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How a Living Trust impacted our family.

by Jerry Ricketts 07/09/2012

Now that the dust has settled and the last checks have been written, just what was my experience and did having a living trust (in place) make that big of a difference when my second parent died last year? Much is being written about living trusts today and rightfully so. Questions like… who really should think about getting a living trust? make sense to me. Usually I see similar stories (like mine) through the lives of our clients. Today, I write from personal experience.

First, some history. My dad worked hard and built up some assets…mainly property. The property was owned both in California and out of state. My mom worked just as hard, first as a homemaker and then enjoying a second career as a nurse. They had many children and grandchildren. Dad died back in 1997. Mom was incapacitated the last few years of her life and she required long term care before she finally died last year. For years, my parents have felt that not all their children, grandchildren or step-grandchildren could handle their finances like they should. They knew that not all of their children got along with each other. They also knew that money can do strange things to a family. I guess you could say they knew some things. One thing for sure was that they both wanted their kids to grieve their passing and not fight over their inheritance. Maybe you (as parents) or your own parents have similar feelings concerning your family members. Having a trust in place effected my family in the the following ways:

Managing property upon incapacity. The first impact of having a trust in place was when mom was unable to manage her own financial affairs several years before her death. Back then, the concern wasn’t her immediate death but who would manage her bills, cover medical costs and manage her properties? Who would make sure that no one would walk off with her money? The trust was put together by an experienced attorney. This attorney made sure that all of the assets owned by mom were transferred by title into the family trust. This simply means that the property, bank accounts, IRA’s etc. were owned by the trust. The trust document named one of the children as the “successor trustee” with a durable power of attorney to manage the trust assets. This child became the trustee after mom was unable to act as her own trustee. Without this type of prior planning things could have become very complicated. (stories of a child getting mom to sign over assets without full disclosure or having an elderly mom sign a handwritten will that no one else is aware of come to mind). Additionally, mom set up a durable power of attorney for health care decisions. This avoided a court-appointed conservator for her medical affairs.

Protecting property for different beneficiaries. Not every beneficiary was an adult. With estate planning my parents also recognized that not all intended beneficiaries are able to handle an inheritance. My parents made decisions to treat their children/grandchildren differently. They made provisions concerning not only the amount of the inheritance but the timing also. After mom’s funeral a trust reading/meeting was held. The reading of the trust documents made this process much easier because an experienced estate planning attorney and staff witnessed the formation of her trust and therefore her wishes.

Avoiding Probate. First, what is probate? Probate is the process in which a court supervises the transfer of property to your heirs. A judge who you have never met will make decisions for your family. This process can take up to a couple of years and it can cost between 3-8% of the gross value of your estate. If all you have is a will then you should probably assume that your assets will go through probate court. Attorneys love probate because of the fees they can charge. My experience was this. When mom died the trustee(child) paid her last bills, sold property, read the trust documents to inform as to how her assets were being distributed and then distributed the property. There was a complete financial accounting made available to the beneficiaries. This all occurred without reporting to the probate court. The lasting legacy was that all children were at her funeral and celebrated her life and legacy…just as she wanted.

Privacy. A Probate is open to the public. With probate, anyone can go to the court clerk’s office and get information about the deceased and family matters. My mom wanted her privacy. The living trust she set up avoided an invasion of privacy. With a living trust, only my mom ‘s heirs and her attorney know of her final wishes and her affairs.

Avoiding a Will contest. A will is far more likely to be contested than a living trust. This is because a will goes into effect only when a person dies. All a person contesting a will has to do is prove that the testator was either incompetent or under undue influence as the precise moment the will was signed. To contest a living trust, you have to prove incompetence not only when the trust instrument was originally signed but every time properties was transferred to the trust, other accounts were set up or when distributions were made during the life of the trust. This is virtually impossible to do! A living trust goes into effect as soon as the trust documents are signed and generally lasts for some time after the owners death. My mom’s trust was never challenged.

We can help. At AIM - All Insurance Marketing, Inc. we of course don’t give legal advice. This article was intended to give you some additional insights as to my own personal experience with trust documents. If you need help we can direct you to an estate planning attorney with over 20 years of experience here in California. Contact us or talk with one of our agents who can direct you.

Note: living trusts are frequently used to avoid fights in nontraditional family settings – stepfamilies, unmarried companions, etc. Also, a living trust is especially necessary when a husband and wife have children from prior marriages. Without proper estate planning, it is possible that children from one of the spouses end up with nothing. Properly done, a trust will insure that the surviving spouse will be cared for and assures that both sets of children will receive their rightful inheritance. A living trust will accomplish these goals and of course avoid probate.

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