.

Unfortunately, the 5-year payout rule on iras upon death is the default when an attorney and/or advisor didn't have the sophistication to know the alternative

This is so good to know.  Like moolarkey's mother, my MIL was pretty darn organized and put nearly every darn thing into a trust, which made the logistics easier for DH and BIL to deal with.  But also like moo's situation, the IRAs were the one thing that she was told couldn't go into the trust and DH and BIL are also doing the five-year payout.  Now I'll know better.

I've previously read about having a detailed binder with all info included too.  It seems so helpful for the survivors and beneficiaries; I'm going to have to do that at some point.

This was a super interesting and helpful thread.  Thanks especially to moolarkey for your detailed responses.  A lot of it mirrored our experience with MIL--we actually ordered too many death certificates though on the advice of some friends of the family, LOL.

I have nothing of value to add here but this thread is really helpful and something I need to consider for myself (and DH of course). I am currently in the process of settling my parents' estate now (they died a few months ago) and it is a messy, frustrating and incredibly expensive nightmare.