Episode Transcript
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Speaker 1 (00:00):
Good morning everyone, and welcome to Life Happens Radio. I'm Lupiro,
your host for this morning, and we hope you can
join us for this hour talking about something that we
hear in our office all the time. We have questions
from clients, we have questions from listeners, and it's all
about trusts. Not trust. Well, you have to trust your lawyer,
let's start there. But trusts, the documents and the creation
(00:23):
of this legal contract between parties, trustees, beneficiaries. How does
a trust work?
Speaker 2 (00:31):
What is it? In effect? Do I need one? And
for that I'm very.
Speaker 1 (00:36):
Fortunate to have with me my partner coming to us
from the Upper West side of Manhattan. Peter Strauss, Good morning, Peter, Good.
Speaker 3 (00:44):
Morning Lou, and good morning everyone who's listening today.
Speaker 1 (00:48):
And Peter, one of the most frequent questions we get
is should I have a trust? What does it do
for me? Do I need a trust? And we're going
to unravel that. The trusts are not these mysterious creatures
out there. They are agreements that are very detailed, very technical,
written by attorneys to take care of things. And Peter,
(01:09):
in our practice, when I started, and I started a
little after you, wills were the document of choice.
Speaker 2 (01:17):
You know, get a will, You're done. You did well.
Speaker 1 (01:20):
You have a will, It goes through court, goes through probate,
you decided where your assets are going to go. But
over my forty one year career, the practice has really evolved,
and I think it's become more enlightened as to the
benefits of trusts. And have you seen that same kind
of phenomenon.
Speaker 3 (01:38):
Absolutely, the changes started probably in the late nineteen eighties.
But historically, as you've said, trusting the states, lawyers who
do state planning for clients really did only wills. Trusts
were for the ultra wealthy. And it then began to
(02:02):
become aware to lawyers that they were missing a great
opportunity to improve the services that they delivered to clients
and using trusts for all of the reasons that we
will talk about this morning.
Speaker 1 (02:18):
And we're going to have this, hopefully as a conversation
with our listeners. So I'm going to give the phone
number out right now early in the show. And if
you have a question on trust, if you have a
trust and you have a question on how to administer
that trust, you're thinking about it, what are the purposes?
What can I do with my trust. Give us a call.
It's eight hundred eight two five five nine four nine.
(02:39):
That's eight hundred talk WGY, eight hundred talk WGY. I'll
give it one more time, eight hundred eight two five
five nine four nine. We'd love to have you call
and ask us a question or make comment about a
trust or any other aspect of the work that we
do here at Pierre, O'Connor and Strauss. Our law firm
(03:00):
does a lot of trusts. We also do probate, We
do wills, and it's from the experience of probating and
going through the process through the court that I have
seen the value of trust administration.
Speaker 3 (03:17):
I think that's absolutely right on target. What we found
over the years is that the probate process has gotten
slower because of budget cuts and staff shortages and frankly inefficiency.
The probate courts take a long time to probate a will.
(03:39):
It's gotten somewhat out of hands in Manhattan and also
the other counties that make up New York City. But
in Manhattan it can take six months to nine months
to get a will probated. Now, it's true that you
can get something called a preliminary appointment that allows you
(04:00):
to administer in a state, but you can't make distributions
from the estate when you only have the preliminary authorization.
Speaker 2 (04:09):
And I've talked to attorneys in New York City.
Speaker 1 (04:11):
I've talked to attorneys in New York City who have
said that preliminary letters are not that much faster than
full letters just because of the number, the sheer numbers
of people who are relying on that court to do
the administration of their estate has gone up, and the
court staff has gone down, and the ability to handle things.
The numbers of judges haven't changed. But during COVID, this
(04:36):
is really where it all came to roost. I think
during COVID, the court's shut down for a few months,
and this backlog built up, and a lot of people
who during COVID were nearing retirement took retirement and didn't
come back, and so you lost the people that had
the deep knowledge of how to move the cases along.
(04:56):
And like anything else, courts are the subject of their employees.
They're as good as their clerks and the staff that
work in those courts. We have a little better time
up State Peter because they're smaller counties, less people. You
still have that surrogate, that one surrogate's court judge that
handles everything, and you develop a relationship with the court
(05:19):
clerk hopefully, and we try to be on good terms
with all the counties that we work in, which are many.
But it's a process regardless of whether you have good
relationships and regardless of whether it goes fully according to plan,
where you have assets tied up for something called the
creditors period Peter, which is seven months from the date
(05:40):
you get not deceased but appointed as executor under the will,
and that seven month period is in the law, so
that there's nothing you can.
Speaker 2 (05:49):
Really do about that.
Speaker 3 (05:52):
Well, probably to me, the worst problem with probate is
that very often, depending on the terms of a will,
you need to go back to court to get instructions
or authority to take some action, which is takes terrible
amounts of time because there are delays. You're not in
(06:14):
a probate department, you're in the other department, and you
may get stuck without being able to take the action
that may be critical. That doesn't happen with trusts, which
you'll see as we discuss it. You don't need to
go to court. You need to discuss it with your trustee,
and you may be your own trustee in many cases,
(06:36):
and you don't have the delays in obtaining permission to
do something that may be critical.
Speaker 1 (06:43):
And we have a caller Tom on the line from Coliny.
Good morning, Tom, Welcome to life Happens FI.
Speaker 4 (06:50):
Good morning. I have a relative who passed away a
while back, had some assets, named me an execut and
also named a local bank as co executor. The will
called for a trust to be established. I am named
as a trustee and the bank is named as a
(07:12):
co trustee. Why would why would that? Well, I don't
know if you're guessing or not, but why would someone
do that? Why would they name a why would they
name a bank a co executor and a co trustee?
Frosen comms? And what what does that mean?
Speaker 1 (07:28):
Yeah, it's a great question. Who are the beneficiaries of
that trust?
Speaker 2 (07:31):
Tom?
Speaker 4 (07:34):
That would be myself and my two sisters, all.
Speaker 2 (07:36):
Right, So they have a trust for And was this
a parent that set it up?
Speaker 4 (07:42):
It was an uncle, an uncle.
Speaker 1 (07:44):
And your uncle worked with counsel to put the will
together to create this. It's a testamentary trust. So just
to go technical a little bit, when when you petition
the court with a will, and a lot of people think, well,
I have a will, I'm the executor and the trustee.
And as you know now that isn't just the case.
You have to go through this whole court process and
get appointed. You have to have a court order admitting
(08:08):
the will to probate, and then you get a certificate
from a court called letters testamentary and that's to bring
the assets into the estate. And then you get a
certificate of letters of trusteeship. Have you secured both of those? Tom,
I believe so okay, So you and the banker, you
(08:30):
and the banker co trustees in what's a testamentary trust?
And the other thing that I'll note about a testamentary
trust and the testamentary big word. That just means it's
created through the will and through the probate process. That
trust is now subject to court jurisdiction going forward. So
your uncle at the point in time when he was
creating the will chose you as a co trustee and
(08:53):
wanted a bank trust company as the co trustee with you. Trusts,
as we're going to talk about, have depending upon with
the level of assets and depending upon the complexity they
have accountings, they have tax returns, investment management, so there
are a whole host of functions that you will be
doing as co trustee along with the bank and the
(09:15):
bank is they are professionals in investment management. They're professionals
in managing distributions to beneficiaries and doing accountings and doing
tax returns. So when you have a corporate co trustee
a bank trust company, you're buying all the services that
they offer and you get investment management plus the technical expertise.
(09:35):
Have you started working with the trust officer yet.
Speaker 2 (09:37):
At the bank?
Speaker 4 (09:40):
Yes?
Speaker 2 (09:41):
And how's that going so far?
Speaker 4 (09:46):
It depends on what individual I'm connected with at the bank.
We'll just say that.
Speaker 1 (09:52):
And that's one of the issues with corporate trustees that
people change.
Speaker 2 (09:56):
People come and go.
Speaker 1 (09:57):
You don't get a person as the co trustee with you. You
get institution and you don't know who's coming that day
from the institution to be the co trustee. They may
change and staff turnovers is not unusual in those situations.
But as you're doing this with the co trustee, your
uncle wanted to have some stability. If you pass away,
(10:20):
who takes your place as the individual co trustee?
Speaker 4 (10:25):
I would have to check into that. Yeah, I don't
think I can answer that.
Speaker 1 (10:28):
So in the document we usually line up successors. Do
your sisters need more management? And I don't want to
pry too much, but is it something where they need
to have someone managing money and managing the distributions to them?
Speaker 4 (10:44):
No, No, I don't think so. I think they have
people that they trust.
Speaker 3 (10:50):
Let me add one more issue here. You really need
to tell us whether or not the will which creates
the trust provide that either trustee connects separately independently, and
that sometimes would relieve some of the problems that you
could take certain actions on your own. My guess is
(11:12):
that it requires the consent of your co trustee, which
is another issue. It's very hard to read the mind
of a person who's no longer living, but the lawyer
would would be the one that would have guided your
uncle as to whether or a trustee a co trustee
(11:33):
is important? Is it both executor and trustee?
Speaker 4 (11:40):
Yes, the bank was named as a co executor and
a co trustee.
Speaker 3 (11:44):
Right. You might have taken a different tack depending on
the size of the estate and the family relationships and
what the motivations were for the client. To have the bank.
Some times it's appropriate. Sometimes maybe it's not necessary, but
(12:04):
that's the custom that that particular lawyer is used toper
applying to a particular matter.
Speaker 1 (12:11):
And very often it depends on how the client got
to the attorney. Did your uncle have a close relationship
with that bank?
Speaker 4 (12:21):
Uh, Well, he had a he had a close relationship
was with his attorney, and I think he had been
you know, he'd been banking with the bank for you know,
for many years. And there was also my aunt who
pat who who passed away ten or fifteen years before
my uncle did. She left, she left the trust behind
that was was with the was with the bank.
Speaker 1 (12:43):
Okay, So they're relying on this bank to kind of
be the foundation for the family wealth management going forward
along with individuals. It's not a terrible arrangement by any means.
And if your uncle, that's good there. Your uncle was
looking for long term stability these How long do these
trusts last?
Speaker 2 (13:02):
Are they lifetime trusts? No, it's a tenure ten yere trust.
Speaker 1 (13:09):
So in that situation, there's less of a need for
a corporate trustee. We do a lot of trusts for
beneficiaries that last their lifetime because you can asset protect
the trust. You can protect it from creditors like divorcing spouses.
And we're going to talk a little bit bit more
about this later in the show. From lawsuits, from bankruptcies,
from medicaid. So you can create a trust for a
(13:30):
lifetime of a beneficiary and make the beneficiary their own trustee.
And in this case, you're a co trustee for yourself
and your two sisters, so it's being managed.
Speaker 2 (13:41):
Then you get to distribution.
Speaker 3 (13:42):
Still, let me just say it one thing. This call
illustrates very dramatically why we move clients into trust created
during their lifetimes. Revocable living trusts are what we normally do,
but there are irrevocable trusts. But this would have been
(14:05):
a case where you never would have had to make
this call if your uncle's will simply said anything that
isn't in my trust during my lifetime, I give to
that trust that I created in you know, twenty twenty one.
It's a perfect example.
Speaker 1 (14:23):
It's called a poor over will, and we try to
fund that trust during lifetime.
Speaker 2 (14:27):
But Tom, I think you had a follow up question.
Speaker 4 (14:32):
Oh no, no, I just what I'm hearing is that
this is not a terribly unusual arrangement, and it's not
necessarily a bad one. And that's you know, I think
I've gotten all the if that's correct, I've gotten all
the information that I had hoped to get.
Speaker 1 (14:45):
Yeah, we use this arrangement for people that want to
have stability, they want to have consistency, and if the
bank was managing the person's assets anyway, that's a great
way to just keep continuity, have continued asset management. If
they're doing it successfully, you kind of lock in the bank.
And to be honest, Tom, it can take some burden
off of you because they can do the tax work,
(15:07):
they can do the accounting work, they can do the bookwork.
Speaker 2 (15:09):
They're they're geared for that. They're a trust company.
Speaker 1 (15:12):
This is what they do, and you can kind of
ride along with them as the individual more of an
advisory role, and that's sometimes how we set that up.
Speaker 4 (15:22):
Okay, Well, great to hear. I appreciate the h I
appreciate the feedback.
Speaker 1 (15:27):
And we appreciate the call. Good morning, and thanks Tom
for joining us this morning. We're gonna put the number
back out there. We're gonna take a short break.
Speaker 2 (15:34):
Give us a call.
Speaker 1 (15:34):
Eight hundred eight two five five nine four nine. That's
eight hundred talk WGY Peter Strauss, Loup Piro from Pierre
o' connor and Strauss. We're gonna be right back after
this short break and we are back back.
Speaker 2 (15:56):
Back to the four seasons.
Speaker 1 (16:00):
And I will give my shout out to Zach. You know,
last week we were talking about the Super Bowl, and
the Super Bowl happened on Sunday, and boy, it was
a miserable game to watch because the Eagles just crushed
Kansas City. The defense of the Eagles was astounding. And
so I'm going to give a shout out to Zach
who's wearing his Eagles championship hat and shirt and.
Speaker 2 (16:19):
Probably his Eagles underwear.
Speaker 1 (16:21):
We won't go there, but congratulations to the Eagles and
that was a great win for them.
Speaker 2 (16:28):
And we have Frank on the line.
Speaker 1 (16:30):
Good morning, Frank, Welcome to Life Happens.
Speaker 5 (16:34):
Good morning.
Speaker 6 (16:34):
They have a quick question hopefully you can answer, okay,
and here's what it's about. So I'm unmarried. I have
a partner, long term partner, and we have an house
together and I added her to the house joined tendancy
with Writers' Survivorship. But we're unmarried and currently I have
(16:57):
a small mortgage on the house. My understanding is that
if I were to form a trust, the bank may
do what may view that as an acceleration.
Speaker 2 (17:09):
Yeah, that's a great question.
Speaker 6 (17:10):
Would And so my question I guess is, I'm unmarried.
How do I protect in terms of Medicaid in New York?
Speaker 1 (17:18):
Yeah, well, you've you've protected some of the house, but
now you've put the house at risk for two people. Right,
So it's it's whoever survives and the joint tendency with
a writer survivorship is going to own the house. And
if the person that ends up owning the house ends
up in a nursing home, then the house is up
for grabs and it becomes an available asset for medicaid purposes.
(17:41):
So you and your partner can create a trust. You
would it's a little difficult for title purposes, and you
would put that trust in And the clause in the
mortgage that you're talking about is a do on sale clause,
and they it triggers when you transfer ownership. And what
we have found is banks don't really object when you
(18:05):
put the house into the trust as long as you
keep paying the mortgage, because their mortgage is secured by
the house. It's going to get paid off at a
point in time where you front. Where you run into
problems is if you go back and try to refinance
the house and you say, oh, the house is now
owned by a trust and I want to take out
a home equity loan, pay off the existing mortgage, get
a little more cash out. They're going to say you
(18:27):
cannot do it with the title in the trust. And
I've actually had banks tell us take the title out
of the trust, do the mortgage, and then put the
title back in for ass a protection purpose, which is
kind of silly, crazy, but that's how it has been working.
But an existing mortgage. We've been doing these for I've
been doing them for almost forty years.
Speaker 3 (18:48):
Peter, how about you, Yes, it's not uncommon, especially here
in New York City. We have to perhaps talk to
a title cup for me to see how they might
object to it, because that's another issue. But it's it's
a problem that's that's solvable. But again, it sounds like
(19:12):
you could use a console with the say planning attorney
of your choice. You you it's complicated. You don't have
the benefit, for say, taxes of a marital deduction. So
if you're over a certain credit tax limits, you really
(19:33):
need to deal.
Speaker 1 (19:33):
With that issue as Yeah, for most people in New York,
now that's that's not really a problem because you have
to have up to set over seven million dollars of assets,
and if you're there, then you definitely need a consultation.
But for most people it's really medicaid planning and making
sure that you can protect this. Do you have children, yes,
(19:54):
I do? And does your partner have children?
Speaker 3 (19:57):
Yes?
Speaker 1 (19:58):
Okay, So what this this comes down to, who do
you want the ultimate beneficiaries of the house to be.
Speaker 2 (20:06):
Yours, mine or ours?
Speaker 1 (20:07):
And it comes down to that, and so you kind
of need to have a conversation about your overall estate plan.
And we do trust for this purpose all the time
because partners, whether they're married or unmarried, when they have
different children, may want their partner to have use of
all of these assets, use of the house during lifetime
and this is very common. But then when that partner
(20:29):
dies or if they die first, they want those assets
to go back to their own children if they've been
family assets. And so this is a critical point when
you sit down and you have to sit down together
and kind of figure out what's yours, what's mine, what's ours?
How do we want this to ultimately go? And we
can draft the trust that will accomplish those goals to
a t and make it very clear and make it
(20:51):
and do it without probate. And this for the last
caller kind of talked about probate and a trust in
certain situations. Probate's not terrible, but when you have conflt
among children, the litigation and the costs are astronomical. So
doing it through a trust, having it crafted for you
so that it hits all of the targets, your targets,
your partner's targets, and making sure the children are clear
(21:12):
on okay, this is our stuff, that's their stuff, and
we're going to share. But getting it protected now for
that ultimate healthcare issue that may arise in the future
is absolutely something to do today.
Speaker 3 (21:25):
So I want to focus on what Lou said, The
critical issue here is what does the disposition of the
surviving partner say about the disposition of his estate, Because
if it says to my children or my issue, your
(21:46):
children get cut out. So you've got to have a
document like a trust, which would be preferable, that makes
it clear that it's dividedally or in whatever shares you
agree on to your children and his children, and that
you need a good essay planning attorney who understands the
(22:07):
problems and how to solve them.
Speaker 2 (22:08):
All Right, Frank, thank you for that call. Excellent question.
Speaker 1 (22:12):
We're going to take a one more call from Bob
in East Durham and good morning, Bob.
Speaker 2 (22:18):
How are you this morning?
Speaker 7 (22:20):
Hi?
Speaker 1 (22:20):
Good morning, And I'm gonna apologize we're going to have
to cut your call in half because we're going to
have to take the news in about a minute and
a half. But let's start the conversation and we'll hold
on during the news and we'll come right.
Speaker 2 (22:31):
Back to you.
Speaker 7 (22:33):
Okay.
Speaker 5 (22:34):
If you have a trust, is it necessary to have
a will?
Speaker 2 (22:39):
Ah?
Speaker 1 (22:40):
So we were actually talking a little bit about this
earlier and Peter brought it up, and the answer is yes.
When we do a trust, whether it's a revocable trust
or an irrevocable trust, our goal for that plan and
we look at every asset. Do you have a car,
do you have a motor home? Do you have a boat?
Do you have bank accounts, brokerage accounts, life insurance? We
(23:00):
have to look asset by asset and we create a
plan not just to avoid probate for trust assets, but
non trust assets as well, your retirement accounts, what perhaps
life insurance, and that we do with beneficiary designation, so
you have the trust assets the beneficiary designations. The goal
is that the will is never needed. But if we miss,
(23:22):
if you miss, if you acquire an asset later and
it's not titled properly in the name of your trust,
or it doesn't have a beneficiary on it, then you
need the will to pick that asset up and to
bring it into the trust. We call it a poor
over will. It's a solution. We put it there. It
sits in the vault. If it's needed, it's needed. If
it's not, we've done our work and the probate is
(23:44):
avoided and the trust has all the assets, and you
don't need to use the will, but you should always
have it there.
Speaker 2 (23:50):
Hang on, we'll come back to that question. Bob.
Speaker 1 (23:53):
We're going to take a short break for the news
and we'll be right back. And we're back. We're going
to give the phone number out one more time. We
still have Bob on alying hand. Bob coming right back
to you. You can call us at eight hundred talk
WGY that's eight hundred eight two five five nine four
(24:13):
nine eight hundred eight two five five nine four nine.
The question on the table is if you have a trust,
do you need a will? And I started that explanation before,
and Bob, did that make sense to you why you
still need a will even though you have a trust?
Speaker 5 (24:30):
Yeah, it's it's sort of. I guess I'm not really
good on all these all these things now if you
have it. So, if you have a will and a trust,
does the will have to be probated?
Speaker 1 (24:44):
Well, that depends on whether you do a good job
funding the trust. And Peter and I were going to
get into this in the second half of the show,
so it's it's a good question to lead us into that.
When you create a living trust, the trust is a
document that's a contract, it's an agreement. You have trustees,
and if it's a revocable trust, you are the trustee,
(25:05):
you have beneficiaries, and you're the grand toury. You're creating
the trust. But the trust only operates as to assets
that are titled in the name of the trust. So
when we create a trust plan for our clients, when
we do the document signing. We go through a whole
process and give a lot of documentation as to Okay,
(25:26):
you have a brokerage account, here's how you put the
brokerage account in the trust. You have real estate, We're
going to prepare the deeds to the real estate. You
have a limited liability company, you have a business, even
if it's a rental property, We're going to put that
limited liability company in the trust.
Speaker 2 (25:39):
We're going to look at bank accounts.
Speaker 1 (25:41):
The one major asset class that does not get retitled
into a trust is qualified plans iras four one ks,
and we have to tie them into the trust with
a beneficiary designation. So during lifetime that asset is in
your name, but at death it's going to flow into
the trust and the beneficiaries are going to have the
(26:02):
protections of the trust after you're passing. This is the
trust funding process, and that is critical to not having
to probate your will and our goal and we sit
down with clients when we do a trust administration, we
take out the trust, we take out our asset list,
and we have a program in our office where we
update this on an annual basis for our clients and
(26:25):
we look at all the assets that we say, okay,
all the assets are accounted for, we do not need
to probate the will. And that trust administration can be
done in a.
Speaker 2 (26:33):
Matter of two weeks.
Speaker 1 (26:35):
It is that easy as opposed to months years in
the probate court. So it's a dramatic difference. The keybob
is funding the trust and accounting for every asset that
you have. And if you do that properly and you
hit all your targets, the will is never probated.
Speaker 5 (26:52):
Okay, Now does a trust does that have to be
probated or no?
Speaker 3 (26:57):
No?
Speaker 5 (26:57):
Is that an advantage to having a trust.
Speaker 1 (27:00):
That is one of the major advantages of having the trust. Absolutely,
the trust is a standalone document. So I was I
sat down with clients yesterday, parent had passed away, created
a trust. We had everything in the trust, the house,
we had the account the retirement accounts accounted for, and
we're going to talk about how we create trusts that
(27:21):
don't end. They last for the next generation called beneficiary
control trust. So if you want to have that asset
protection for your children, your trust can create that and
it just continues on. That administration literally is going to
take about two weeks. No, court involvement, private, secure, efficient,
(27:42):
and they're going to save you know, thousands, maybe tens
of thousands of dollars in court cost, court fees, and
all the things that go along with probate. So one
of the reasons we believe strongly in trusts is the privacy,
efficiency and security of that arrangement and the success or
trustees simply step in and administer.
Speaker 4 (28:03):
Peter.
Speaker 3 (28:03):
You want to add to that, well, the only the
only thing I would add is to our listeners. In
New York City, our probate court here, it's called the
surrogate court, has a peculiar practice that may or may
not be legal of when you probate a will, even
if it's just a simple poor over will, they're going
(28:24):
to ask for a copy of your lifetime trust and
they're going to make you notice the beneficiaries under that trust.
We can't avoid it. We we can't fire the surrogate
We have two surrogate court judges here. But it is
something people need to be aware of. So whatever bad
(28:44):
things you want to say about a beneficiary, you should
never put in your testamentary documents. Write a letter, good point,
all right, follow up, follow up to that Bob, thank
you very much.
Speaker 2 (28:58):
All right, thanks thanks for your calling. Give us call.
Speaker 1 (29:02):
We have an open phone line. Zach is waiting eight
hundred talk WGY. That's eight hundred eight two five five
nine four nine. Peter, the trust discussion, Probate, We can
avoid it. You have to do it. You have to
be diligent, You have to be careful in how you
do this. And there is work involved, but it's work
(29:23):
that's done by the client. And I have a revocable
living trust. My assets are scattered. I have different businesses,
my home, different things, So it takes work, but it's
work that you do once.
Speaker 2 (29:37):
It's work that you do.
Speaker 1 (29:39):
While you're capable of doing it yourself, and the burden
on the children is lifted. And I can tell you
that we sit with kids that say, geez, I don't
know where mom's date is, I don't know what's in
the house. I don't know what assets she had, and
they start to rummage through drawers and trying to find
assets and trying to find property. You can take away
(29:59):
the mystery by having everything tied together in that living
trust and managing that trust properly over time.
Speaker 2 (30:05):
Peter.
Speaker 3 (30:07):
Yes, and in terms of the funding. You have the
benefit of having the maker of your testamentary documents alive
and usually well in your office, and you can really
assist in getting the information about assets that she or
(30:28):
he may have forgotten about. And that process, even if
it takes a couple of months, is much more efficient
than trying to speak to a person who's no longer
living to find out what's going on here. The other
thing I want to say about the benefit of the
living trust is that when you want to make changes,
(30:51):
you don't have to go to your lawyer's office and
do an amendment to a will or a new will.
You can do it by a simple piece of paper
that your lawyer can and prepare. And the cost of
amending the living trust is far greater than making a
new will or a consicil to a will. And conoscoles
we don't particularly like anyway, because that causes other problems
(31:14):
and the mechanics of probate. But I don't think we
have time to discuss that today.
Speaker 1 (31:19):
Well, I can do that very quickly. When I started practice,
we typed wills on onion skin paper on an underwood typewriter,
and that was when I started nineteen eighty three. There
were no computers, there were no word processors, and so
if you had a ten page will and you wanted
to redo the will, you had to retype all ten pages.
Today everything is word processing, So instead of doing a
(31:39):
second document that makes one change to the will, you
just redo the will and it's much simpler, much more efficient,
and when it comes time to probate. I had a
client that did her She was a lawyer and did
her own planning, did her own will, and did a
will with four constiles. Every constil had different witnesses and
there was a challenge to that will. So we had
to bring eight bank tellers to court with each of
(32:02):
the consicils to justify the will and the fur conticils.
So simplifying things, folks, is not that hard because technology
has allowed us to do things in a much much.
Speaker 2 (32:12):
More efficient way.
Speaker 1 (32:14):
We have Bill Iniski Youna. Good morning, Bill, Welcome to
Life Happens Radio.
Speaker 7 (32:18):
Good morning. My question is my wife and I have
an irrevocable trust and I was wondering whether or not
we would put a life insurance policy plus possibly monies
from traditional iris that we cash in and takes ahead.
(32:38):
Is that in either case is that something that would
go into a trust?
Speaker 2 (32:42):
Sure?
Speaker 1 (32:43):
And it depends. Like all legal questions, the answer is
it depends. Right, So what type of life insurance is it?
If and you're doing this, I'm assuming bill for asset
protection purposes. You want to make sure that your assets
are protected if you or your wife need care, nursing,
home care, things like that. Is that is that accurate?
Speaker 7 (33:02):
That is definitely accurate. It would be a group life
insurance policy.
Speaker 1 (33:07):
Okay, so group term life insurance for Medicaid purposes does
not have any value, so you don't need to change
ownership on that policy. But you want to change the beneficiary.
You want to make the trust the beneficiary so that
when when one of you passes, it doesn't become an
available asset. The death benefit does not become an available
(33:29):
asset for the survivor. So having the policy pay into
the trust make the beneficiary of the trust. You don't
have to change ownership on a group term policy for
this purpose. You want to make the trust you want
to make Yeah, you want to make the trust the beneficiary,
and then that takes care of the life insurance with
retirement plans. If you're taking required minimum distributions. That means
(33:53):
you're over seventy three, right, So that's what you have
to start drawing on it, and you're taking cash out
and you don't want to build up too much care
outside your trust. You can continue to make contributions to
the trust. But Peter, that then creates a new lookback
period for each contribution.
Speaker 3 (34:12):
I think that's right. But the idea is to get
the trust, get the policy ownership into an irrevocable life
insurance trust.
Speaker 1 (34:22):
Now, Peter, and that we're not doing tax planning yet. Remember,
we don't have to do that unless it's seven million dollars.
So if you're over seven million, we want to get
it out for tax purposes. But in medicaid planning world,
we don't care if it's included in the taxable estate.
So we're not going to do the tax planning unless
you're over seven million, in which case you may not
need medicaid planning.
Speaker 2 (34:43):
Right, So they kind of don't go together.
Speaker 1 (34:46):
But if we are doing medicaid planning, naming the trust
as the death benefit beneficiary is the way to do this,
because the term life doesn't have any value for Medicaid purposes,
and we're not talking about I'm guessing it's not millions
of dollars in a group term policy.
Speaker 7 (35:03):
Oh absolutely, master, Yeah, yeah.
Speaker 1 (35:06):
So just naming the beneficiary will take care of that.
When you make withdrawals from an IRA and you make
additional contributions to your Medicaid trust, Remember, for nursing home purposes,
you have a five year look back.
Speaker 2 (35:20):
So you created when did you create the trust originally.
Speaker 7 (35:24):
Back in twenty fifteen.
Speaker 1 (35:26):
Okay, so anything you did back then, you put your
probably put your house in there and some other assets
in there back in twenty fifteen. That's done. You don't
have to worry about that. But when you make additional
contributions of those rmds into the trust, you now have
a new five year look back to be concerned about.
Oh okay, that's that's the only only thing to worry about.
(35:48):
And it gets more complicated than that, because when you
look at Medicaid, it covers two main things. It covers
people who are at home and getting home care, and
it covers people who are in a nursing home. And
the home care benefit at this point in time does
not have any look back period. So you can make withdrawals,
put money in and qualify for Medicaid the next month
(36:11):
for home care nursing home care. That creates a five
year lookback period. So it gets a little tricky, but
keep doing what you're doing. You're on the right track.
Change the death benefit. You can keep putting money into
the trust, and that's fine, but just know that you
have Medicaid to think about when you do those additional contributions.
(36:31):
But that's the plan, and I think you're in good shape.
If you did in twenty fifteen, everything you did is
already outside the five year look back and you're in
good shape.
Speaker 7 (36:40):
That sounds excellent. Thank you very much for your time.
Speaker 1 (36:42):
All right, Bill, thanks for the call. We have Jim
on the line. Good morning, Jim. How are you this morning?
Speaker 8 (36:49):
Good morning. I've got a question about my trust that
I haven't really been able to get a satisfactory answer,
but I think you may be able to help me.
Speaker 2 (37:00):
Let's do it.
Speaker 8 (37:01):
What I'm trying to do is we've my wife and
I have been married fifty three years. We have no children,
and recently the last few years, we established a trust
and we moved every conceivable non retirement asset into that trust,
either directly or as transfer on debt. My question concerns
(37:25):
when the time comes the trustee administers of the successor
trustee administers the trust and distributes according to our wishes.
What happens with the other stuff, the retirement assets. What
we've done is we have designated beneficiaries, which are all charities,
(37:46):
and they will be the beneficiary of our entire the
IRA portion of our state.
Speaker 1 (37:52):
Very solid planning, by the way, because the charities are
tax exempt and they get every penny of that regardless
of income tax or state tax.
Speaker 2 (37:59):
So good planning.
Speaker 8 (38:02):
What I don't understand though, is if the trustee has
to inform the charities that they are entitled to this
money and they should pick it up, does the trustee
get paid for that or does it all get rolled
into one and the trustee gets paid from the entire state.
Speaker 2 (38:20):
Yeah, it's a good question.
Speaker 1 (38:22):
When you have a trust and you have retirement accounts
that do not get retitled in the name of the trust,
the trustee does not have authority over those accounts because
they're not trust accounts. In order for the trustee to
get authority over the accounts, you would have to name
the trust as the beneficiary, but you don't necessarily want
(38:42):
to do that. You wanted to go directly to the charity,
And what I would do during lifetime is send a
letter to the charity with the beneficiary designation and the
account information, and it's up to the charity then to
collect it. They can file the claim. They can do
it on their own, so you don't have to pay
your trustee to do that. And you may advise your
trustee in a document or a letter to say, okay,
(39:05):
these are the charities, send them a copy of when
we die, send them a copy of the death certificate,
and then it's up to the charity to get the
accounts moved into the charity's name.
Speaker 8 (39:16):
Yes, so that is kind of something I've been thinking about.
Does that normally go by some kind of contract where
we would take the success or trustee, we'd say on
our death, we will you will be entitled to X
number of dollars for notifying six charities that they are
the beneficiaries of our estate of our iras.
Speaker 1 (39:38):
Yeah, if I do, siaries get compensated based upon a
statutory commission. So right, they're going to get a commission.
If you want to pay them some extra, you can
absolutely put that in the document. If you want to
give them the lector reward for doing the extra work. Yes,
you can. You can draft that.
Speaker 3 (39:54):
Out, This is Peter. That's what I've done. I've added
to the compensation clause that the trustee can be compensated
for additional time dealing with non probate assets and non
trust assets. So that's a good idea. Do you name
the charities in the trust?
Speaker 2 (40:16):
Yes, in the trust are on the buyer eight.
Speaker 8 (40:20):
Not in the trust, I'm sorry, in the IRA designated beneficiaries.
Speaker 2 (40:24):
Much more efficient way to do it, and for tax purposes,
the better way to do it.
Speaker 3 (40:27):
Correct, Absolutely right.
Speaker 2 (40:29):
Good, all right, Jim.
Speaker 1 (40:31):
Good planning, and congratulations on fifty three years of marriage.
Speaker 2 (40:35):
That's a feat in and of itself. Peter, how long
you been married?
Speaker 3 (40:40):
Sixty sixty three years?
Speaker 2 (40:43):
Sixty three? Okay, so we got you. We got you
one uped, Jim.
Speaker 3 (40:46):
I got you on that one.
Speaker 2 (40:48):
All right, have a good morning. Thanks for calling.
Speaker 1 (40:51):
We have Bob and Saint Augustine, but we have to
take a short break, our last break of the morning. Bob,
hopefully you can stay with us. We will pick you
up right after this short break.
Speaker 7 (41:02):
There, all right, welcome back.
Speaker 1 (41:05):
It looks like Bob has stayed on the line with us.
Good morning, Bob, Welcome to life happens.
Speaker 9 (41:11):
Good morning. I'm in New York State, retiree living in Florida,
and I had a will mate before I moved down
here six seven years ago, and it was my New
Year's resolution to get a trust. So after my wife
and I attended a couple of summoners down here, we
chose a firm, and now it's being written as we speak.
(41:33):
It's underway. Procrastination seems to take forever. Once you make
a decision, all of a sudden, everything seems to be
moving at lightning speed. My questions are, I can never
hear enough times, what's the difference between revocable and irrevocable
and why you do one or the other. But the
(41:53):
other question I'm asking is, once you make a trust,
if you're unhappy with it, is there a way to
back out and go another way? Wait to nobody's talked
about costs. So all that's what's on my mind today.
Speaker 1 (42:07):
Two great questions and two that we can answer easily.
The cost question varies widely, so we'll try to address that.
But the revocable versus irrevocable question. You do the revocable
trust to avoid probate, manage assets if you become incapacitated.
That revocable trust has success or trustees who manage the
assets for you and for your benefit. So you write
(42:31):
the script, and that's what I refer to it. As
you write the script. If I have Alzheimer's, if I
have a stroke, if I have an accident, my success
or trustees are going to step in. And here's how
I want my assets dealt with, managed and used for
my benefit, perhaps my spouse's benefit, my life partner's benefit.
If I'm not married, we have to make sure we
draft that in. If I have children who have dependency,
(42:53):
they have special needs, are chronically ill, I want to
make sure my trust takes care of them during my lifetime.
All of that goes in the revocable trust. When you pass,
there's no probate, and your trustee simply takes the assets
administers them in accordance with your wishes. You are the
trustee of that trust, and it is revocable, which means
they're your assets. The reasons we do irrevocable trusts are two.
(43:18):
We're either doing it for asset protection purposes or tax
planning purposes, and when it's asset protection. The majority of
cases that we get now because the exemptions are so
damn high. You're in Florida, the federal estate tax exemption
is now thirteen point nine to nine million dollars, fourteen
million dollars. You can pass a state tax free and
(43:38):
there's no Florida estate tax. In New York we have
a lower threshold. It's seven million, but still seven million dollars.
How many people need to worry about a seven million
dollar exemption? But Medicaid is the plan that most people
are concerned about because the cost of care is so
high and you're looking at now two hundred thousand dollars
a year in our area up here for nursing home
(44:01):
care more down where Peter is in New York City.
So we do revocable trusts for all the reasons stated
management of assets during lifetime, avoidance, to probate, privacy, expediency,
cost savings. We do irrevocable trusts for asset protection purposes
and tax planning purposes. In an irrevocable trust, you're not
the trustee. Now under New York and Florida law, both
(44:24):
you can create a revocable trust and change it, re
mend it, of revoke it at any time. When you
have an irrevocable trust, it is still possible to retain control,
be able to change trustees at any time, be able
to change beneficiaries at any time. And in both states,
if you want to revoke your trust, you can do
it with the consent of the beneficiaries. So the difference
(44:47):
is you can revoke the revocable trust on your own.
One signature trust is gone. With an irrevocable trust, you
have to get the beneficiaries to consent. But think about
one thing that I said. You get to redesignate the beneficiaries.
So the example I use is if you have three
kids and one says not so much. You know, my
wife says, I shouldn't do this. I shouldn't sign this
(45:10):
because we're going to get a third of this trust
someday and I don't want to affect my inheritance.
Speaker 2 (45:15):
What do you do with that child? You fire him,
You're out.
Speaker 1 (45:19):
Now I have two beneficiaries, they're getting fifty to fifty,
and they're going to consent to this because the next
thing I'm going to do is write a new trust
or some other plan and they're going to get the benefit.
They're going to get the benefit of my estate. So
you still have leverage and control even in an irrevocable
trust situation, but you have to make sure that your
attorneys are drafting it properly and giving you all the
(45:39):
rights that you can have. Is the trust that you're
having done revocable or irrevocable?
Speaker 9 (45:47):
I believe that's part of my I'm going to double check,
but I think it's really I think it's irrevocable. Not sure.
Speaker 1 (45:53):
Okay, if you're doing it for asset protection and medicaid
planning purposes and you want to protect your home and
all those other things, then it's going to be an
irrevocable trust to get the asset protection.
Speaker 2 (46:05):
Yeah.
Speaker 9 (46:05):
I think it sounds like I've got everything going the right.
Speaker 2 (46:08):
Way, so excellent. Where are you in Florida?
Speaker 4 (46:12):
I'm in St.
Speaker 9 (46:13):
Augustine, Norris, Saint John's Country. I'm halfway between Jacksonville and Daytona.
Speaker 2 (46:20):
Yep.
Speaker 1 (46:21):
Nice area, beautiful, historical, very historical area.
Speaker 4 (46:26):
Yeah. All right, then, are well.
Speaker 1 (46:29):
Thank you for your call and we appreciate it. Good
luck with your trust. Sounds like you're doing all the
right things, and we are at about five minutes, Peter,
I don't think we have any callers left on the line,
so let's just kind of wrap our conversation for the
last five minutes. These are great questions and they've raised
(46:50):
a lot of interesting points, and I didn't address the cost.
I'm not avoiding it, but it is such a wide disparity.
But when you're doing a plan and you're doing it
on a comprehensive basis, where you're looking at every asset,
every element, designing the trust properly, funding the trust properly,
it's going to cost you several thousand dollars to do that.
Trust It's not something you can get off a shelf.
(47:10):
It's not something you can take out of a book.
And there are a lot of over time, Peter, there
have been a lot of discount providers that have come
in and try.
Speaker 2 (47:19):
To do this.
Speaker 1 (47:21):
You know, celebrities and I won't name names, but they
appear on TV and say, oh, I'm not a lawyer,
but use my trust kit, And you're just doing yourself
a disservice by doing that.
Speaker 3 (47:34):
Yes, please, please do not do a trust from an
online document that you pay several hundred dollars for you
think you're avoiding legal fees, and that, of course is correct,
but that could be a very disastrous decision. We're not
saying we're the best in the world, although some clients
(47:55):
they think we're pretty good. But we give you this
kind of advice that or hearing about today, and it
is critical. The move to a trust is better for
you in so many ways. And remember there are always
amendable very simply by doing a simple amendment. And remember
(48:15):
in the age of computers where everything is stored online
and folder under your name, it makes the amendment process very,
very simple. Please think about this and if you have
any doubt, give us a call. But having a trust
really makes a lot of sense for a lot of reasons.
Speaker 1 (48:37):
And I want to close talking about the revocable trust,
the irrevocable trust. When they terminate, should they terminate, Should
you simply say, Okay, I have three children, or I
have nieces and nephews. I want to just leave everything
outright to my kids. Think about the kids' lives, what
their lives are going to be like going into the future.
(49:00):
But their children, your grandchildren are going to be able
to benefit from someday and is there a way that
we can take our trusts, my revocable trust which I have,
and protect it from my kids, so that what I've
worked for my lifetime goes to my children, not to
anyone else, not to their spouse in a divorce, not
(49:20):
to that lawsuit, not to that creditor, not to the
bankruptcy court, not to medicaid, and not to the government
in a state tax payments. Because if my children are successful,
what I leave to them compounds their estate tax problem.
I have a document that I've written called the Beneficiary
Control Trust Guide. If you'd like to get a copy
(49:40):
of this, How to protect your kids, How to create
a trust that goes downstream, protects your children, your grandchildren,
keeps it in the bloodline, makes sure that your hard
earned money during your lifetime is protected. This is one
of the best reasons to have a living trust because
the kids trusts are done expeditiously.
Speaker 2 (49:59):
In me.
Speaker 1 (50:00):
Upon your passing, your trust just carves out into those
other trusts. So, Peter, we're thirty seconds away from the
end of the show. Thanks for joining me today. This
has been a great show, a lot of great callers.
Thanks for listening, Thanks for calling, and as always. We
hope you listen every Saturday morning at nine am for
Life Happens Radio, and you will be prepared. I'm Lou
(50:20):
Piro along with Peter Strauss.
Speaker 3 (50:22):
Peter, thank you, Yes, everybody. Enjoy your day, and we
hope you'll pay attention to some of these suggestions.
Speaker 2 (50:32):
But stay safe, look good, and we'll see you next
week
Good morning everyone, and welcome to Life Happens Radio. I'm Lupiro,
your host for this morning, and we hope you can
join us for this hour talking about something that we
hear in our office all the time. We have questions
from clients, we have questions from listeners, and it's all
about trusts. Not trust. Well, you have to trust your lawyer,
let's start there. But trusts, the documents and the creation
(00:23):
of this legal contract between parties, trustees, beneficiaries. How does
a trust work?
Speaker 2 (00:31):
What is it? In effect? Do I need one? And
for that I'm very.
Speaker 1 (00:36):
Fortunate to have with me my partner coming to us
from the Upper West side of Manhattan. Peter Strauss, Good morning, Peter, Good.
Speaker 3 (00:44):
Morning Lou, and good morning everyone who's listening today.
Speaker 1 (00:48):
And Peter, one of the most frequent questions we get
is should I have a trust? What does it do
for me? Do I need a trust? And we're going
to unravel that. The trusts are not these mysterious creatures
out there. They are agreements that are very detailed, very technical,
written by attorneys to take care of things. And Peter,
(01:09):
in our practice, when I started, and I started a
little after you, wills were the document of choice.
Speaker 2 (01:17):
You know, get a will, You're done. You did well.
Speaker 1 (01:20):
You have a will, It goes through court, goes through probate,
you decided where your assets are going to go. But
over my forty one year career, the practice has really evolved,
and I think it's become more enlightened as to the
benefits of trusts. And have you seen that same kind
of phenomenon.
Speaker 3 (01:38):
Absolutely, the changes started probably in the late nineteen eighties.
But historically, as you've said, trusting the states, lawyers who
do state planning for clients really did only wills. Trusts
were for the ultra wealthy. And it then began to
(02:02):
become aware to lawyers that they were missing a great
opportunity to improve the services that they delivered to clients
and using trusts for all of the reasons that we
will talk about this morning.
Speaker 1 (02:18):
And we're going to have this, hopefully as a conversation
with our listeners. So I'm going to give the phone
number out right now early in the show. And if
you have a question on trust, if you have a
trust and you have a question on how to administer
that trust, you're thinking about it, what are the purposes?
What can I do with my trust. Give us a call.
It's eight hundred eight two five five nine four nine.
(02:39):
That's eight hundred talk WGY, eight hundred talk WGY. I'll
give it one more time, eight hundred eight two five
five nine four nine. We'd love to have you call
and ask us a question or make comment about a
trust or any other aspect of the work that we
do here at Pierre, O'Connor and Strauss. Our law firm
(03:00):
does a lot of trusts. We also do probate, We
do wills, and it's from the experience of probating and
going through the process through the court that I have
seen the value of trust administration.
Speaker 3 (03:17):
I think that's absolutely right on target. What we found
over the years is that the probate process has gotten
slower because of budget cuts and staff shortages and frankly inefficiency.
The probate courts take a long time to probate a will.
(03:39):
It's gotten somewhat out of hands in Manhattan and also
the other counties that make up New York City. But
in Manhattan it can take six months to nine months
to get a will probated. Now, it's true that you
can get something called a preliminary appointment that allows you
(04:00):
to administer in a state, but you can't make distributions
from the estate when you only have the preliminary authorization.
Speaker 2 (04:09):
And I've talked to attorneys in New York City.
Speaker 1 (04:11):
I've talked to attorneys in New York City who have
said that preliminary letters are not that much faster than
full letters just because of the number, the sheer numbers
of people who are relying on that court to do
the administration of their estate has gone up, and the
court staff has gone down, and the ability to handle things.
The numbers of judges haven't changed. But during COVID, this
(04:36):
is really where it all came to roost. I think
during COVID, the court's shut down for a few months,
and this backlog built up, and a lot of people
who during COVID were nearing retirement took retirement and didn't
come back, and so you lost the people that had
the deep knowledge of how to move the cases along.
(04:56):
And like anything else, courts are the subject of their employees.
They're as good as their clerks and the staff that
work in those courts. We have a little better time
up State Peter because they're smaller counties, less people. You
still have that surrogate, that one surrogate's court judge that
handles everything, and you develop a relationship with the court
(05:19):
clerk hopefully, and we try to be on good terms
with all the counties that we work in, which are many.
But it's a process regardless of whether you have good
relationships and regardless of whether it goes fully according to plan,
where you have assets tied up for something called the
creditors period Peter, which is seven months from the date
(05:40):
you get not deceased but appointed as executor under the will,
and that seven month period is in the law, so
that there's nothing you can.
Speaker 2 (05:49):
Really do about that.
Speaker 3 (05:52):
Well, probably to me, the worst problem with probate is
that very often, depending on the terms of a will,
you need to go back to court to get instructions
or authority to take some action, which is takes terrible
amounts of time because there are delays. You're not in
(06:14):
a probate department, you're in the other department, and you
may get stuck without being able to take the action
that may be critical. That doesn't happen with trusts, which
you'll see as we discuss it. You don't need to
go to court. You need to discuss it with your trustee,
and you may be your own trustee in many cases,
(06:36):
and you don't have the delays in obtaining permission to
do something that may be critical.
Speaker 1 (06:43):
And we have a caller Tom on the line from Coliny.
Good morning, Tom, Welcome to life Happens FI.
Speaker 4 (06:50):
Good morning. I have a relative who passed away a
while back, had some assets, named me an execut and
also named a local bank as co executor. The will
called for a trust to be established. I am named
as a trustee and the bank is named as a
(07:12):
co trustee. Why would why would that? Well, I don't
know if you're guessing or not, but why would someone
do that? Why would they name a why would they
name a bank a co executor and a co trustee?
Frosen comms? And what what does that mean?
Speaker 1 (07:28):
Yeah, it's a great question. Who are the beneficiaries of
that trust?
Speaker 2 (07:31):
Tom?
Speaker 4 (07:34):
That would be myself and my two sisters, all.
Speaker 2 (07:36):
Right, So they have a trust for And was this
a parent that set it up?
Speaker 4 (07:42):
It was an uncle, an uncle.
Speaker 1 (07:44):
And your uncle worked with counsel to put the will
together to create this. It's a testamentary trust. So just
to go technical a little bit, when when you petition
the court with a will, and a lot of people think, well,
I have a will, I'm the executor and the trustee.
And as you know now that isn't just the case.
You have to go through this whole court process and
get appointed. You have to have a court order admitting
(08:08):
the will to probate, and then you get a certificate
from a court called letters testamentary and that's to bring
the assets into the estate. And then you get a
certificate of letters of trusteeship. Have you secured both of those? Tom,
I believe so okay, So you and the banker, you
(08:30):
and the banker co trustees in what's a testamentary trust?
And the other thing that I'll note about a testamentary
trust and the testamentary big word. That just means it's
created through the will and through the probate process. That
trust is now subject to court jurisdiction going forward. So
your uncle at the point in time when he was
creating the will chose you as a co trustee and
(08:53):
wanted a bank trust company as the co trustee with you. Trusts,
as we're going to talk about, have depending upon with
the level of assets and depending upon the complexity they
have accountings, they have tax returns, investment management, so there
are a whole host of functions that you will be
doing as co trustee along with the bank and the
(09:15):
bank is they are professionals in investment management. They're professionals
in managing distributions to beneficiaries and doing accountings and doing
tax returns. So when you have a corporate co trustee
a bank trust company, you're buying all the services that
they offer and you get investment management plus the technical expertise.
(09:35):
Have you started working with the trust officer yet.
Speaker 2 (09:37):
At the bank?
Speaker 4 (09:40):
Yes?
Speaker 2 (09:41):
And how's that going so far?
Speaker 4 (09:46):
It depends on what individual I'm connected with at the bank.
We'll just say that.
Speaker 1 (09:52):
And that's one of the issues with corporate trustees that
people change.
Speaker 2 (09:56):
People come and go.
Speaker 1 (09:57):
You don't get a person as the co trustee with you. You
get institution and you don't know who's coming that day
from the institution to be the co trustee. They may
change and staff turnovers is not unusual in those situations.
But as you're doing this with the co trustee, your
uncle wanted to have some stability. If you pass away,
(10:20):
who takes your place as the individual co trustee?
Speaker 4 (10:25):
I would have to check into that. Yeah, I don't
think I can answer that.
Speaker 1 (10:28):
So in the document we usually line up successors. Do
your sisters need more management? And I don't want to
pry too much, but is it something where they need
to have someone managing money and managing the distributions to them?
Speaker 4 (10:44):
No, No, I don't think so. I think they have
people that they trust.
Speaker 3 (10:50):
Let me add one more issue here. You really need
to tell us whether or not the will which creates
the trust provide that either trustee connects separately independently, and
that sometimes would relieve some of the problems that you
could take certain actions on your own. My guess is
(11:12):
that it requires the consent of your co trustee, which
is another issue. It's very hard to read the mind
of a person who's no longer living, but the lawyer
would would be the one that would have guided your
uncle as to whether or a trustee a co trustee
(11:33):
is important? Is it both executor and trustee?
Speaker 4 (11:40):
Yes, the bank was named as a co executor and
a co trustee.
Speaker 3 (11:44):
Right. You might have taken a different tack depending on
the size of the estate and the family relationships and
what the motivations were for the client. To have the bank.
Some times it's appropriate. Sometimes maybe it's not necessary, but
(12:04):
that's the custom that that particular lawyer is used toper
applying to a particular matter.
Speaker 1 (12:11):
And very often it depends on how the client got
to the attorney. Did your uncle have a close relationship
with that bank?
Speaker 4 (12:21):
Uh, Well, he had a he had a close relationship
was with his attorney, and I think he had been
you know, he'd been banking with the bank for you know,
for many years. And there was also my aunt who
pat who who passed away ten or fifteen years before
my uncle did. She left, she left the trust behind
that was was with the was with the bank.
Speaker 1 (12:43):
Okay, So they're relying on this bank to kind of
be the foundation for the family wealth management going forward
along with individuals. It's not a terrible arrangement by any means.
And if your uncle, that's good there. Your uncle was
looking for long term stability these How long do these
trusts last?
Speaker 2 (13:02):
Are they lifetime trusts? No, it's a tenure ten yere trust.
Speaker 1 (13:09):
So in that situation, there's less of a need for
a corporate trustee. We do a lot of trusts for
beneficiaries that last their lifetime because you can asset protect
the trust. You can protect it from creditors like divorcing spouses.
And we're going to talk a little bit bit more
about this later in the show. From lawsuits, from bankruptcies,
from medicaid. So you can create a trust for a
(13:30):
lifetime of a beneficiary and make the beneficiary their own trustee.
And in this case, you're a co trustee for yourself
and your two sisters, so it's being managed.
Speaker 2 (13:41):
Then you get to distribution.
Speaker 3 (13:42):
Still, let me just say it one thing. This call
illustrates very dramatically why we move clients into trust created
during their lifetimes. Revocable living trusts are what we normally do,
but there are irrevocable trusts. But this would have been
(14:05):
a case where you never would have had to make
this call if your uncle's will simply said anything that
isn't in my trust during my lifetime, I give to
that trust that I created in you know, twenty twenty one.
It's a perfect example.
Speaker 1 (14:23):
It's called a poor over will, and we try to
fund that trust during lifetime.
Speaker 2 (14:27):
But Tom, I think you had a follow up question.
Speaker 4 (14:32):
Oh no, no, I just what I'm hearing is that
this is not a terribly unusual arrangement, and it's not
necessarily a bad one. And that's you know, I think
I've gotten all the if that's correct, I've gotten all
the information that I had hoped to get.
Speaker 1 (14:45):
Yeah, we use this arrangement for people that want to
have stability, they want to have consistency, and if the
bank was managing the person's assets anyway, that's a great
way to just keep continuity, have continued asset management. If
they're doing it successfully, you kind of lock in the bank.
And to be honest, Tom, it can take some burden
off of you because they can do the tax work,
(15:07):
they can do the accounting work, they can do the bookwork.
Speaker 2 (15:09):
They're they're geared for that. They're a trust company.
Speaker 1 (15:12):
This is what they do, and you can kind of
ride along with them as the individual more of an
advisory role, and that's sometimes how we set that up.
Speaker 4 (15:22):
Okay, Well, great to hear. I appreciate the h I
appreciate the feedback.
Speaker 1 (15:27):
And we appreciate the call. Good morning, and thanks Tom
for joining us this morning. We're gonna put the number
back out there. We're gonna take a short break.
Speaker 2 (15:34):
Give us a call.
Speaker 1 (15:34):
Eight hundred eight two five five nine four nine. That's
eight hundred talk WGY Peter Strauss, Loup Piro from Pierre
o' connor and Strauss. We're gonna be right back after
this short break and we are back back.
Speaker 2 (15:56):
Back to the four seasons.
Speaker 1 (16:00):
And I will give my shout out to Zach. You know,
last week we were talking about the Super Bowl, and
the Super Bowl happened on Sunday, and boy, it was
a miserable game to watch because the Eagles just crushed
Kansas City. The defense of the Eagles was astounding. And
so I'm going to give a shout out to Zach
who's wearing his Eagles championship hat and shirt and.
Speaker 2 (16:19):
Probably his Eagles underwear.
Speaker 1 (16:21):
We won't go there, but congratulations to the Eagles and
that was a great win for them.
Speaker 2 (16:28):
And we have Frank on the line.
Speaker 1 (16:30):
Good morning, Frank, Welcome to Life Happens.
Speaker 5 (16:34):
Good morning.
Speaker 6 (16:34):
They have a quick question hopefully you can answer, okay,
and here's what it's about. So I'm unmarried. I have
a partner, long term partner, and we have an house
together and I added her to the house joined tendancy
with Writers' Survivorship. But we're unmarried and currently I have
(16:57):
a small mortgage on the house. My understanding is that
if I were to form a trust, the bank may
do what may view that as an acceleration.
Speaker 2 (17:09):
Yeah, that's a great question.
Speaker 6 (17:10):
Would And so my question I guess is, I'm unmarried.
How do I protect in terms of Medicaid in New York?
Speaker 1 (17:18):
Yeah, well, you've you've protected some of the house, but
now you've put the house at risk for two people. Right,
So it's it's whoever survives and the joint tendency with
a writer survivorship is going to own the house. And
if the person that ends up owning the house ends
up in a nursing home, then the house is up
for grabs and it becomes an available asset for medicaid purposes.
(17:41):
So you and your partner can create a trust. You
would it's a little difficult for title purposes, and you
would put that trust in And the clause in the
mortgage that you're talking about is a do on sale clause,
and they it triggers when you transfer ownership. And what
we have found is banks don't really object when you
(18:05):
put the house into the trust as long as you
keep paying the mortgage, because their mortgage is secured by
the house. It's going to get paid off at a
point in time where you front. Where you run into
problems is if you go back and try to refinance
the house and you say, oh, the house is now
owned by a trust and I want to take out
a home equity loan, pay off the existing mortgage, get
a little more cash out. They're going to say you
(18:27):
cannot do it with the title in the trust. And
I've actually had banks tell us take the title out
of the trust, do the mortgage, and then put the
title back in for ass a protection purpose, which is
kind of silly, crazy, but that's how it has been working.
But an existing mortgage. We've been doing these for I've
been doing them for almost forty years.
Speaker 3 (18:48):
Peter, how about you, Yes, it's not uncommon, especially here
in New York City. We have to perhaps talk to
a title cup for me to see how they might
object to it, because that's another issue. But it's it's
a problem that's that's solvable. But again, it sounds like
(19:12):
you could use a console with the say planning attorney
of your choice. You you it's complicated. You don't have
the benefit, for say, taxes of a marital deduction. So
if you're over a certain credit tax limits, you really
(19:33):
need to deal.
Speaker 1 (19:33):
With that issue as Yeah, for most people in New York,
now that's that's not really a problem because you have
to have up to set over seven million dollars of assets,
and if you're there, then you definitely need a consultation.
But for most people it's really medicaid planning and making
sure that you can protect this. Do you have children, yes,
(19:54):
I do? And does your partner have children?
Speaker 3 (19:57):
Yes?
Speaker 1 (19:58):
Okay, So what this this comes down to, who do
you want the ultimate beneficiaries of the house to be.
Speaker 2 (20:06):
Yours, mine or ours?
Speaker 1 (20:07):
And it comes down to that, and so you kind
of need to have a conversation about your overall estate plan.
And we do trust for this purpose all the time
because partners, whether they're married or unmarried, when they have
different children, may want their partner to have use of
all of these assets, use of the house during lifetime
and this is very common. But then when that partner
(20:29):
dies or if they die first, they want those assets
to go back to their own children if they've been
family assets. And so this is a critical point when
you sit down and you have to sit down together
and kind of figure out what's yours, what's mine, what's ours?
How do we want this to ultimately go? And we
can draft the trust that will accomplish those goals to
a t and make it very clear and make it
(20:51):
and do it without probate. And this for the last
caller kind of talked about probate and a trust in
certain situations. Probate's not terrible, but when you have conflt
among children, the litigation and the costs are astronomical. So
doing it through a trust, having it crafted for you
so that it hits all of the targets, your targets,
your partner's targets, and making sure the children are clear
(21:12):
on okay, this is our stuff, that's their stuff, and
we're going to share. But getting it protected now for
that ultimate healthcare issue that may arise in the future
is absolutely something to do today.
Speaker 3 (21:25):
So I want to focus on what Lou said, The
critical issue here is what does the disposition of the
surviving partner say about the disposition of his estate, Because
if it says to my children or my issue, your
(21:46):
children get cut out. So you've got to have a
document like a trust, which would be preferable, that makes
it clear that it's dividedally or in whatever shares you
agree on to your children and his children, and that
you need a good essay planning attorney who understands the
(22:07):
problems and how to solve them.
Speaker 2 (22:08):
All Right, Frank, thank you for that call. Excellent question.
Speaker 1 (22:12):
We're going to take a one more call from Bob
in East Durham and good morning, Bob.
Speaker 2 (22:18):
How are you this morning?
Speaker 7 (22:20):
Hi?
Speaker 1 (22:20):
Good morning, And I'm gonna apologize we're going to have
to cut your call in half because we're going to
have to take the news in about a minute and
a half. But let's start the conversation and we'll hold
on during the news and we'll come right.
Speaker 2 (22:31):
Back to you.
Speaker 7 (22:33):
Okay.
Speaker 5 (22:34):
If you have a trust, is it necessary to have
a will?
Speaker 2 (22:39):
Ah?
Speaker 1 (22:40):
So we were actually talking a little bit about this
earlier and Peter brought it up, and the answer is yes.
When we do a trust, whether it's a revocable trust
or an irrevocable trust, our goal for that plan and
we look at every asset. Do you have a car,
do you have a motor home? Do you have a boat?
Do you have bank accounts, brokerage accounts, life insurance? We
(23:00):
have to look asset by asset and we create a
plan not just to avoid probate for trust assets, but
non trust assets as well, your retirement accounts, what perhaps
life insurance, and that we do with beneficiary designation, so
you have the trust assets the beneficiary designations. The goal
is that the will is never needed. But if we miss,
(23:22):
if you miss, if you acquire an asset later and
it's not titled properly in the name of your trust,
or it doesn't have a beneficiary on it, then you
need the will to pick that asset up and to
bring it into the trust. We call it a poor
over will. It's a solution. We put it there. It
sits in the vault. If it's needed, it's needed. If
it's not, we've done our work and the probate is
(23:44):
avoided and the trust has all the assets, and you
don't need to use the will, but you should always
have it there.
Speaker 2 (23:50):
Hang on, we'll come back to that question. Bob.
Speaker 1 (23:53):
We're going to take a short break for the news
and we'll be right back. And we're back. We're going
to give the phone number out one more time. We
still have Bob on alying hand. Bob coming right back
to you. You can call us at eight hundred talk
WGY that's eight hundred eight two five five nine four
(24:13):
nine eight hundred eight two five five nine four nine.
The question on the table is if you have a trust,
do you need a will? And I started that explanation before,
and Bob, did that make sense to you why you
still need a will even though you have a trust?
Speaker 5 (24:30):
Yeah, it's it's sort of. I guess I'm not really
good on all these all these things now if you
have it. So, if you have a will and a trust,
does the will have to be probated?
Speaker 1 (24:44):
Well, that depends on whether you do a good job
funding the trust. And Peter and I were going to
get into this in the second half of the show,
so it's it's a good question to lead us into that.
When you create a living trust, the trust is a
document that's a contract, it's an agreement. You have trustees,
and if it's a revocable trust, you are the trustee,
(25:05):
you have beneficiaries, and you're the grand toury. You're creating
the trust. But the trust only operates as to assets
that are titled in the name of the trust. So
when we create a trust plan for our clients, when
we do the document signing. We go through a whole
process and give a lot of documentation as to Okay,
(25:26):
you have a brokerage account, here's how you put the
brokerage account in the trust. You have real estate, We're
going to prepare the deeds to the real estate. You
have a limited liability company, you have a business, even
if it's a rental property, We're going to put that
limited liability company in the trust.
Speaker 2 (25:39):
We're going to look at bank accounts.
Speaker 1 (25:41):
The one major asset class that does not get retitled
into a trust is qualified plans iras four one ks,
and we have to tie them into the trust with
a beneficiary designation. So during lifetime that asset is in
your name, but at death it's going to flow into
the trust and the beneficiaries are going to have the
(26:02):
protections of the trust after you're passing. This is the
trust funding process, and that is critical to not having
to probate your will and our goal and we sit
down with clients when we do a trust administration, we
take out the trust, we take out our asset list,
and we have a program in our office where we
update this on an annual basis for our clients and
(26:25):
we look at all the assets that we say, okay,
all the assets are accounted for, we do not need
to probate the will. And that trust administration can be
done in a.
Speaker 2 (26:33):
Matter of two weeks.
Speaker 1 (26:35):
It is that easy as opposed to months years in
the probate court. So it's a dramatic difference. The keybob
is funding the trust and accounting for every asset that
you have. And if you do that properly and you
hit all your targets, the will is never probated.
Speaker 5 (26:52):
Okay, Now does a trust does that have to be
probated or no?
Speaker 3 (26:57):
No?
Speaker 5 (26:57):
Is that an advantage to having a trust.
Speaker 1 (27:00):
That is one of the major advantages of having the trust. Absolutely,
the trust is a standalone document. So I was I
sat down with clients yesterday, parent had passed away, created
a trust. We had everything in the trust, the house,
we had the account the retirement accounts accounted for, and
we're going to talk about how we create trusts that
(27:21):
don't end. They last for the next generation called beneficiary
control trust. So if you want to have that asset
protection for your children, your trust can create that and
it just continues on. That administration literally is going to
take about two weeks. No, court involvement, private, secure, efficient,
(27:42):
and they're going to save you know, thousands, maybe tens
of thousands of dollars in court cost, court fees, and
all the things that go along with probate. So one
of the reasons we believe strongly in trusts is the privacy,
efficiency and security of that arrangement and the success or
trustees simply step in and administer.
Speaker 4 (28:03):
Peter.
Speaker 3 (28:03):
You want to add to that, well, the only the
only thing I would add is to our listeners. In
New York City, our probate court here, it's called the
surrogate court, has a peculiar practice that may or may
not be legal of when you probate a will, even
if it's just a simple poor over will, they're going
(28:24):
to ask for a copy of your lifetime trust and
they're going to make you notice the beneficiaries under that trust.
We can't avoid it. We we can't fire the surrogate
We have two surrogate court judges here. But it is
something people need to be aware of. So whatever bad
(28:44):
things you want to say about a beneficiary, you should
never put in your testamentary documents. Write a letter, good point,
all right, follow up, follow up to that Bob, thank
you very much.
Speaker 2 (28:58):
All right, thanks thanks for your calling. Give us call.
Speaker 1 (29:02):
We have an open phone line. Zach is waiting eight
hundred talk WGY. That's eight hundred eight two five five
nine four nine. Peter, the trust discussion, Probate, We can
avoid it. You have to do it. You have to
be diligent, You have to be careful in how you
do this. And there is work involved, but it's work
(29:23):
that's done by the client. And I have a revocable
living trust. My assets are scattered. I have different businesses,
my home, different things, So it takes work, but it's
work that you do once.
Speaker 2 (29:37):
It's work that you do.
Speaker 1 (29:39):
While you're capable of doing it yourself, and the burden
on the children is lifted. And I can tell you
that we sit with kids that say, geez, I don't
know where mom's date is, I don't know what's in
the house. I don't know what assets she had, and
they start to rummage through drawers and trying to find
assets and trying to find property. You can take away
(29:59):
the mystery by having everything tied together in that living
trust and managing that trust properly over time.
Speaker 2 (30:05):
Peter.
Speaker 3 (30:07):
Yes, and in terms of the funding. You have the
benefit of having the maker of your testamentary documents alive
and usually well in your office, and you can really
assist in getting the information about assets that she or
(30:28):
he may have forgotten about. And that process, even if
it takes a couple of months, is much more efficient
than trying to speak to a person who's no longer
living to find out what's going on here. The other
thing I want to say about the benefit of the
living trust is that when you want to make changes,
(30:51):
you don't have to go to your lawyer's office and
do an amendment to a will or a new will.
You can do it by a simple piece of paper
that your lawyer can and prepare. And the cost of
amending the living trust is far greater than making a
new will or a consicil to a will. And conoscoles
we don't particularly like anyway, because that causes other problems
(31:14):
and the mechanics of probate. But I don't think we
have time to discuss that today.
Speaker 1 (31:19):
Well, I can do that very quickly. When I started practice,
we typed wills on onion skin paper on an underwood typewriter,
and that was when I started nineteen eighty three. There
were no computers, there were no word processors, and so
if you had a ten page will and you wanted
to redo the will, you had to retype all ten pages.
Today everything is word processing, So instead of doing a
(31:39):
second document that makes one change to the will, you
just redo the will and it's much simpler, much more efficient,
and when it comes time to probate. I had a
client that did her She was a lawyer and did
her own planning, did her own will, and did a
will with four constiles. Every constil had different witnesses and
there was a challenge to that will. So we had
to bring eight bank tellers to court with each of
(32:02):
the consicils to justify the will and the fur conticils.
So simplifying things, folks, is not that hard because technology
has allowed us to do things in a much much.
Speaker 2 (32:12):
More efficient way.
Speaker 1 (32:14):
We have Bill Iniski Youna. Good morning, Bill, Welcome to
Life Happens Radio.
Speaker 7 (32:18):
Good morning. My question is my wife and I have
an irrevocable trust and I was wondering whether or not
we would put a life insurance policy plus possibly monies
from traditional iris that we cash in and takes ahead.
(32:38):
Is that in either case is that something that would
go into a trust?
Speaker 2 (32:42):
Sure?
Speaker 1 (32:43):
And it depends. Like all legal questions, the answer is
it depends. Right, So what type of life insurance is it?
If and you're doing this, I'm assuming bill for asset
protection purposes. You want to make sure that your assets
are protected if you or your wife need care, nursing,
home care, things like that. Is that is that accurate?
Speaker 7 (33:02):
That is definitely accurate. It would be a group life
insurance policy.
Speaker 1 (33:07):
Okay, so group term life insurance for Medicaid purposes does
not have any value, so you don't need to change
ownership on that policy. But you want to change the beneficiary.
You want to make the trust the beneficiary so that
when when one of you passes, it doesn't become an
available asset. The death benefit does not become an available
(33:29):
asset for the survivor. So having the policy pay into
the trust make the beneficiary of the trust. You don't
have to change ownership on a group term policy for
this purpose. You want to make the trust you want
to make Yeah, you want to make the trust the beneficiary,
and then that takes care of the life insurance with
retirement plans. If you're taking required minimum distributions. That means
(33:53):
you're over seventy three, right, So that's what you have
to start drawing on it, and you're taking cash out
and you don't want to build up too much care
outside your trust. You can continue to make contributions to
the trust. But Peter, that then creates a new lookback
period for each contribution.
Speaker 3 (34:12):
I think that's right. But the idea is to get
the trust, get the policy ownership into an irrevocable life
insurance trust.
Speaker 1 (34:22):
Now, Peter, and that we're not doing tax planning yet. Remember,
we don't have to do that unless it's seven million dollars.
So if you're over seven million, we want to get
it out for tax purposes. But in medicaid planning world,
we don't care if it's included in the taxable estate.
So we're not going to do the tax planning unless
you're over seven million, in which case you may not
need medicaid planning.
Speaker 2 (34:43):
Right, So they kind of don't go together.
Speaker 1 (34:46):
But if we are doing medicaid planning, naming the trust
as the death benefit beneficiary is the way to do this,
because the term life doesn't have any value for Medicaid purposes,
and we're not talking about I'm guessing it's not millions
of dollars in a group term policy.
Speaker 7 (35:03):
Oh absolutely, master, Yeah, yeah.
Speaker 1 (35:06):
So just naming the beneficiary will take care of that.
When you make withdrawals from an IRA and you make
additional contributions to your Medicaid trust, Remember, for nursing home purposes,
you have a five year look back.
Speaker 2 (35:20):
So you created when did you create the trust originally.
Speaker 7 (35:24):
Back in twenty fifteen.
Speaker 1 (35:26):
Okay, so anything you did back then, you put your
probably put your house in there and some other assets
in there back in twenty fifteen. That's done. You don't
have to worry about that. But when you make additional
contributions of those rmds into the trust, you now have
a new five year look back to be concerned about.
Oh okay, that's that's the only only thing to worry about.
(35:48):
And it gets more complicated than that, because when you
look at Medicaid, it covers two main things. It covers
people who are at home and getting home care, and
it covers people who are in a nursing home. And
the home care benefit at this point in time does
not have any look back period. So you can make withdrawals,
put money in and qualify for Medicaid the next month
(36:11):
for home care nursing home care. That creates a five
year lookback period. So it gets a little tricky, but
keep doing what you're doing. You're on the right track.
Change the death benefit. You can keep putting money into
the trust, and that's fine, but just know that you
have Medicaid to think about when you do those additional contributions.
(36:31):
But that's the plan, and I think you're in good shape.
If you did in twenty fifteen, everything you did is
already outside the five year look back and you're in
good shape.
Speaker 7 (36:40):
That sounds excellent. Thank you very much for your time.
Speaker 1 (36:42):
All right, Bill, thanks for the call. We have Jim
on the line. Good morning, Jim. How are you this morning?
Speaker 8 (36:49):
Good morning. I've got a question about my trust that
I haven't really been able to get a satisfactory answer,
but I think you may be able to help me.
Speaker 2 (37:00):
Let's do it.
Speaker 8 (37:01):
What I'm trying to do is we've my wife and
I have been married fifty three years. We have no children,
and recently the last few years, we established a trust
and we moved every conceivable non retirement asset into that trust,
either directly or as transfer on debt. My question concerns
(37:25):
when the time comes the trustee administers of the successor
trustee administers the trust and distributes according to our wishes.
What happens with the other stuff, the retirement assets. What
we've done is we have designated beneficiaries, which are all charities,
(37:46):
and they will be the beneficiary of our entire the
IRA portion of our state.
Speaker 1 (37:52):
Very solid planning, by the way, because the charities are
tax exempt and they get every penny of that regardless
of income tax or state tax.
Speaker 2 (37:59):
So good planning.
Speaker 8 (38:02):
What I don't understand though, is if the trustee has
to inform the charities that they are entitled to this
money and they should pick it up, does the trustee
get paid for that or does it all get rolled
into one and the trustee gets paid from the entire state.
Speaker 2 (38:20):
Yeah, it's a good question.
Speaker 1 (38:22):
When you have a trust and you have retirement accounts
that do not get retitled in the name of the trust,
the trustee does not have authority over those accounts because
they're not trust accounts. In order for the trustee to
get authority over the accounts, you would have to name
the trust as the beneficiary, but you don't necessarily want
(38:42):
to do that. You wanted to go directly to the charity,
And what I would do during lifetime is send a
letter to the charity with the beneficiary designation and the
account information, and it's up to the charity then to
collect it. They can file the claim. They can do
it on their own, so you don't have to pay
your trustee to do that. And you may advise your
trustee in a document or a letter to say, okay,
(39:05):
these are the charities, send them a copy of when
we die, send them a copy of the death certificate,
and then it's up to the charity to get the
accounts moved into the charity's name.
Speaker 8 (39:16):
Yes, so that is kind of something I've been thinking about.
Does that normally go by some kind of contract where
we would take the success or trustee, we'd say on
our death, we will you will be entitled to X
number of dollars for notifying six charities that they are
the beneficiaries of our estate of our iras.
Speaker 1 (39:38):
Yeah, if I do, siaries get compensated based upon a
statutory commission. So right, they're going to get a commission.
If you want to pay them some extra, you can
absolutely put that in the document. If you want to
give them the lector reward for doing the extra work. Yes,
you can. You can draft that.
Speaker 3 (39:54):
Out, This is Peter. That's what I've done. I've added
to the compensation clause that the trustee can be compensated
for additional time dealing with non probate assets and non
trust assets. So that's a good idea. Do you name
the charities in the trust?
Speaker 2 (40:16):
Yes, in the trust are on the buyer eight.
Speaker 8 (40:20):
Not in the trust, I'm sorry, in the IRA designated beneficiaries.
Speaker 2 (40:24):
Much more efficient way to do it, and for tax purposes,
the better way to do it.
Speaker 3 (40:27):
Correct, Absolutely right.
Speaker 2 (40:29):
Good, all right, Jim.
Speaker 1 (40:31):
Good planning, and congratulations on fifty three years of marriage.
Speaker 2 (40:35):
That's a feat in and of itself. Peter, how long
you been married?
Speaker 3 (40:40):
Sixty sixty three years?
Speaker 2 (40:43):
Sixty three? Okay, so we got you. We got you
one uped, Jim.
Speaker 3 (40:46):
I got you on that one.
Speaker 2 (40:48):
All right, have a good morning. Thanks for calling.
Speaker 1 (40:51):
We have Bob and Saint Augustine, but we have to
take a short break, our last break of the morning. Bob,
hopefully you can stay with us. We will pick you
up right after this short break.
Speaker 7 (41:02):
There, all right, welcome back.
Speaker 1 (41:05):
It looks like Bob has stayed on the line with us.
Good morning, Bob, Welcome to life happens.
Speaker 9 (41:11):
Good morning. I'm in New York State, retiree living in Florida,
and I had a will mate before I moved down
here six seven years ago, and it was my New
Year's resolution to get a trust. So after my wife
and I attended a couple of summoners down here, we
chose a firm, and now it's being written as we speak.
(41:33):
It's underway. Procrastination seems to take forever. Once you make
a decision, all of a sudden, everything seems to be
moving at lightning speed. My questions are, I can never
hear enough times, what's the difference between revocable and irrevocable
and why you do one or the other. But the
(41:53):
other question I'm asking is, once you make a trust,
if you're unhappy with it, is there a way to
back out and go another way? Wait to nobody's talked
about costs. So all that's what's on my mind today.
Speaker 1 (42:07):
Two great questions and two that we can answer easily.
The cost question varies widely, so we'll try to address that.
But the revocable versus irrevocable question. You do the revocable
trust to avoid probate, manage assets if you become incapacitated.
That revocable trust has success or trustees who manage the
assets for you and for your benefit. So you write
(42:31):
the script, and that's what I refer to it. As
you write the script. If I have Alzheimer's, if I
have a stroke, if I have an accident, my success
or trustees are going to step in. And here's how
I want my assets dealt with, managed and used for
my benefit, perhaps my spouse's benefit, my life partner's benefit.
If I'm not married, we have to make sure we
draft that in. If I have children who have dependency,
(42:53):
they have special needs, are chronically ill, I want to
make sure my trust takes care of them during my lifetime.
All of that goes in the revocable trust. When you pass,
there's no probate, and your trustee simply takes the assets
administers them in accordance with your wishes. You are the
trustee of that trust, and it is revocable, which means
they're your assets. The reasons we do irrevocable trusts are two.
(43:18):
We're either doing it for asset protection purposes or tax
planning purposes, and when it's asset protection. The majority of
cases that we get now because the exemptions are so
damn high. You're in Florida, the federal estate tax exemption
is now thirteen point nine to nine million dollars, fourteen
million dollars. You can pass a state tax free and
(43:38):
there's no Florida estate tax. In New York we have
a lower threshold. It's seven million, but still seven million dollars.
How many people need to worry about a seven million
dollar exemption? But Medicaid is the plan that most people
are concerned about because the cost of care is so
high and you're looking at now two hundred thousand dollars
a year in our area up here for nursing home
(44:01):
care more down where Peter is in New York City.
So we do revocable trusts for all the reasons stated
management of assets during lifetime, avoidance, to probate, privacy, expediency,
cost savings. We do irrevocable trusts for asset protection purposes
and tax planning purposes. In an irrevocable trust, you're not
the trustee. Now under New York and Florida law, both
(44:24):
you can create a revocable trust and change it, re
mend it, of revoke it at any time. When you
have an irrevocable trust, it is still possible to retain control,
be able to change trustees at any time, be able
to change beneficiaries at any time. And in both states,
if you want to revoke your trust, you can do
it with the consent of the beneficiaries. So the difference
(44:47):
is you can revoke the revocable trust on your own.
One signature trust is gone. With an irrevocable trust, you
have to get the beneficiaries to consent. But think about
one thing that I said. You get to redesignate the beneficiaries.
So the example I use is if you have three
kids and one says not so much. You know, my
wife says, I shouldn't do this. I shouldn't sign this
(45:10):
because we're going to get a third of this trust
someday and I don't want to affect my inheritance.
Speaker 2 (45:15):
What do you do with that child? You fire him,
You're out.
Speaker 1 (45:19):
Now I have two beneficiaries, they're getting fifty to fifty,
and they're going to consent to this because the next
thing I'm going to do is write a new trust
or some other plan and they're going to get the benefit.
They're going to get the benefit of my estate. So
you still have leverage and control even in an irrevocable
trust situation, but you have to make sure that your
attorneys are drafting it properly and giving you all the
(45:39):
rights that you can have. Is the trust that you're
having done revocable or irrevocable?
Speaker 9 (45:47):
I believe that's part of my I'm going to double check,
but I think it's really I think it's irrevocable. Not sure.
Speaker 1 (45:53):
Okay, if you're doing it for asset protection and medicaid
planning purposes and you want to protect your home and
all those other things, then it's going to be an
irrevocable trust to get the asset protection.
Speaker 2 (46:05):
Yeah.
Speaker 9 (46:05):
I think it sounds like I've got everything going the right.
Speaker 2 (46:08):
Way, so excellent. Where are you in Florida?
Speaker 4 (46:12):
I'm in St.
Speaker 9 (46:13):
Augustine, Norris, Saint John's Country. I'm halfway between Jacksonville and Daytona.
Speaker 2 (46:20):
Yep.
Speaker 1 (46:21):
Nice area, beautiful, historical, very historical area.
Speaker 4 (46:26):
Yeah. All right, then, are well.
Speaker 1 (46:29):
Thank you for your call and we appreciate it. Good
luck with your trust. Sounds like you're doing all the
right things, and we are at about five minutes, Peter,
I don't think we have any callers left on the line,
so let's just kind of wrap our conversation for the
last five minutes. These are great questions and they've raised
(46:50):
a lot of interesting points, and I didn't address the cost.
I'm not avoiding it, but it is such a wide disparity.
But when you're doing a plan and you're doing it
on a comprehensive basis, where you're looking at every asset,
every element, designing the trust properly, funding the trust properly,
it's going to cost you several thousand dollars to do that.
Trust It's not something you can get off a shelf.
(47:10):
It's not something you can take out of a book.
And there are a lot of over time, Peter, there
have been a lot of discount providers that have come
in and try.
Speaker 2 (47:19):
To do this.
Speaker 1 (47:21):
You know, celebrities and I won't name names, but they
appear on TV and say, oh, I'm not a lawyer,
but use my trust kit, And you're just doing yourself
a disservice by doing that.
Speaker 3 (47:34):
Yes, please, please do not do a trust from an
online document that you pay several hundred dollars for you
think you're avoiding legal fees, and that, of course is correct,
but that could be a very disastrous decision. We're not
saying we're the best in the world, although some clients
(47:55):
they think we're pretty good. But we give you this
kind of advice that or hearing about today, and it
is critical. The move to a trust is better for
you in so many ways. And remember there are always
amendable very simply by doing a simple amendment. And remember
(48:15):
in the age of computers where everything is stored online
and folder under your name, it makes the amendment process very,
very simple. Please think about this and if you have
any doubt, give us a call. But having a trust
really makes a lot of sense for a lot of reasons.
Speaker 1 (48:37):
And I want to close talking about the revocable trust,
the irrevocable trust. When they terminate, should they terminate, Should
you simply say, Okay, I have three children, or I
have nieces and nephews. I want to just leave everything
outright to my kids. Think about the kids' lives, what
their lives are going to be like going into the future.
(49:00):
But their children, your grandchildren are going to be able
to benefit from someday and is there a way that
we can take our trusts, my revocable trust which I have,
and protect it from my kids, so that what I've
worked for my lifetime goes to my children, not to
anyone else, not to their spouse in a divorce, not
(49:20):
to that lawsuit, not to that creditor, not to the
bankruptcy court, not to medicaid, and not to the government
in a state tax payments. Because if my children are successful,
what I leave to them compounds their estate tax problem.
I have a document that I've written called the Beneficiary
Control Trust Guide. If you'd like to get a copy
(49:40):
of this, How to protect your kids, How to create
a trust that goes downstream, protects your children, your grandchildren,
keeps it in the bloodline, makes sure that your hard
earned money during your lifetime is protected. This is one
of the best reasons to have a living trust because
the kids trusts are done expeditiously.
Speaker 2 (49:59):
In me.
Speaker 1 (50:00):
Upon your passing, your trust just carves out into those
other trusts. So, Peter, we're thirty seconds away from the
end of the show. Thanks for joining me today. This
has been a great show, a lot of great callers.
Thanks for listening, Thanks for calling, and as always. We
hope you listen every Saturday morning at nine am for
Life Happens Radio, and you will be prepared. I'm Lou
(50:20):
Piro along with Peter Strauss.
Speaker 3 (50:22):
Peter, thank you, Yes, everybody. Enjoy your day, and we
hope you'll pay attention to some of these suggestions.
Speaker 2 (50:32):
But stay safe, look good, and we'll see you next
week
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