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This article will discuss living trusts. I will also explore taking the
"Next Step" and possibly meeting with a professional financial planner
to evaluate your personal situation, maximize your investment returns,
and set realistic goals. The last article I talked about the why and
wherefore of wills. While completing my will I discovered one more
reason to have one. If you die in "testate" (without a will) in
Pennsylvania the surviving spouse only receives the 1st $30,000 + half
of the remainder of the estate. The children or decedent’s parents share
half of the remainder by law.
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I attended several excellent estate planning seminars hosted by
Hefren-Tillotson, Inc, a financial planning and
brokerage house in Pittsburgh. Charles R. Reis, Esquire was their guest speaker
and he gave an exceptional presentation on estate planning and taxes. He started
off with several frightening scenarios for unsuspecting widows and widowers
including the one mentioned above. Many think that the State will take care of
the surviving spouse but that isn’t always the case. This is just one of many
reasons why ALL need to execute a will and ASAP. The software Quicken WillMaker Plus
or Preparing your Legal Documents Online
can draft a legal will in about an hour for
residents of all states except Louisiana and you can also them for your wills, trusts, and health directives. There is really NO reason to
wait and if you are uncomfortable with computer software see an attorney. A
basic will shouldn’t cost much at all.
Revocable Living Trusts
Living trusts are relatively easy to set up. Trusts transfer property outside
of probate upon your death and generally are not public record. Even though
trust documents may not be public record, in states that assess inheritance
taxes, the trust’s value may be listed on your state’s inheritance tax office
records. In Pennsylvania inheritance taxes are assessed on all estates
C regardless of the size C
unlike federal estate taxes that don’t tax estates that are valued under a set
amount.
Trusts are flexible and allow you to transfer some or the majority of your
assets to your heirs. There is little paperwork involved and you don’t’ have to
maintain separate tax records or apply for a separate taxpayer ID number. They
call this a living or revocable trust because you initiate it during your
lifetime, have full control over the assets as long as you live, and can amend
it as needed throughout your life. They can also continue for years after you
die if the basic trust establishes an "Ongoing Trust" to control property that
is needed to support someone with special needs or to provide for your spouse
and children from previous marriages.
Living Trusts are almost impossible to contest because they are initiated
during your lifetime when you are active and able to make sound judgments.
Living trusts can be easily drafted online. However, when you have special needs dependents and
other unique situations it is wise to consult with an attorney to review or
draft your documents. Both
Quicken WillMaker Plusor Preparing your Legal Documents Onlineare easy to use and I completed my trust in about an
hour because I had all of the information available in my
"Survivor’s Binder."
Not everyone needs a living trust. You can use other methods to avoid probate
such as designating bank accounts, savings bonds, stocks, and brokerage
accounts, Joint Tenancy, Pay on Death (POD), Transfer on Death (TOD), and
designating beneficiaries for insurance policies. Use the free downloadable "Asset
Allocation" spreadsheet that I developed with samples to determine how your
accounts are registered and designated. You can evaluate and amend the account
registrations and designations to insure your assets go to the desired
beneficiary. If the majority of your assets can be transferred with proper
account registration you may not need a trust document. Trusts aren’t
recommended for small estates with little monetary value, if you don’t have
someone to designate "Successor Trustee," or if you have complex debt problems.
The book titled
Plan Your Estate
states, "To create a trust, you must sign a document that
specifies:
- The "Trustee," who has the authority to manage the trust property. You
name yourself as the trustee.
- The "successor trustee," who turns the trust property over to the
beneficiaries after your death.
- The property that is subject to the trust.
- The "beneficiary" or beneficiaries of the trust, who receive the trust
at your death.
- Other terms of the trust, including the fact that you can amend or
revoke it at any time."
During your lifetime you have full control over the trust and it is
revocable. After you die it can not be changed and the trust assets are
distributed by the successor trustee to the beneficiaries outside of probate.
The only delay in distribution would be due to the estate and inheritance tax
inventories that may be required depending on the size of the state. Purchase a
copy of
Plan Your Estate to learn more about estate planning. It is an excellent book
and even if you plan to use an estate attorney to draft your documents read
"Plan Your Estate" first so that you will understand what is going on and be
able to make informed decisions. One word of caution, you must still have a will
to transfer residual estate assets that don’t make it into the living trust.
Professional Options
I mentioned earlier that I’m attending a series of seminars sponsored by
Hefren-Tillotson, Inc, a financial planning and
brokerage house in Pittsburgh. The FREE four seminar series is titled "Hefrin-Tilloston’s
School to Financial Freedom" and is hosted by the amicable William Pisciuneri,
Vice President and Financial Advisor, Kevin Guernsey, Financial Advisor, and
Belynda Slaugenhaupt, Associate Vice President. The series covers investment
planning, asset allocation, security research, insurance protection options,
estate planning, and pensions.
I discovered Hefren Tilloston one Sunday many years ago while listening to
their weekend talk show "Your Money and You" hosted by Jim Meredith. I called
the show several times to talk with Jim about various issues and found his
advise and public service refreshing. He and I both agree that "no debt is the
only good debt." I discussed this concept in my book titled "Dollars & Sense;
Safe Investment Strategies for Small Investors" that was published in 1988.
The series is informative and there hasn’t been any high pressure sales
pressure that you would expect at a free seminar. The professional staff
specialists and guests have contributed to three enjoyable seminars to date and
the last seminar is next Tuesday. Last week’s estate planning seminar was
exceptional and their guest speaker, Charles R. Reis, Esquire is a well
respected attorney in the field. Hefren-Tillotson
offers to design a comprehensive
"Master Plan"
for participants to consider that is geared to your personal situation and
goals. The sample plan that I reviewed was well thought out, comprehensive,
straight forward, conservative, understandable and actionable.
I’ve explored the various fees and costs and will present more on this in
subsequent articles and have found them to be very reasonable when compared to
other venues. They also cleared up issues that I always questioned. I evaluate
my portfolio performance each year and reallocate between funds and stocks based
on my research and long term performance. They frequently recommend American
Funds and my screens often suggest these funds as well. However, if an
individual buys them, the loads can be over 5%. Then, when you add fund
management fees, you have to have great returns to turn a profit. I discovered
that when their brokerage house buys these funds your loads are dramatically
reduced to about half because of their total holdings in that fund family.
Basically, if you aren’t good at or dislike working with your estate and
finances it is wise to consult professionals in the field. Even if you are
comfortable managing your investments it never hurts to get a second opinion.
The first step is to find a reputable company and then compare fees and costs
before you sign up. One of the first things you should do is check their Better
Business Bureau rating at www.bbb.org.
Well, that does it for this series. It was a long series and I hope I
provided sufficient information to get your starting on your financial planning
path. Stay tuned for more guidance and visit our estate planning page for
additional information and guidance. You can also ask our
Benefits and Finance forum host, Linda Duncan,
about your unique issues and concerns. She is currently pursuing her masters to
obtain her Certified Financial Planning credentials.
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