Just curious - by whom were you informed? Did he or she say *why* a living trust would be a good idea for your mother?

In general, a living trust is an instrument used to avoid probate. For many years, it was used primarily by the rich and famous, those who wanted their private matters to remain private. Recently, as many lawyers and others discovered this untapped income-producing potential, living trusts have been touted as absolutely essential to protect your loved ones from the "horrors" of probate.

It works like this:
1. Create a trust for the purpose of holding and administering assets. The trust will, like a will, specify what should be done to your assets upon your death. You must also appoint a trustee for the trust, with backups.
2. Transfer desired assets to the trust.

With some exceptions, a living trust will not avoid estate taxes or income taxes, and the assets will still be counted by Medicare in exactly the same way as if no living trust existed. You *can* avoid probate, but for most estates of ordinary, middle-class people, this is not that significant.

The big problem with living trusts is that to get any real benefit (other than the perceived benefit of avoiding probate), the person making the trust has to give up all control over his or her estate. This comes with a very real price, and many people are unwilling to do this. (My own father was almost frantic to set up a living trust to protect his assets - due to heavy advertising in favor of them, and I always talked him out of it by asking if he wanted to give up control and use of his own things. He never said yes!)

I am a lawyer, and I attend various legal seminars on estate planning. The overwhelming consensus is that, unless your estate consists of many millions of dollars *and* you want to keep your affairs private or change things frequently, a living will isn't a good idea.

There are many other ways of avoiding probate that make much more sense for a person whose estate is not so large:
- List a beneficiary on stocks, bonds, bank accounts, life insurance, etc.
- Hold your house in joint tenancy with right of survivorship with your beneficiaries
- Make gifts to your beneficiaries before your death.

Whether or not you have a living trust, you still need a will, a living will or some other written record of your instructions should you become seriously ill, and probably a revocable power of attorney. Oh, and medigap insurance.

Here are some sites to look at:

http://www.nolo.com/lawcenter/ency/index.cfm/catID/FD1795A9-8049-422C-9087838F86A2BC2B#9F594B71-B41B-4513-923BF19B4D9ACDAA

http://www.nolo.com/lawcenter/ency/article.cfm/ObjectID/F4C1FEEE-F76C-4543-842919D53D7BCAE1

http://www.elderlawanswers.com/test2_new.asp?menuitem=Medicaid+Planning

Don't know much about them except to say that DH's gandfather just passed away, and DH mentioned that the trust was taking a lot of money. I guess the people who run the trust (lawyers) collect a lot of administrative fees, etc. If your children are not the type to fight over your assets, and you have a good will written out, I don't see a need for it. A living will is important too. My grandmother had that, so that she was able to stipulate that if she died she would not be resussetated or put on life support.

Thanks for responding to my question. We had a great meeting the the lawyer and feel comfortable with the end result. Mom has enough monthly income to take care of her needs, if the time comes, be it a Nursing Home or in home care, so medicare will never be an issue. We need to go back to the lawyers in a few weeks to finish it all up, but we are happy to find that she is in such great financial shape.

Thanks again.

Sooey

I put my money in a Living Trust for my boys and it is not locked up. I can spend every dime of it because it doesn't take effect until I die. The documents are at the bank to insure it goes to the trustee. My sis has one also and so did her ex-husband. He has died and it went through like clock work. The problem with a living trust is "who do you trust to divide the assest equally"? The children don't pay fed taxes, but do pay state taxes, not because it is a trust but because they government allows a certain amount of money to be tax free for direct decendants. A living trust is a money saver, probate is not the problem, it only cost around $30, it is the attorneys that get the money. My BIL lost 60% of his inheritance from an aunt for attorney's fees.

If you list your house or bank accounts in your childrens names, it becomes their property. They can go get the entire account at any time. It can also be lost if there is a divorce of the child or if the child is involved in a lawsuit. In some states you can list a beneficary on your home deed just like you can an insurance policy or savings account. A Will will require an attorney, my nephew is an estate planner and did our trusts. He was at a party and heard a lawyer bragging that him and his wife were going to Europe next year thanks to Mr ___ who died last week.

I can't believe how much I learn from this forum and on so many subjects. I live in California and my DH and I are in the middle of refinancing. Since we do not have a trust, we were advised to hold the house in "community property with rights of survivorship". We have one heir and definitely do not have a big estate. Around here, lawyers charge 1500 - 2000 to set up a living trust--which everybody says we need. I'm wondering about that now that I've read your posts. I'm hoping a good will and the house held as mentioned is enough?

Katalina - I am a lawyer, and if you were my client, I would advise you that a living trust was unnecessary.

It's interesting you mention the cost of creating a living estate. I often hear people say that pretty much everyone needs a living trust to avoid the cost and length of probate. While charging *more* than it would cost to hire a lawyer to probate the average will.

And truly, it's not that hard to probate a will, even for a layman. You take stock of all assets, pay all bills, and split the rest according to the will. Sure, you need to file some forms, but it's not rocket science. Both of my parents acted as executors for their parents' wills, plus various others, and managed to probate the wills perfectly well. Neither had any training in law.

Doesn't take that long to distribute the assets, either. Virtually every state allows the executor to distribute assets if s/he is fairly certain there is enough left in the estate for final bills.

When my father died, my sister and I hired a lawyer to probate the will. Someone out of the yellow pages, someone neither of us knew, and she charged $1000 to probate an estate of about $450,000. Not bad.

Of course, none of this applies to people with many millions of dollars in complicated assets.

Just additional info concerning my above post that the trust took "a lot." Saw my in-laws this past weekend, and MIL mentioned that the trust administrators took 12% off the top of the estate. The lawyer was also going to take a large percentage (I think 12%,) but my FIL, who is the executor, and NOT a greedy person, is waving his executor fee. MIL thinks that the lawyer felt a little guilty, and agreed to take a flat fee of $5000, which is significantly lower. I asked my MIL why grandpa would agree to give up all his assets, and place them into an irrevocable trust, and she said it was because grandpa thought that grandma was going to live a lot longer than she did, and would have huge medical bills. She spent several years in a nursing home before her death. I can only assume that placing ones assets into an irrevocable trust would protect them somehow in this type of situation, but I have no idea how.

I can't imagine how someone could lose 60% of an estate to a lawyer, unless it was a complicated estate and the lawyer was the executor of the will!?!

I live in the midwest and had my trust set up for $500.

Having to have to deal with two within 7 months: If a person is single, divorced, widowed, whatever, not worth it.

If person is married, Yes.. go for it, as it puts assets normally 'given' to spouse in trust. Any assets over the gov limit will go into "C" trust for future heirs to pay taxes on.

The trick is to run down assets of A and C trust so 'inheritor' will not have to pay taxes on so much.

There is another aspect of a Living Trust. If the 2nd family wants to keep the assets away from the 1st family (usually in a nasty divorce) the LT is the way to go.

My brother and wife are Fl. residents for app. 15 yrs. They purchased a home in both names app.14 yrs. ago. At that time a "life estate interest" was added with the wife as "remainder" person.She had 2 children, not his. She passed away app. a year and half ago without leaving a will.If he wants to sell the house now, how does this effect his ability to sell or does this living estate end with her death?( They were still married and living together at time of death) I appreciat any help on this as he can not afford an attorney at this time and financially really needs to sell this house.

>>The big problem with living trusts is that to get any real benefit (other than the perceived benefit of avoiding probate), the person making the trust has to give up all control over his or her estate.This may be true in New England but it is certainly not true in CA. We have a Revocable Living Trust as does my widowed MIL, and have full control of the assets in both cases. In an IRREVOCABLE Living Trust, such as an ILIT (Irrevocable Life Insurance Trust), you do indeed lose control of the assets.

Also underrepresented in the current craze to sell the middle-class on getting RTs is the fact that unless the trust originators spell out some non-standard instructions, most lawyers use a standard software to produce an RT. This can in fact create problems - for example, my MIL is allowed to draw down the principal of her deceased husband's share of the estate for health, education, and maintenance. This is EXTREMELY unusual, yet most middle class people would assume they could do this. Not so, unless your trust is set up this way.

As for probate not being a problem, I beg to differ. I settled my sister's estate - a simple one with no real estate, just a car and some art assets. It took a full 18 months to get through probate and three different lawyers (the first two were incompetent and lazy; the third was a gem and wrapped it up in less than 2 months).

Probate in CA costs a percentage fee to both the lawyer and the executor, plus expenses. On average it's about 1.5% (a big change from the 6% it used to be!). So on a $1M estate that's $15K to the lawyer and $15K to the executor, plus expenses.

OTOH, a trust passes without probate, and trustees don't get paid unless specified in the trust, or unless you have specified a professional trustee. If you name a spouse, family member, or friend, they DO NOT GET PAID. They can get reimbursed for expenses but that is all, unless the trust originators have specified they can be paid on an hourly basis, at the current professional rate (about $65-70 hr here in the SF Bay Area).

The fee of $2500 to set up the trust (don't forget, we are in one of the most expensive-to-live areas of the country, so our costs are always higher than most places) included pour-over wills, durable healthcare Power of Attorney with HIPAA releases, Power of Attorney docs, and the title transfer of our property into the trust, for both of us. Our MIL got the same pkg, which is important in her case because the original RT she and her husband set up was 25 yrs out of date. It was critical for us to arrange a way to change the successor trustee and contingent beneficiary lists to reflect the many changes that had happened in the last quarter century. The lawyer spent hours with us and my MIL, over a series of three meetings, making sure my MIL understood all the changes we were making and why. This lawyer was a bargain at any price and did an outstanding job for this small flat fee.

Both my DM and MIL set up revocable trusts. Each had complete control over her assets until she died and the trusts became irrevocable trusts. Neither named a bank or trust company as any but last choice trustee (should none of the named trustees be alive or willing to act).

Both DH and I have revocable trusts. Our DS and DIL do, too. Our home is held 50% in each of our trusts. My late DM's trust owns a vacation rental property. (It continues to exist as a separate entity -- owns property, pays RE taxes, files income taxes. DH and I are trustees with "power to appoint" assets.)

These have not been expensive to set up or maintain, although you must be sure that aquired assets are put in the name of a trust and you must keep each trust's affairs separate and in order.

When people think of a trust as costly they are probably thinking of trusts that have a paid trustee like a bank trust department, not those that name a family member or members as trustees.

As with a will, creating a trust is an opportunity to think and plan how you want your estate managed and distributed. There can be other advantages, such as my DM's trust owning the rental. The trust is its own entity, although I, as trustee, can buy and sell out of it.

Our experience with trusts has been positive.

Since my post on this thread my husband has died. I have been working at setting up my estate so that the heir gets everything without loosing a lot to attorneys. And please believe me they do get thousands on small estates, my niece socializes with the wives. At one party she heard an attorney's wife say, "Oh, Mr. Jones died last week and my husband are going to Europe on his fee". Anyway, since I am single now, I put TOD on my car when I bought it and POD on my bank accounts. I also saw an attorney. He was explaining the living trust to me, when I interrupted him and asked about the TOD and POD. He was shocked that I knew about that, he said it was the best way to go. He removed my husband's name from our home, put the college on as TOD, wrote a bill of sale for the contents of my home and made a will as a reinforcement for my wishes. The college wanted it in case our children made a claim on my estate. He also did the usual papers, living will, including comfort care only, a POA for my chosen person all for only $400. He explained about giving the POA a COPY ONLY and put the orig in a very safe place where she can get it when I need her help due to death or nursing care. For those you who do not know, TOD is "transfer on death", POD is "payment on death". He said that was so secure that if anyone contested it, the judge would immediately throw it out. I don't know how state laws vary, I live in Kansas.

For those who find jonesy's post interesting, there is further information available on the web if you Google the term "transfer on death."

There's a .pdf from 2001 put out by a county agency in Ohio discussing situations where a TOD is not recommended. Also, TOD is apparently not allowed in certain states, according to one of the national brokerages, so be sure to do sufficient research on the laws in your state first!

Here is a link that might be useful: Discusses times when TOD is not recommended

You should always verify any information. For an example, the first attorney I contacted after my husband was diagnosed with Alzheimer's told me I would have nothing left except my social security to live on, no home and no car if my husband went to a care home. I don't know how he got his license to practice law. My present attorney told me exactly what I would have left after I did a division of assets and he was right. He was an estate lawyer and once the lieutenant gov of Kansas. I can't get the link to open in my Firefox browser, but found the same or similar article. I would not consider TOD if I had a spouse or children that I wanted to have my assets. This is a way for my heir, a small Lutheran College in my husband's home town to transfer my property without going through probate.

Okay, the last posting was about 7 months ago so I'm not sure anyone will be reading this... I am trying to get information on a LIVING ESTATE, not a living trust. I was told this is a way of selling my mothers house without her having to move. She would be able to continue living in the house until she passes. Has anyone heard of this?

Semantics, but Google 'Life Estate'. It's simply another kind of property right. In effect, you would have a life estate if during your lifetime you receive income from property or are entitled to the use of the real property, but then after your death, the property is given to another person.

For example - and maybe a bit roundabout - a widow named A dies but had made provisions for her young child named C (or some other entity, charitable institution, etc.) to inherit her house and do whatever with it at some future date - but also provided that her elderly mother named B should live in the house until her death. When the elderly mother B dies, her life estate (ie. her right to live in the house until death) does not pass under her will or by any operation of the law. Her interest or right to the property ceases with death and the property is inherited by the widow's child/entity named C.

Thank you so much! This is exactly what I was looking for. I Googled "Life Estate" and have found a wealth of information!