Menu
The forum is temporarily closed for new topics and comments. We are working on improving your forum experience. Stay tuned!

Why is my attorney pushing for trust over will in an “easy” probate state (TX)?

Home Estate Planning Why is my attorney pushing for trust over will in an “easy” probate state (TX)?

  • Avatar exces6 
    Participant
    Status: Resident
    Posts: 15
    Joined: 02/06/2019

    An unfunded RLT is useless.

    Remember, this is a revocable LIVING trust. If you don’t fund it, then you have nothing that you could not get with a will that established one or more trusts at your death.

    An unfunded RLT cannot do what a LIVING trust is designed to do:

    It cannot bypass probate. Probate may or may not be difficult, depending on circumstances, but it is one more thing to be done when someone dies. A funded RLT takes this off the agenda. An unfunded RLT does nothing.

    It cannot avoid ancillary administration if you own real estate in another state. An RLT that has title to the property can do this. An unfunded RLT cannot.

    It cannot help someone take over and manage your affairs while you are alive- should you become incapacitated. If your assets are in a funded RLT, then the trustee can manage them. If your assets are not in the trust, then the trustee is powerless. You would have to rely on someone acting under a durable power of attorney. But many companies will not recognize a perfectly legal DPOA. Unfunded RLT cannot help here.

     

    An unfunded RLT is essentially a will. But you should also have a will. So the unfunded RLT is useless.

    Retitling assets is trivial. WAY, WAY easier than someone probating your estate because you were intimidated by filling out a few forms. There is no court involved in retitling your assets. Funding the RLT while you are young means that new assets you acquire during your career will be titled in the name of the trust as you go along. For example, once you establish the trust as the owner of your brokerage account, all holdings in the account will be owned by the trust. There is nothing else to do.

     

    There are no costs associated with having a funded RLT. Trust income is reported on your personal income tax return. There is no need to pay someone to prepare the return. You can manage the money yourself, exactly as you would if you did not have a funded trust. There is no reason to pay anyone to manage them for you just because they are held by a trust.

    Creating an RLT but not funding it has the same effect as a will, you get no benefits of the R LIVING T.

     

    Click to expand…

    Great post, much appreciated. The bolded point above is spot on and exactly the realization we came to talking with some family this weekend, which really seems to make choosing an RLT a no-brainer. I think that’s a key point that wasn’t as obvious to me from my original research. Why would I pay for double work (will now and RLT later) when I could just establish the RLT now, fund it, and let future purchases be titled to it as I acquire them.

    The choice described was will only vs will plus RLT. Creating a will and RLT but not funding the trust makes the trust superfluous. The same terms can be put in the will to create a trust that only comes into existence at your death. If you don’t fund the RLT it does nothing.

    Tenants by the entireties is a way to get protection for jointly held assets. Depending on the state this may be valuable enough to build an estate plan around it. Or not. In some states it is limited to the jointly owned residence of the married couple. Other states extend the protection to jointly held assets other than the family home. Some states don’t offer particularly good protection for TBE property. Some states offer unlimited protection for the family home without TBE.

    Depending on circumstances, it may or may not be a good idea to own your assets jointly.

    None of that means that an unfunded RLT accomplishes anything. The trust only applies to the assets in the trust. If there are no assets then the trust does nothing.

    You can include instructions to set up a testamentary trust in your will. It will do, after death, the same thing as if your will said to pour everything into the unfunded trust, then retain or dispose of assets as defined in the trust. But creating a LIVING trust and then not funding it does nothing that your will would not do.

    Click to expand…

    To clarify for anyone in the future who might find this thread helpful, my original choices were as follows:

    1. Will which creates a testamentary trust at time of death -> still requires probate to put assets into the trust once I die OR

    2. A revocable living trust (exists while I’m alive) with pour-over will -> Anything in the trust (presumably all major assets) avoid probate, with the pour-over will catching anything forgotten or all the smaller things like personal property that don’t have titles.

    The outcome for heirs is the same, they end up with a trust that contains my assets, but it’s the process to get there (and associated costs) that differ.

    Joint tenants by the entirety is another really interesting concept, but my state doesn’t recognize it (list). But that could certainly be an interesting option for anyone who does live in such a state.

    Tough to say what the motivations are.

    I suspect he is in the business of pushing and cranking out these revocable living trusts.  With a website name like that it sounds like he is catering to the lowest common denominator with a one-size-fits-all approach.

    Very often attorneys will steer you toward the forms they use a lot and are comfortable with.  A “simpler” will may be shorter and less complex, but drafting would take more attorney time than dropping your names into a longer form they fill out daily (and know like the back of their hands).

    Regardless, he should be able to tell you why, make you feel comfortable with why, and be willing to accept if you still want something else.

    I would also be spooked by a dual attorney / insurance salesman.

    Click to expand…

    We managed to get a personal recommendation this weekend for an attorney who just does estate planning, so I put the original guy on hold and am waiting to hear back from the new one. Was hoping I would hear back today but haven’t yet.

    I agree that it feels scummy to have roles overlap. We’ve been trying to get life insurance too, and I can’t begin to explain how frustrating it is that so many people who sell insurance are also wealth managers or some other type of financial planner. I’m not looking for any financial advice or a wealth management relationship, I just want to buy insurance and be done with it.

    #236577 Reply
    Avatar afan 
    Participant
    Status: Physician
    Posts: 113
    Joined: 05/07/2017

    Fortunately, life insurance for your family is a lot simpler than estate planning.

    You want term life policies on both of you. You want this for a long time. You have to do some planning to estimate how long. For many couples it is something like “when the college tuition bills for the youngest child have been fully funded.” Or if you are less generous “when the youngest turns 18 and is turned out on their own.”

    You need to look at current assets, income expectations and savings plan to get an idea of how long that will be. A pair of docs in high income fields and one child may reach the point that the surviving spouse and the kids will be fine without the deceased income fairly quickly. A single doctor family with a low earning spouse, high med school debts and a large family may need insurance for a longer time.

    If you need insurance for 20 or 30 years you should look at 20 or 30 year term policies. The premiums are level throughout this time. This can be a good deal if you hold it until the term runs out. It can be a bad deal if you do not hold it for close to the full period. These policies work by overcharging in the early years to make up for low prices later. If you keep a 20 year policy for 10 years then you have overpaid for all the coverage you ever got.

    It is easy to shop for term. There are websites that will give you estimated costs for policies from a variety of companies. Some of the captive agent companies may not participate, so go directly to USAA, Northwestern Mutual, etc. The prices will be based in what you tell them about your health status. If something turns up during medical underwriting then the cost will be higher.

    Pick a company and a policy and that is all there is to it.

    You can go through an independent agent but unless you have unusual circumstances you don’t need their help and they will be limited to those companies they represent.

    You both need disability insurance.

    #237104 Reply
    Avatar exces6 
    Participant
    Status: Resident
    Posts: 15
    Joined: 02/06/2019

    Update:

    Had a great conversation with the second lawyer yesterday. He really knows his stuff and got into much more detail about the various ways we can structure a trust (marital trust to protect assets from future spouses/children, separate trusts for each child to avoid fights over equality, how long to structure the trust to avoid tax issues for our kids and protect assets from any divorces, etc., all kinds of contingencies for the various parts of our plan, and detailed info about tax implications that could be an issue as we build wealth. )

    He was very reasonable and wasn’t shy with making realistic recommendations to us while not being pushy. And having a dedicated attorney who isn’t afraid to recommend for something that would be useful but also against things that aren’t is invaluable.

    If anyone needs a recommendation in Texas, feel free to PM me.

    #237574 Reply

Reply To: Why is my attorney pushing for trust over will in an “easy” probate state (TX)?

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear