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Due to SC laws requiring Probate, an attorney has recommended creating a Trust. Should IRAs be included in the Trust? My husband started RMD in 2012 and I will begin RMD in 2013. Should life insurance policies, HO insurance also be included in a Trust?
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I would post this on the Estate Planning board:

http://boards.fool.com/estate-planning-and-the-fool-113006.a...
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IRAs will be distorted as you say in the beneficiary section of your IRA. In my view it is foolish to send your IRA money to your estate. Same for insurance policies.

Regarding creation of the trust, would maybe the attorney recommending the trust would get paid for creating the trust? My cynical side does not trust lawyers to do anything without first watching their pockets.

While SC may require probate, based on other states, that does not require an attorney and it may only mean your executor files your will with the court. Since the estate often cannot be distributed until months after death, use of an attorney to file papers may not speed the distribution of the estate.

Given the hourly rate of lawyers, I am willing to ask a few questions and determine whether or not their services are needed. Additionally, we have a letter of instruction to our executor making it clear we have no objection if she finds using an attorney is beneficial after our deaths. We trust her judgement - if we didn't we would not have named her to handle our affairs.

Gordon
Atlanta
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Due to SC laws requiring Probate, an attorney has recommended creating a Trust. Should IRAs be included in the Trust? My husband started RMD in 2012 and I will begin RMD in 2013. Should life insurance policies, HO insurance also be included in a Trust?

It appears you know nothing beyond "The lawyer said to." You need to ask a lot more questions. If you understood the purpose of the trust you wouldn't be asking these questions.

I don't share Gordon's cynicism about lawyers. I set up and funded my trust for less than $300, and that was with a lawyer, not DIY. (It was also 10 years ago.)

So, go back to the lawyer and ask:

1. Why a trust?
2. What should go into the trust; what should stay out?
3. What happens when the first spouse dies?
4. What happens when the second spouse dies?
5. Why in the world do I have life insurance? (OK, that question is mine, directed to you.)

And since not all lawyers are really good with tax law, no, do not name the trust as the beneficiary of your IRA.

Phil
Rule Your Retirement Home Fool
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We have talked to several SC attorneys who have recommended a trust to avoid Probate and years of attorney fees. With a simple Will if my husband dies first & I am named primary beneficiary, everything would pass directly to me sans going to court. It is after I pass or if we we both pass together that everything would need to go through Probate. In SC it takes about 2 years to go through Probate. A home can not be sold or assets distributed until that process is finished. I we have a properly organized Trust, our assets would be distributed immediately and it would not involve the courts.

It would cost $2500-3000 to set up a Trust. The attorney's office would handle all the paper work to properly title assets. Expensive yes but less expensive that Probate and inusing attorney expenses.

I was asking if IRAs should be included in a Trust as I remembered reading that there may be some tax benefits regarding withdrawals if inherited IRAs are not part of a Trust.
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Why do I have life insurance:
a. to cover burial costs
b. to cover medical expenses
c. to provide for my family
d. to help pay taxes
e. to help pay living expenses until estate is settled.
f. best of all - it was a free - paid by my former employer!
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It would cost $2500-3000 to set up a Trust. The attorney's office would handle all the paper work to properly title assets.

Gordon, my apologies. Maybe in the Southeast they're all greedy bastards.

I will note, though, that you get what you pay for. My attorney gave me the titling verbiage and I did the legwork of retitling my assets. Much better IMO than paying him $ridiculous/hour to do simple paperwork.

Phil
Rule Your Retirement Home Fool
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best of all - it was a free - paid by my former employer!

That reason makes sense regarding someone in her 70's having life insurance. The rest of them, not so much. Seems to me that life insurance serves to replace the decedent's income for a period that allows the survivors dependent on that income to adjust to the reduced income.

Phil
Rule Your Retirement Home Fool
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Phil don't worry about my cynicism or your comments on same. I may be very far off base, but my feeling was the OP probably did not have a large estate i.e. not several hundred thousand. In short I felt there was a decent chance the person was being taken advantage of. I understand it is dangerous to engage in conclusion jumping particularly without facts.

Finally, I use lawyers - in fact just last summer we spend a few hundred having our Wills, General Powers of Attorney and Georgia Advanced Healthcare directives (think Living Will and Durable POA for Healthcare) redone.

Gordon
Atlanta
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We have talked to several SC attorneys who have recommended a trust to avoid Probate and years of attorney fees.

We have just been through this with an aunt in Missouri who used a living trust to avoid probate costs. Resolving her trust took a year and a half and cost $5K in legal fees. That was after she spent several thousand to set up the trust, and had legal fees from time to time to make adjustments.

Trust is useful for privacy. Your papers are not available to the public in your local courthouse.

Trust is useful especially if either of you has children from a previous marriage (or a variety of special situations such as minor children, dependents with special needs, etc).

Trust is useful if your estate value including IRAs and life insurance exceeds the federal estate tax minimums.

Otherwise, it is usually possible to put TODs (transfer on death) on most assets. This avoids probate for most assets. Your IRA already has designated beneficiaries. But make sure you have assets to cover estate taxes if any and your final expenses (funeral, burial, tombstone, outstanding bills).
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It would cost $2500-3000 to set up a Trust. The attorney's office would handle all the paper work to properly title assets.

Gordon, my apologies. Maybe in the Southeast they're all greedy bastards.

I will note, though, that you get what you pay for. My attorney gave me the titling verbiage and I did the legwork of retitling my assets. Much better IMO than paying him $ridiculous/hour to do simple paperwork.

Phil
Rule Your Retirement Home Fool


Our trust documents fill a large 3-ring binder. Lots of whereas's and wherefores. It was well less than $2500. CA has ridiculous probate rules as well, and the trust sidesteps them. We were told the IRA's must NOT go in the trust.

Try Legalzoom.com and see what's there. Well less than $2500.

Count Upp
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It would cost $2500-3000 to set up a Trust. The attorney's office would handle all the paper work to properly title assets. Expensive yes but less expensive that Probate and inusing attorney expenses.

Whoa! I had my revocable trust/will/health power thing set up by an attorney that specializes in this field. $700 fee for the whole thing. He did everything and it is quite involved. I live in Ohio and a revocable trust is necessary.

BTW, My IRA is NOT in the trust. Since I am widowed, my beneficiaries are my children and GKs. My house, car, bank account, taxable brokerage account, (not sure about life insurance) all are in the trust. I also have a living will to hand out to docs and hospital. My daughter is named as Power of Attorney for my health. No one is named to handle my money.

I have read that it can cost a lot for an attorney to make up a trust...glad mine was not one of those. I do have to say, it was some time ago that I made this up....I should be going back for a "free" review.

Birgit
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No one is named to handle my money.

But I assume the trust names a successor trustee if you become unable to perform the trustee's duties. Since your assets are in the trust additional paperwork in the form of a power of attorney wouldn't be required.

Phil
Rule Your Retirement Home Fool
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Brigit wrote My daughter is named as Power of Attorney for my health. No one is named to handle my money.

You might want to think about this. What is going to happen if you have a stroke and can't talk, write, etc. Any General Power of Attorney can be revoked if you change your mind. Another feature to think about in your situation is what type of POA you want. See this:
http://www.duhaime.org/LegalDictionary/S/SpringingPowerofAtt...
While people may think they want to control when someone uses the POA, my view is make the POA effective immediately. #1 If you can't trust the person, you need a different individual. #2 You can revoke or change anytime you want. #3 If you have some limitation (like statement of physician or clergy must concur you are not capable) the Attorney in Fact will have to jump through hoops to activate. Depending on your local laws that may require affidavits and court appearances.

The comments are made by a person who has had to act through a General Power of Attorney. It is not as simple as walking into a bank and signing Brigit's name on a check.

Gordon
Atlanta
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Since your assets are in the trust additional paperwork in the form of a power of attorney wouldn't be required.

My experience is that should be "Since your assets are in the trust additional paperwork in the form of a power of attorney shouldn't be required."

When dealing with the affairs of a disabled person under this paperwork, you must present the documents to each institution and have them reviewed by their attorney. Sometimes your attorney must intervene to explain the paperwork and its intention. The institution's attorney will decide if business will be conducted by the trustee or the designated POA individual or some modification is needed.

It does not work as it theoretically should in the textbooks. Expect to be hassled at every step. Expect every transaction to take extra time.
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But I assume the trust names a successor trustee if you become unable to perform the trustee's duties. Since your assets are in the trust additional paperwork in the form of a power of attorney wouldn't be required.

Phil
Rule Your Retirement Home Fool


My eldest daughter is named as executor of the estate when I pass....I have to look up about a successor trustee. I know I was reluctant about giving anyone control over my finances;)

That's a reason these trusts should be revisited from time to time...stuff changes. I should sit down with my daughters and have a discussion about where all my info is. Although I will probably be leaving them a mess!

Birgit
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