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Hi,
As many of you are aware, personal financial advisor Suze Orman is a
major supporter or the Revocable Living Trust instead of having a Will,
has one herself and has put our a CD Will and Trust kit that encourages
most people to use a Revocable Living Trust INSTEAD of a Will except
for a few rare instances.
She promotes the probate benefits, etc. and her arguement is very
convincing. I find her advice normally very helpful and easy to
understand in other areas, but am uneasy about Revocable Living Trust
because I don't see masses of people going out and getting them instead
of wills.
Are they truly something of huge value to most people? Are they as easy
to setup as Orman has said?
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Hi,
As many of you are aware, personal financial advisor Suze Orman is a
major supporter or the Revocable Living Trust instead of having a Will,
has one herself and has put our a CD Will and Trust kit that encourages
most people to use a Revocable Living Trust INSTEAD of a Will except
for a few rare instances.
She promotes the probate benefits, etc. and her arguement is very
convincing. I find her advice normally very helpful and easy to
understand in other areas, but am uneasy about Revocable Living Trust
because I don't see masses of people going out and getting them instead
of wills.
Who cares what masses of people are going out and doing? As a rule
of thumb, 90% of the people you know are idiots. If all the idiots had
living trusts, it might not be worth it for you. If nary an idiot had one,
it
might be a good idea for you. It depends on your financial and familial
situations.
Are they truly something of huge value to most people? Are they as easy
to setup as Orman has said?
Pros:
1. A revocable trust can be set up to preserve your estate tax exemption,
which is current $1.5M. That is, your estate pays no estate tax on the
first
$1.5M. Suppose you and your wife have $4M in assets, split 50-50.
You die first, and you will your wife your half. She won't pay the tax
since
she's your wife, but her estate is now the whole $4M. When she dies, the
feds are standing in line for taxes on $2.5M (that's her estate of $4M less
the 1.5M exemption). The marginal tax rate is 49%, and they'll want over
$780K. Now suppose you set up a living trust that splits upon your death.
The extra trust holds your half ($2M) and the original holds your wife's.
Your trust will owe taxes on $500K ($2M less the exemption). The
marginal rate is 34%, and they'll want a bit over $70K. When your wife
dies, they'll want the same from her trust. (Assuming for simplicity that
her
trust's assets stay the same.) $70K twice or $780K. Up to you. Assumes
you're married, of course. (In 2010, the exemption is unlimited, and there's
no
tax until 2011, when the exemption is scheduled to drop to pre-2001 levels
($1M). Unless the Republicans manage to get rid of the estate
tax entirely before then.)
2. A revocable trust is private. There's no probate on trust assets when
you die: they're not in your estate; they're in the trust.
3. A revocable trust is hard to contest. First of all, it's private;
secondly,
it exists as an ongoing legal fiction during your lifetime.
4. You have a chance to set things up for disability trustees. In the case
that you are disabled, you can direct a trustee to take over and spend your
assets for your benefit. No courts involved, no guardianship to obtain.
If you're married, you expect your spouse to do this, but what if
your spouse dies or is also disabled?
5. A trust is flexible. Suppose you know your kid will blow any
inheritance he gets. Don't let him have it until he's 45, and then only
half. The other half when he's 55. But wait. Suppose there's an
emergency. Wouldn't want him to die for lack of funds for, say,
an emergency operation when he 44. You can spell it all out in a
trust.
Cons:
1. You need a lawyer. Trust documents aren't rocket science, but the
laws governing them vary by state, and you'll want to set them up right.
Around where I live, this might be $2K for a couple.
2. A trust is work. You'll need to title your assets in the trust's name.
A lot of people end up with a living trust and fail to fund it. The trust
exists but it's empty and will have no effect on anything. You'll need
to keep current. You buy and sell, open and close, and you need to
keep up.
3. A trust requires learning. I've been told that charitable contributions
shouldn't come from trust accounts; that means keeping a joint account
with a POD clause. Probably should have the trust named as an
additional insured on your car insurance if the trust owns your car.
See 1. See 2. On the other hand, as far as the IRS is concerned you
and your trust are identical until you die. No extra paperwork there.
4. A trust is private. You need to find trustees whom you trust.
There won't be much if any oversight when you're gone.
Don't think that a trust will relieve you of all taxes or protect you
from creditors. It's an estate planning tool. Do you need a trust
to do adequate planning? It's impossible to give a universal
answer, and unfortunately, you'll never know.
Oh, and you'll probably still need a will. If only to dump things
into the trust.
*** I am not a lawyer, so this can't be legal advice. ***
*** I am not a financial planner, so this can't be estate planning advice.
***
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On 29 Apr 2005 10:33:10 -0700, "Ryan" <welziak@snet.net> wrote:
Hi,
As many of you are aware, personal financial advisor Suze Orman is a
major supporter or the Revocable Living Trust instead of having a Will,
has one herself and has put our a CD Will and Trust kit that encourages
most people to use a Revocable Living Trust INSTEAD of a Will except
for a few rare instances.
She promotes the probate benefits, etc. and her arguement is very
convincing. I find her advice normally very helpful and easy to
understand in other areas, but am uneasy about Revocable Living Trust
because I don't see masses of people going out and getting them instead
of wills.
Are they truly something of huge value to most people? Are they as easy
to setup as Orman has said?
First of all, EVERYBODY should have a will. Where they need a will
AND a living trust is an answer that depends on the types of assets
they own, the value and the state where they are located. Besides
avoiding probate and protecting privacy, there are also tax reasons
that make a living trust superior to having just a will. However,
these are things you should discuss with a qualified attorney in your
state.
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