“The biggest estate-planning mistake is that people think it’s only about the money,” said Marlene Stum, a professor at the University of Minnesota and author of the “Who Gets Grandma’s Yellow Pie Plate?” workbook and website. “When it comes to their personal possessions, they say, ‘It’s just stuff.’ ”
In my opinion, the personal items in a home is often the biggest source of unhappiness among families when a loved one dies. Without taking the time on how to resolve the distribution of personal possessions, you can unwittingly leave a legacy of rancor and resentment.
Baby boomers surveyed by Allianz Life Insurance Company selected personal possessions six times more often than financial inheritance as important in legacy planning.
Okay, where do we start? How about asking your heirs what items mean something to them? Then keep a list and resolve any overlapping interests.
Next, on a sheet of paper, titled Personal Property Distributions, and upon completion attached to the back of your Will, list who gets what and sign, date and number the sheet(s) 0f paper. While writing the names on the pieces themselves seems like a great idea, it is unlikely supported in the law if there is a dispute on who gets which items.
If you have a lot of sentimental items, and you do not want to list who receives them, perhaps a third party executor or successor trustee that will distribute the personal items will work better since their decisions will not be treated as biased or personal.
Starting the process early leaves time to work out ground rules and deal with different assumptions and opinions. And it can be a chance to see the pleasure your treasures can bring to their new owners if you choose to give them the items you do not need now.
This question usually gets asked by the family after a loved one has died and they are told they have to go through probate. How did this happen?
Yes, one of the benefits of a revocable trust is avoiding probate. The explanation everyone has heard is because the assets are held in trust there isn’t an estate to be probated. Instead, the successor trustee can access, get under control, liquidate and ultimately distribute the estate to the trust beneficiaries. So, if this is what is suppose to work, what went wrong? These are the most common cases of probates in spite of a revocable trust being in place:
Refinance. Very often when a client has a house in a trust decides to refinance the mortgage, the house gets transferred out of trust in order to make the financing go through. Too often the title company will transfer the property out but never takes any steps to transfer the house back in or even remind the owner that the house needs transferred back.
IRA or Insurance Beneficiary dies. If you have named a beneficiary of your IRA or life insurance and they die, often the contract states it will be paid to your “Estate.” This often means probate.
Leaving checking or investment accounts and vehicles out of trust. While you can have up to $75,000 outside of trust and not go through probate, sometimes accounts do not get titled in the name of the trust. If the total non-trust assets exceed $75,000, you may be in probate.
Mortgages. While a house may be in the trust, and therefore avoid probate, if you have to work with a lender, you will need to have an executor appointed to represent the decedent in all dealings with the lender. The same may apply to other debts or the IRS.
Of course most of these can be avoided with just being mindful that most assets need to be titled in the name of the trust.
Avoidance of probate. In particular, a revocable living trust can avoid expensive multiple probate proceedings when you own real estate in several different states, as well as the publication of the otherwise private financial details of your estate.
Avoidance of conservatorship. A revocable trust can avoid the additional cost of a conservatorship in the event of your incapacity.
Efficient distribution. A revocable trust can reduce delays in t istributing your property after you die, although delays caused by filing an estate tax return cannot be avoided.
Confidentiality. Generally the terms of your living trust are confidential, with only your named beneficiaries and trustee having access to that information.
Continuity. A trust can provide continuity of management of your property after your death or incapacity.
Disadvantages of a Revocable Living Trust
Expenses of planning. A revocable living trust can be a little more complicated than a will to draft, and asset transfers can take time and can result in additional costs.
Expenses of administration. If you appoint a bank or trust company as trustee, you will have fees to pay (though these may take the place of investment advisory fees and other fees you are already paying). Of course if you do not use these services, this additional expense will not apply. Setting up a revocable living trust will not eliminate the need for professional services of attorneys and accountants in the future.
Inconvenience. Once the trust is established, you must be sure that trust books are maintained and that all assets continue to be registered to the trustee. Again, this is not a large issue but certainly is something to consider.
Unforeseen problems. Revocable living trusts can raise a variety of new problems regarding the ability to borrow against property, title insurance coverage, real estate in other countries, Subchapter-S stock, certain pension distributions, and many other issues. Only a skilled attorney familiar with estate planning can tell you whether, on the whole, a revocable living trust is right for you, your family and your assets.
In this author’s opinion, the advantages far out weight the disadvantages
This is based on an posting by the Oregon State Bar