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.
Speaker 2 (00:17):
Not trust. Well, you have to trust your lawyer, let's
start there.
Speaker 1 (00:21):
But trusts, the documents and the creation of this legal
contract between parties, trustees, beneficiaries.
Speaker 2 (00:29):
How does a trust work? 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.
Speaker 2 (00:41):
Peter Strauss, Good morning, Peter.
Speaker 3 (00:44):
Good 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 and make comment about a
trust or any other aspect of the work that we
do here at Pierre O'Connor and Strauss. Sure our law
(03:00):
firm 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 (04:12):
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 really.
Speaker 2 (05:50):
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):
the 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 call it 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 athsets named me an execus and
also named a local bank as co executor. H The
will called for a trust to be established. I am
named as a trustee and the bank is named as
(07:11):
a 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?
Frozen 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.
Speaker 2 (07:36):
All 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, and.
Speaker 1 (07:45):
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, I'm the trust
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 the court called letters testamentary and that's to bring
the assets into the estate. And then you get a
certificate of letters of trustees. Ship have you secured both
of those? Tom, I believe so okay, So you and
the banker, you and the banker co trustees in what's
(08:32):
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 wanted a bank trust company as the
(08:55):
co trustee with you. Trusts, as we're going to talk about,
have depend 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 bank is they are professionals in
(09:17):
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. Have you started working with
the trust officer yet at the bank?
Speaker 5 (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. Now,
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 5 (10:44):
No?
Speaker 4 (10:45):
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
(11:13):
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 be the one that would have guided your uncle
as to whether or a trustee A co trustee is important?
(11:35):
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 super
applying to a particular matter.
Speaker 1 (12:11):
And very often it depends on how the client got
to the attorney.
Speaker 2 (12:16):
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.
Speaker 2 (12:54):
And if it's your uncle, that's good there.
Speaker 1 (12:57):
Yeah, your uncle was looking for long term stability these
How long do these trusts last?
Speaker 2 (13:02):
Are they lifetime trusts?
Speaker 4 (13:05):
No, it's a ten yere.
Speaker 2 (13:07):
Ten year 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.
Speaker 2 (13:39):
So it's being managed. 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. And 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.
They're they're geared for that. They're a trust company. 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 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. Give
us a call. Eight hundred eight two, five, five, nine,
four nine. That's eight hundred talk Wgy Peter Strauss, Loup
Piro from Pier o' connor and Straus. So we're gonna
be right back after this short break. I will give
my shout out to Zach. You know, last week we
(15:47):
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 gonna
give a shout out to Zach who's wearing his Eagles
championship hat and shirt and probably his Legals underwear. We
won't go there, but congratulations to the Eagles and that
(16:08):
was a great win for them.
Speaker 2 (16:11):
And we have Frank on the line.
Speaker 1 (16:13):
Good morning, Frank, Welcome to Life Happens.
Speaker 6 (16:17):
Good morning.
Speaker 7 (16:18):
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
(16:40):
a small mortgage on the house. So My understanding is
that if I were to form a trust, the bank
may do what may view that as an acceleration event.
Speaker 2 (16:52):
Yeah, that's a great question.
Speaker 6 (16:55):
And so my.
Speaker 7 (16:56):
Question I guess is, I'm unmarried. How do I protect
in terms of Medicaid in New York?
Speaker 1 (17:02):
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 a 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.
(17:25):
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 it triggers when you transfer ownership. And what we
have found is banks don't really object when you put
(17:49):
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 fund. 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 cannot do
(18:11):
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 2 (18:31):
Peter, how about you.
Speaker 3 (18:33):
Yes, it's not uncommon, especially here in New York City.
We have to perhaps talk to a title company to
see how they might object to it, because that's another issue.
But it's a problem that's solvable. But again, it sounds
(18:55):
like you could use a console with the safe plan
attorney of your choice. You you it's complicated. You don't
have the benefit for state taxes of a marital deduction,
so if you're over a certain credit tax limits, you
(19:16):
really need to deal with that. Issue as Yeah, for most.
Speaker 1 (19:19):
People in New York, now that's that's not really a
problem because you have to have up to 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.
Speaker 2 (19:34):
Do you have children, yes, I do? And does your
partner have children?
Speaker 6 (19:41):
Yes?
Speaker 1 (19:41):
Okay, So what this comes down to, who do you
want the ultimate beneficiaries of the house to be yours
minor ours? 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, becausetners, whether they're married or unmarried, when
(20:02):
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 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
(20:23):
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 a trust that will accomplish those
goals to a t and make it very clear and
make it 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 conflicts among children, the litigation and the costs are astronomical.
(20:47):
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
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 (21:08):
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
(21:29):
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 estate planning attorney who understands the
(21:50):
problems and how to solve them.
Speaker 2 (21:52):
All right, Frank, thank you for that call. Excellent question.
Speaker 1 (21:56):
We're going to take one more call from Bob in
East Durham and good morning, Bob.
Speaker 2 (22:02):
How are you this morning?
Speaker 6 (22:04):
Good morning?
Speaker 1 (22:05):
And I'm gonna apologize we're gonna have to cut your
call in half because we're gonna 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 (22:15):
Back to you.
Speaker 6 (22:17):
Okay, If you have a trust, is it necessary to
have a will?
Speaker 2 (22:23):
Ah?
Speaker 1 (22:23):
So we were actually talking a little bit about this
earlier and Peter brought it up.
Speaker 2 (22:27):
The answer is yes.
Speaker 1 (22:29):
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
have to look asset by asset and we create a
plan not just to avoid probate for trust assets, but
(22:49):
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 doesn't nations. The
goal is that the will is never needed. But if
we miss, if you miss, if you acquire an asset
later and it's not titled properly in the name of
(23:11):
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 avoided and the trust has all the assets, and
(23:31):
you don't need to use the will, but you should
always have it there. Hang on, we'll come back to
that question, Bob. We're going to take a short break
for the news and we'll be right back. 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?
Speaker 2 (23:49):
Why you still need a will even though you have
a trust.
Speaker 6 (23:54):
Yeah, it's sort of. I guess I'm not really good
on all these all these things. You have a So
if you have a will and a trust, does the
will have to be probated?
Speaker 1 (24:07):
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 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,
(24:29):
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,
(24:49):
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. We're going to look
at bank accounts. The one major asset class that does
not get retitled into a trust is qualified plans iras
(25:13):
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 protections of the trust after your passing.
This is the trust funding process and that is critical
(25:34):
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 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
(25:56):
administration can be done in a matter.
Speaker 2 (25:57):
Of two weeks.
Speaker 1 (25:59):
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 6 (26:16):
Okay, now does a trust does that have to be
probated or no?
Speaker 2 (26:21):
No?
Speaker 6 (26:21):
Is that an advantage to having a trust.
Speaker 2 (26:23):
That is one of the major advantages of having the trust.
Speaker 1 (26:26):
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
don't end. They last for the next generation called beneficiary
(26:49):
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, no court involvement, private, secure, efficient,
and they're going to save you know, thousands, maybe tens
of thousands of dollars in court cost, court fees, and
(27:11):
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 successor trustees
simply step in and administer.
Speaker 2 (27:26):
Peter, you want to add to that.
Speaker 6 (27:27):
Well.
Speaker 3 (27:28):
The only the only thing I would add is to
our listeners in New York City, our probate court here
that 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 to ask for a copy of
(27:49):
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 things you want to say
about a beneficiary or you should never put in your
(28:11):
test cymentary documents, write a letter.
Speaker 8 (28:16):
Good point, all right, Bob, follow up? Follow up to that, Bob,
Thank you very much. All right, Thanks, thanks for your call.
Give us a call. We have an open phone line.
Zach is waiting. Eight hundred talk WG. Why that's eight
hundred eight two five five nine four nine, uh, Peter,
the trust discussion, probate.
Speaker 2 (28:38):
We can avoid it. You have to do it.
Speaker 1 (28:40):
You have to be diligent, you have to be careful
in how you do this. And there is work involved,
but it's work 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 you once. It's work that
(29:02):
you do while you're capable of doing it yourself, and
the burden on the children is lifted.
Speaker 2 (29:08):
Uh.
Speaker 1 (29:08):
And I can tell you that we sit with kids
that say, geez, I don't know where mom's deed 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 the mystery by having everything tied
together in that living trust and managing that trust properly
over time.
Speaker 3 (29:29):
Peter, 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
(29:51):
or he may have forgotten about. And and that process,
even if it takes a couple of months, is much
more efficient. And 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
(30:13):
make changes, 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 prepare. And the cost
of amending the living trust is far greater than making
a new will or a condicil to a will, and
consils we don't particularly like anyway, because that causes other
(30:37):
problems in the mechanics of probate. But I don't think
we have time to discuss that today.
Speaker 1 (30:43):
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
second document that makes one change to the will, you
(31:05):
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 constils. 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
(31:26):
the consils to justify the will and the four consicils.
So simplifying things, folks, is not that hard because technology
has allowed us to do things in a much much.
Speaker 2 (31:36):
More efficient way.
Speaker 1 (31:38):
We have Bill Innskiuna, Good morning, Bill, Welcome to Life
Happens Radio.
Speaker 9 (31:41):
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 moneies
from traditional iris that we cash in and takes ahead.
(32:02):
Is that in either case? Is that something that would
go into a trust?
Speaker 2 (32:06):
Sure?
Speaker 1 (32:07):
And it depends, Like all legal questions, the answer is
it depends. Right, So what type of life insurance is it?
Speaker 2 (32:14):
If?
Speaker 1 (32:15):
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 accurate?
Speaker 9 (32:26):
That is definitely accurate. It would be a group life
insurance policy.
Speaker 1 (32:30):
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 one of you passes, it doesn't become an available asset.
The death benefit does not become an available asset for
(32:54):
the survivor. So having the policy pay into the trust,
make the beneficiary the trust. You don't have to change
ownership on a group term policy for this purpose.
Speaker 10 (33:03):
You want to make the trust you want to make.
Speaker 1 (33:06):
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 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 cash outside your trust.
You can continue to make contributions to the trust, but Peter,
(33:30):
that then creates a new lookback period for each contribution.
Speaker 3 (33:35):
I think that's right. But but the idea is to
get the trust, get the policy ownership into an irrevocable
life insurance.
Speaker 1 (33:46):
Trust now, Peter, And then 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
(34:06):
need medicaid planning. Right, So they kind of don't go together.
But if we're 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 9 (34:27):
Oh absolutely, master, yea yeah, So.
Speaker 1 (34:30):
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, so you create it.
Speaker 2 (34:44):
When did you create the trust?
Speaker 9 (34:45):
Originally back in twenty fifteen.
Speaker 1 (34:49):
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 the only only thing to worry about.
(35:12):
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
(35:35):
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.
(35:55):
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 ship.
Speaker 9 (36:04):
Such sounds sexual. Thank you very much, a true your time.
Speaker 1 (36:06):
All right, Bill, thanks for the call. We have Jim
on the line. Good morning, Jim, how are you this morning?
Speaker 10 (36:13):
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 (36:23):
Let's do it.
Speaker 10 (36:25):
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
(36:49):
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,
(37:09):
and they will be the beneficiary of our entire IRA,
the IRA portion of our state.
Speaker 1 (37:15):
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 (37:22):
So good planning.
Speaker 10 (37:25):
Well, 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 (37:44):
Yeah, it's a good question.
Speaker 1 (37:45):
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.
Speaker 2 (37:55):
Not okay trust accounts.
Speaker 1 (37:57):
In order for the trustee to get authority were the accounts,
you would have to name the trust as the beneficiary.
But you don't necessarily want to do that. You wanted
to go directly to the charity, right, 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 them. They
(38:19):
can file the claim. Yes, 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, 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 10 (38:40):
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 depth, we will you will be entitled to X
number of dollars for notifying six charities that they are
the beneficiaries of our state, of our iras.
Speaker 2 (39:02):
Yeah, if I do.
Speaker 1 (39:02):
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 litt lextuor
reward for doing the extra work, yes you can. You
can draft that out.
Speaker 3 (39:19):
This is feeder. That's what I've done. I've added to
the compensation clause that the trust see can be compensated
for additional time dealing with non probate assets and non
trust assets. So that's that's a good idea.
Speaker 9 (39:36):
Do you name the charities?
Speaker 3 (39:38):
In the trust.
Speaker 2 (39:40):
Yes, in the trust or on the buyer eight.
Speaker 10 (39:43):
Not in the trust, I'm sorry. In the IRA designate
beneficiaries a much.
Speaker 1 (39:47):
More efficient way to do it, and for tax purposes,
the better way to do it.
Speaker 8 (39:51):
Correct, absolutely right, good, all right, Jim, good planning, and
congratulations on fifty three years of marriage.
Speaker 2 (39:58):
That's a feat in and of ITSLF. Peter, how long
you been married?
Speaker 3 (40:03):
Sixty sixty three years?
Speaker 2 (40:07):
Sixty three? Okay, so we got you. We got you
one uped, Jim, I got you on that one. All right,
have a good morning. Thanks for calling.
Speaker 1 (40:15):
We have Bob in Saint Augustine, but we have to
take a short break, our last break of the morning.
Speaker 2 (40:19):
Bob.
Speaker 1 (40:19):
Hopefully you can stay with us. We will pick you
up right after this short break with us. Good morning, Bob,
Welcome to life happens.
Speaker 5 (40:27):
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 the it's being written as
(40:49):
we speak, it's underway. Great 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.
(41:09):
But the 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. Nobody's talked
about costs. So that's what's on my mind today.
Speaker 1 (41:24):
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
(41:47):
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,
(42:09):
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.
(42:34):
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
(42:55):
there's no Florida estate tax. In New York we have
a lower threshold, its 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 care.
(43:18):
More down where Peter is in New York City. So
we do revocable trusts for all of 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
(43:40):
you can create a revocable trust and change it, a
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
(44:04):
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, h not so much. You know,
my wife says, I shouldn't do this. I shouldn't sign
(44:26):
this because we're going to get a third of this
trust someday and I don't want to affect my inheritance.
Speaker 2 (44:32):
What do you do with that child? You fire them,
You're out.
Speaker 1 (44:35):
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.
Speaker 2 (44:44):
They're going to get the benefit of my estate.
Speaker 1 (44:46):
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 rights that you can have. Is the trust that
you're having done revocable or irrevocable?
Speaker 3 (45:02):
Uh?
Speaker 5 (45:04):
I believe that's part of my I'm gonna double check,
but I think it's really I think it's irrevocable.
Speaker 4 (45:09):
Not sure.
Speaker 1 (45:10):
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 3 (45:21):
Yeah.
Speaker 5 (45:21):
I think it sounds like I've got everything going the
right way.
Speaker 2 (45:25):
So excellent. Where are you in Florida.
Speaker 5 (45:29):
I'm in St. Augustine, Norris, Saint John's County. I'm halfway
between Jacksonville and Daytona.
Speaker 2 (45:36):
Yep.
Speaker 1 (45:37):
Nice area, beautiful, historical, very historical area.
Speaker 5 (45:42):
Yeah, all right, the nice area.
Speaker 1 (45:45):
Well, 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 is 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
(46:06):
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 every element, designing the trust properly, funding the trust properly.
It's going to cost you several thousand dollars to do that.
Speaker 6 (46:25):
Trust.
Speaker 1 (46:25):
It's not something you can get off a shelf. 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 to do this. You know, celebrities and I
won't name names, but they appear on TV and say, oh,
I'm not a lawyer, but he use my trust kit,
(46:46):
and you're just doing yourself a disservice by doing that.
Speaker 3 (46:50):
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
(47:12):
may think we're pretty good, but we give you this
kind of advice that you're 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
(47:32):
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
(47:53):
of reasons.
Speaker 1 (47:54):
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,
(48:16):
what 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
(48:37):
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
(48:57):
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. Make 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 immediately upon your passing,
(49:17):
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.
Speaker 2 (49:36):
I'm Lou Piro along with Peter Strauss.
Speaker 3 (49:38):
Peter, thank you, Yes, everybody, enjoy your day, and we
hope you'll pay attention to some of these suggestions.
Speaker 2 (49:48):
But stay said, 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.
Speaker 2 (00:17):
Not trust. Well, you have to trust your lawyer, let's
start there.
Speaker 1 (00:21):
But trusts, the documents and the creation of this legal
contract between parties, trustees, beneficiaries.
Speaker 2 (00:29):
How does a trust work? 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.
Speaker 2 (00:41):
Peter Strauss, Good morning, Peter.
Speaker 3 (00:44):
Good 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 and make comment about a
trust or any other aspect of the work that we
do here at Pierre O'Connor and Strauss. Sure our law
(03:00):
firm 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 (04:12):
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 really.
Speaker 2 (05:50):
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):
the 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 call it 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 athsets named me an execus and
also named a local bank as co executor. H The
will called for a trust to be established. I am
named as a trustee and the bank is named as
(07:11):
a 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?
Frozen 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.
Speaker 2 (07:36):
All 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, and.
Speaker 1 (07:45):
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, I'm the trust
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 the court called letters testamentary and that's to bring
the assets into the estate. And then you get a
certificate of letters of trustees. Ship have you secured both
of those? Tom, I believe so okay, So you and
the banker, you and the banker co trustees in what's
(08:32):
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 wanted a bank trust company as the
(08:55):
co trustee with you. Trusts, as we're going to talk about,
have depend 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 bank is they are professionals in
(09:17):
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. Have you started working with
the trust officer yet at the bank?
Speaker 5 (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. Now,
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 5 (10:44):
No?
Speaker 4 (10:45):
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
(11:13):
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 be the one that would have guided your uncle
as to whether or a trustee A co trustee is important?
(11:35):
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 super
applying to a particular matter.
Speaker 1 (12:11):
And very often it depends on how the client got
to the attorney.
Speaker 2 (12:16):
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.
Speaker 2 (12:54):
And if it's your uncle, that's good there.
Speaker 1 (12:57):
Yeah, your uncle was looking for long term stability these
How long do these trusts last?
Speaker 2 (13:02):
Are they lifetime trusts?
Speaker 4 (13:05):
No, it's a ten yere.
Speaker 2 (13:07):
Ten year 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.
Speaker 2 (13:39):
So it's being managed. 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. And 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.
They're they're geared for that. They're a trust company. 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 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. Give
us a call. Eight hundred eight two, five, five, nine,
four nine. That's eight hundred talk Wgy Peter Strauss, Loup
Piro from Pier o' connor and Straus. So we're gonna
be right back after this short break. I will give
my shout out to Zach. You know, last week we
(15:47):
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 gonna
give a shout out to Zach who's wearing his Eagles
championship hat and shirt and probably his Legals underwear. We
won't go there, but congratulations to the Eagles and that
(16:08):
was a great win for them.
Speaker 2 (16:11):
And we have Frank on the line.
Speaker 1 (16:13):
Good morning, Frank, Welcome to Life Happens.
Speaker 6 (16:17):
Good morning.
Speaker 7 (16:18):
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
(16:40):
a small mortgage on the house. So My understanding is
that if I were to form a trust, the bank
may do what may view that as an acceleration event.
Speaker 2 (16:52):
Yeah, that's a great question.
Speaker 6 (16:55):
And so my.
Speaker 7 (16:56):
Question I guess is, I'm unmarried. How do I protect
in terms of Medicaid in New York?
Speaker 1 (17:02):
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 a 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.
(17:25):
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 it triggers when you transfer ownership. And what we
have found is banks don't really object when you put
(17:49):
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 fund. 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 cannot do
(18:11):
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 2 (18:31):
Peter, how about you.
Speaker 3 (18:33):
Yes, it's not uncommon, especially here in New York City.
We have to perhaps talk to a title company to
see how they might object to it, because that's another issue.
But it's a problem that's solvable. But again, it sounds
(18:55):
like you could use a console with the safe plan
attorney of your choice. You you it's complicated. You don't
have the benefit for state taxes of a marital deduction,
so if you're over a certain credit tax limits, you
(19:16):
really need to deal with that. Issue as Yeah, for most.
Speaker 1 (19:19):
People in New York, now that's that's not really a
problem because you have to have up to 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.
Speaker 2 (19:34):
Do you have children, yes, I do? And does your
partner have children?
Speaker 6 (19:41):
Yes?
Speaker 1 (19:41):
Okay, So what this comes down to, who do you
want the ultimate beneficiaries of the house to be yours
minor ours? 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, becausetners, whether they're married or unmarried, when
(20:02):
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 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
(20:23):
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 a trust that will accomplish those
goals to a t and make it very clear and
make it 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 conflicts among children, the litigation and the costs are astronomical.
(20:47):
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
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 (21:08):
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
(21:29):
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 estate planning attorney who understands the
(21:50):
problems and how to solve them.
Speaker 2 (21:52):
All right, Frank, thank you for that call. Excellent question.
Speaker 1 (21:56):
We're going to take one more call from Bob in
East Durham and good morning, Bob.
Speaker 2 (22:02):
How are you this morning?
Speaker 6 (22:04):
Good morning?
Speaker 1 (22:05):
And I'm gonna apologize we're gonna have to cut your
call in half because we're gonna 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 (22:15):
Back to you.
Speaker 6 (22:17):
Okay, If you have a trust, is it necessary to
have a will?
Speaker 2 (22:23):
Ah?
Speaker 1 (22:23):
So we were actually talking a little bit about this
earlier and Peter brought it up.
Speaker 2 (22:27):
The answer is yes.
Speaker 1 (22:29):
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
have to look asset by asset and we create a
plan not just to avoid probate for trust assets, but
(22:49):
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 doesn't nations. The
goal is that the will is never needed. But if
we miss, if you miss, if you acquire an asset
later and it's not titled properly in the name of
(23:11):
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 avoided and the trust has all the assets, and
(23:31):
you don't need to use the will, but you should
always have it there. Hang on, we'll come back to
that question, Bob. We're going to take a short break
for the news and we'll be right back. 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?
Speaker 2 (23:49):
Why you still need a will even though you have
a trust.
Speaker 6 (23:54):
Yeah, it's sort of. I guess I'm not really good
on all these all these things. You have a So
if you have a will and a trust, does the
will have to be probated?
Speaker 1 (24:07):
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 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,
(24:29):
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,
(24:49):
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. We're going to look
at bank accounts. The one major asset class that does
not get retitled into a trust is qualified plans iras
(25:13):
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 protections of the trust after your passing.
This is the trust funding process and that is critical
(25:34):
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 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
(25:56):
administration can be done in a matter.
Speaker 2 (25:57):
Of two weeks.
Speaker 1 (25:59):
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 6 (26:16):
Okay, now does a trust does that have to be
probated or no?
Speaker 2 (26:21):
No?
Speaker 6 (26:21):
Is that an advantage to having a trust.
Speaker 2 (26:23):
That is one of the major advantages of having the trust.
Speaker 1 (26:26):
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
don't end. They last for the next generation called beneficiary
(26:49):
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, no court involvement, private, secure, efficient,
and they're going to save you know, thousands, maybe tens
of thousands of dollars in court cost, court fees, and
(27:11):
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 successor trustees
simply step in and administer.
Speaker 2 (27:26):
Peter, you want to add to that.
Speaker 6 (27:27):
Well.
Speaker 3 (27:28):
The only the only thing I would add is to
our listeners in New York City, our probate court here
that 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 to ask for a copy of
(27:49):
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 things you want to say
about a beneficiary or you should never put in your
(28:11):
test cymentary documents, write a letter.
Speaker 8 (28:16):
Good point, all right, Bob, follow up? Follow up to that, Bob,
Thank you very much. All right, Thanks, thanks for your call.
Give us a call. We have an open phone line.
Zach is waiting. Eight hundred talk WG. Why that's eight
hundred eight two five five nine four nine, uh, Peter,
the trust discussion, probate.
Speaker 2 (28:38):
We can avoid it. You have to do it.
Speaker 1 (28:40):
You have to be diligent, you have to be careful
in how you do this. And there is work involved,
but it's work 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 you once. It's work that
(29:02):
you do while you're capable of doing it yourself, and
the burden on the children is lifted.
Speaker 2 (29:08):
Uh.
Speaker 1 (29:08):
And I can tell you that we sit with kids
that say, geez, I don't know where mom's deed 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 the mystery by having everything tied
together in that living trust and managing that trust properly
over time.
Speaker 3 (29:29):
Peter, 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
(29:51):
or he may have forgotten about. And and that process,
even if it takes a couple of months, is much
more efficient. And 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
(30:13):
make changes, 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 prepare. And the cost
of amending the living trust is far greater than making
a new will or a condicil to a will, and
consils we don't particularly like anyway, because that causes other
(30:37):
problems in the mechanics of probate. But I don't think
we have time to discuss that today.
Speaker 1 (30:43):
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
second document that makes one change to the will, you
(31:05):
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 constils. 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
(31:26):
the consils to justify the will and the four consicils.
So simplifying things, folks, is not that hard because technology
has allowed us to do things in a much much.
Speaker 2 (31:36):
More efficient way.
Speaker 1 (31:38):
We have Bill Innskiuna, Good morning, Bill, Welcome to Life
Happens Radio.
Speaker 9 (31:41):
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 moneies
from traditional iris that we cash in and takes ahead.
(32:02):
Is that in either case? Is that something that would
go into a trust?
Speaker 2 (32:06):
Sure?
Speaker 1 (32:07):
And it depends, Like all legal questions, the answer is
it depends. Right, So what type of life insurance is it?
Speaker 2 (32:14):
If?
Speaker 1 (32:15):
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 accurate?
Speaker 9 (32:26):
That is definitely accurate. It would be a group life
insurance policy.
Speaker 1 (32:30):
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 one of you passes, it doesn't become an available asset.
The death benefit does not become an available asset for
(32:54):
the survivor. So having the policy pay into the trust,
make the beneficiary the trust. You don't have to change
ownership on a group term policy for this purpose.
Speaker 10 (33:03):
You want to make the trust you want to make.
Speaker 1 (33:06):
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 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 cash outside your trust.
You can continue to make contributions to the trust, but Peter,
(33:30):
that then creates a new lookback period for each contribution.
Speaker 3 (33:35):
I think that's right. But but the idea is to
get the trust, get the policy ownership into an irrevocable
life insurance.
Speaker 1 (33:46):
Trust now, Peter, And then 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
(34:06):
need medicaid planning. Right, So they kind of don't go together.
But if we're 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 9 (34:27):
Oh absolutely, master, yea yeah, So.
Speaker 1 (34:30):
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, so you create it.
Speaker 2 (34:44):
When did you create the trust?
Speaker 9 (34:45):
Originally back in twenty fifteen.
Speaker 1 (34:49):
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 the only only thing to worry about.
(35:12):
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
(35:35):
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.
(35:55):
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 ship.
Speaker 9 (36:04):
Such sounds sexual. Thank you very much, a true your time.
Speaker 1 (36:06):
All right, Bill, thanks for the call. We have Jim
on the line. Good morning, Jim, how are you this morning?
Speaker 10 (36:13):
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 (36:23):
Let's do it.
Speaker 10 (36:25):
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
(36:49):
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,
(37:09):
and they will be the beneficiary of our entire IRA,
the IRA portion of our state.
Speaker 1 (37:15):
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 (37:22):
So good planning.
Speaker 10 (37:25):
Well, 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 (37:44):
Yeah, it's a good question.
Speaker 1 (37:45):
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.
Speaker 2 (37:55):
Not okay trust accounts.
Speaker 1 (37:57):
In order for the trustee to get authority were the accounts,
you would have to name the trust as the beneficiary.
But you don't necessarily want to do that. You wanted
to go directly to the charity, right, 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 them. They
(38:19):
can file the claim. Yes, 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, 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 10 (38:40):
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 depth, we will you will be entitled to X
number of dollars for notifying six charities that they are
the beneficiaries of our state, of our iras.
Speaker 2 (39:02):
Yeah, if I do.
Speaker 1 (39:02):
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 litt lextuor
reward for doing the extra work, yes you can. You
can draft that out.
Speaker 3 (39:19):
This is feeder. That's what I've done. I've added to
the compensation clause that the trust see can be compensated
for additional time dealing with non probate assets and non
trust assets. So that's that's a good idea.
Speaker 9 (39:36):
Do you name the charities?
Speaker 3 (39:38):
In the trust.
Speaker 2 (39:40):
Yes, in the trust or on the buyer eight.
Speaker 10 (39:43):
Not in the trust, I'm sorry. In the IRA designate
beneficiaries a much.
Speaker 1 (39:47):
More efficient way to do it, and for tax purposes,
the better way to do it.
Speaker 8 (39:51):
Correct, absolutely right, good, all right, Jim, good planning, and
congratulations on fifty three years of marriage.
Speaker 2 (39:58):
That's a feat in and of ITSLF. Peter, how long
you been married?
Speaker 3 (40:03):
Sixty sixty three years?
Speaker 2 (40:07):
Sixty three? Okay, so we got you. We got you
one uped, Jim, I got you on that one. All right,
have a good morning. Thanks for calling.
Speaker 1 (40:15):
We have Bob in Saint Augustine, but we have to
take a short break, our last break of the morning.
Speaker 2 (40:19):
Bob.
Speaker 1 (40:19):
Hopefully you can stay with us. We will pick you
up right after this short break with us. Good morning, Bob,
Welcome to life happens.
Speaker 5 (40:27):
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 the it's being written as
(40:49):
we speak, it's underway. Great 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.
(41:09):
But the 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. Nobody's talked
about costs. So that's what's on my mind today.
Speaker 1 (41:24):
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
(41:47):
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,
(42:09):
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.
(42:34):
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
(42:55):
there's no Florida estate tax. In New York we have
a lower threshold, its 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 care.
(43:18):
More down where Peter is in New York City. So
we do revocable trusts for all of 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
(43:40):
you can create a revocable trust and change it, a
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
(44:04):
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, h not so much. You know,
my wife says, I shouldn't do this. I shouldn't sign
(44:26):
this because we're going to get a third of this
trust someday and I don't want to affect my inheritance.
Speaker 2 (44:32):
What do you do with that child? You fire them,
You're out.
Speaker 1 (44:35):
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.
Speaker 2 (44:44):
They're going to get the benefit of my estate.
Speaker 1 (44:46):
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 rights that you can have. Is the trust that
you're having done revocable or irrevocable?
Speaker 3 (45:02):
Uh?
Speaker 5 (45:04):
I believe that's part of my I'm gonna double check,
but I think it's really I think it's irrevocable.
Speaker 4 (45:09):
Not sure.
Speaker 1 (45:10):
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 3 (45:21):
Yeah.
Speaker 5 (45:21):
I think it sounds like I've got everything going the
right way.
Speaker 2 (45:25):
So excellent. Where are you in Florida.
Speaker 5 (45:29):
I'm in St. Augustine, Norris, Saint John's County. I'm halfway
between Jacksonville and Daytona.
Speaker 2 (45:36):
Yep.
Speaker 1 (45:37):
Nice area, beautiful, historical, very historical area.
Speaker 5 (45:42):
Yeah, all right, the nice area.
Speaker 1 (45:45):
Well, 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 is 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
(46:06):
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 every element, designing the trust properly, funding the trust properly.
It's going to cost you several thousand dollars to do that.
Speaker 6 (46:25):
Trust.
Speaker 1 (46:25):
It's not something you can get off a shelf. 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 to do this. You know, celebrities and I
won't name names, but they appear on TV and say, oh,
I'm not a lawyer, but he use my trust kit,
(46:46):
and you're just doing yourself a disservice by doing that.
Speaker 3 (46:50):
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
(47:12):
may think we're pretty good, but we give you this
kind of advice that you're 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
(47:32):
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
(47:53):
of reasons.
Speaker 1 (47:54):
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,
(48:16):
what 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
(48:37):
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
(48:57):
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. Make 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 immediately upon your passing,
(49:17):
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.
Speaker 2 (49:36):
I'm Lou Piro along with Peter Strauss.
Speaker 3 (49:38):
Peter, thank you, Yes, everybody, enjoy your day, and we
hope you'll pay attention to some of these suggestions.
Speaker 2 (49:48):
But stay said, look good, and we'll see you next week.
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