In the comments on my last post, several readers asked thoughtful questions about family trusts, second marriages, and protecting assets in the event of cognitive decline. A few readers even asked if I would write a post specifically about trusts and estate planning. So here it is.
Over the years, I’ve heard various comments and questions come up, such as:
“Is a trust really necessary?”
“I have a durable power of attorney; isn’t that good enough?”
“My situation is simple. It’s all going to the kids, and I have a will.”
Estate planning can feel complicated, but the core issues usually come down to a few practical questions:
- When does a trust actually make sense?
- Why might a durable power of attorney fall short?
- What common mistakes cause problems for families later?
Today, we’ll walk through each of these.
Do you really need a Trust? Today, you'll find out. Share on X
Do You Really Need a Trust?
Let’s address each of the core issues in turn, starting with a basic overview:
Pros and Cons of a Trust
I’ve had a revocable living trust in place since 2018. At the time I set it up, I was single with no kids. So why did I feel I needed one?
Before answering that, it helps to understand what a revocable living trust (RLT) actually does.
An RLT simply means you create a legal entity that holds your assets while you are alive. You typically serve as the grantor, trustee, and beneficiary. And a revocable trust means you can change its terms at any time.
You still control everything exactly as you did before. The key difference is that you name a successor trustee who can step in if you become incapacitated or after you pass away.
There are no special tax benefits or creditor protections simply from setting up a revocable living trust this way. So why do people do it?
Five practical reasons usually come up:
- Privacy
- Avoiding probate
- Control over how assets are distributed after death
- Creditor protection for beneficiaries
- Easier management if you become incapacitated
Probate is the court process used to settle an estate. It requires public disclosure of assets and can involve legal costs and delays depending on the state.
Assets titled in a trust generally avoid that process.
That said, many assets already bypass probate. Accounts with named beneficiaries—such as retirement accounts, life insurance policies, annuities, and transfer-on-death accounts—avoid probate and pass directly to the beneficiary.
So again, why bother with a trust at all?
In my experience, the answer usually comes down to three things: control, protection, and planning for incapacity.
Control and Creditor Protection
Trusts are often used when people want more control over how assets are distributed after death. Trust structures can also provide creditor protection for beneficiaries in certain circumstances—typically once the trust becomes irrevocable after your passing.
For example,
- protecting assets for kids in second marriages, or from ramifications of a spouse who remarries after you pass
- preventing your child’s inheritance from being lost in divorce
- putting limits in place on the use of funds for a child who struggles with spending or addiction
- protecting assets for beneficiaries in high-liability professions such as surgeons or entrepreneurs
One practical example: romance fraud is increasingly common among older adults. If you pass away first, how do you ensure assets meant for your children don’t end up redirected to a new partner?
Most people trust their spouse completely, and that trust is usually well-placed. But cognitive decline later in life can make even well-meaning people vulnerable to scams. A trust can serve as a safeguard, providing income to a surviving spouse while protecting the principal for the next generation.
The downside is cost and complexity. Corporate trustees can be expensive, and naming a family member as a trustee for other beneficiaries can sometimes create tension.
Naming your surviving spouse as successor trustee is most common, but in cases of romance scams or cognitive decline, there is the potential that they could misuse or squander trust assets.
While control and creditor protection are critical in some situations, for most households, I find the biggest practical benefit of a trust comes from something else entirely.
Ease of Management Later in Life
Over the years, I’ve worked with several older clients who began showing signs of cognitive decline. A few have since passed, and I remember each situation clearly.
In two cases, clients moved into long-term care facilities with the help of an adult child. Because the trust named that child as successor trustee, we were able to add them as co-trustee with the agreement of the attorney and the client.
This allowed us to continue handling everything seamlessly. Bills were paid, required minimum distributions were processed, taxes were withheld, and the family could give us direction through the co-trustee.
It made a difficult time much easier for everyone involved.
At this point, you may be thinking:
“Isn’t that what a durable power of attorney is for?”
Why a Durable Power of Attorney is Not Enough
Many people assume a durable power of attorney solves this problem.
In theory, it should. In practice, it often doesn’t.
Financial institutions frequently refuse to accept outside power-of-attorney documents, particularly if they were created years earlier. The reason is usually that the document doesn’t contain enough detail.
Banks and brokerage firms often require specific language authorizing actions such as:
- changing an address
- initiating withdrawals
- sending money to third parties
- changing beneficiaries
- transferring funds
If those powers are not clearly spelled out, the institution may refuse to honor the document.
As a result, many financial institutions require their own internal power-of-attorney forms. In practice, this means you need to complete separate forms for each bank or brokerage account. If the person needing help is incapacitated or unable to sign, this becomes a serious problem.
I’ve seen adult children show up with perfectly valid legal documents and still be unable to access a parent’s accounts.
When assets are titled in a trust, the transition is typically much smoother. The successor trustee already has authority to act, which avoids the scramble of gathering and approving documents across multiple institutions.
For more on this topic and other critical info on inheriting assets and planning your estate, watch or listen to the podcast episode “How Inheritances Really Fit into a Retirement Plan.”
Why Did I Feel I Needed a Trust?
So why did I personally decide to create a trust?
I owned a business with a buy-sell agreement in place. I also owned a home and brokerage accounts. If I died, I wanted one person named as successor trustee to consolidate everything and distribute assets to my four siblings.
But the bigger reason was incapacity planning.
I wanted someone who could step in quickly if I ever became unable to manage things myself. That was the scenario that mattered most to me.
Of course, creating the trust is only half the job. You also have to fund it.
I transferred my home to the trust using a quitclaim deed. My brokerage account was retitled to the trust, allowing assets to transfer in-kind without tax consequences. My business shares were assigned to the trust through additional legal documentation.
Retirement accounts are handled differently. They cannot be owned by a trust, though a trust can be named as a beneficiary. In my case, I chose to name family members directly as beneficiaries instead.
Other Estate Stuff You Need to Know
Every time you open a financial account, title property, or name a beneficiary, you are engaging in estate planning.
And small details matter.
For example, if you open a joint account with a child, the assets legally belong to that child when you pass away—even if you intended them to be divided among several children.
In one case, a client maintained about 10 different bank savings accounts, each earmarked for a different purpose. He occasionally opened new ones in his own name without retitling them in the trust. When he died suddenly, those accounts had to go through probate, creating complications in an otherwise well-structured estate plan.
In another situation, a woman with pancreatic cancer worked with an attorney to establish a trust. Unfortunately, she never updated the beneficiary designation on her 401(k). She intended for the assets to be divided between her husband and her two children from a previous marriage. Instead, the entire account was passed to the husband. He ultimately shared the funds with the children as she intended, but doing so required him to take a full distribution and created unnecessary tax consequences.
Second-marriage situations often require careful planning. Sometimes, part of an IRA or Roth account is intentionally directed to children from a prior marriage. Other times, a trust structure allows a surviving spouse to receive income while preserving principal for children.
A good estate planning attorney can help you sort through those options.
Wrapping Up
In short, I did my estate planning—and have amended my trust twice since then—because the idea of something unexpected happening without a plan bothered me.
I could just imagine the headline:
“Prominent financial planner didn’t do her own planning.”
Now, I’m not well-known enough for that headline to matter, but you get the point. I didn’t want to be a hypocrite.
And the truth is, once it was done, I felt far more peace of mind than I expected. Not quite a sparkle bomb. More like the smell of a Downey dryer sheet fresh out of the dryer.
What About You?
Most people I talk to fall into one of three groups:
- Everything is done and reviewed regularly
- Some documents exist, but they probably need updating
- It’s still sitting on the to-do list
If you’ve completed your estate planning, how did you feel once it was finished?
And if it’s still on the to-do list, what’s been the biggest obstacle—time, complexity, or just not knowing where to start? Let’s chat in the comments.
Great article. I worked for a financial institution so I’ve seen plenty in my years of experience, and some very sad situations. I would like to add if anyone uses a transfer agent for their stocks, please move it to a self managed brokerage account with a reputable brokerage company and name a beneficiary. These transfer agents are extremely difficult for the beneficiary to transfer the stock into their name and move it out. The transfer agents make the beneficiary jump through hoops to prove their identity and legal claim and in most cases they need a Medallion Stamp and because of liability, most banks have discontinued this service. I turned many beneficiaries away that were totally lost in what to do next and I wasn’t able to offer them any advice.
The only time I saw my company refuse an outside power of attorney was because the language was too general and not specific (as your article stated), and because the POA was very old, despite having specific language. How often should one update their estate documents, even though there are no changes?
What is your opinion on choosing an individual verses a corporate institution as the trustee or as a co-trustee? You can have full faith in the person you name as a trustee, but people get sick, they can become greedy and/or unethical and they eventually will die. A corporate institution might be more expensive, but they have to follow company rules & policies and no one can raid the trust like an individual can.
Great point on the transfer agent. On occasion, we also come across insurance companies (annuity products) that require a medallion signature guarantee. It is a frustrating process.
Regarding how often someone should update estate documents, it is difficult to set a specific timeline. At least every other year, you should be thinking about what has changed in your life and whether there have been any major life or estate-planning changes that warrant an update. In many cases, the answer is no. But if you get in the habit of reviewing and checking this, you’ll recognize when that answer changes. My next thought would be, you do it automatically at key milestones – at retirement. And before RMDs begin – not because it has anything to do with RMDs, but that can be a good point to check in before the Slow-Go years begin. You want to update everything BEFORE you need it.
RE individual vs. corporate trustees – this is another challenging question. I’ve worked with very capable households who inherited a trust with a corporate trustee and it was such a pain. The people were responsible and having the restrictions of how much they could take and what it could be used for AND the administrative hassle of working with the corporate trustee – along with the extra cost that was eating away at a trust value that was less than $500k – all of that did not benefit the situation. I’ve seen this several times. At the same time, I’ve seen cases where someone named a family member as successor trustee – and that family member did not distribute things according to the terms of the trust – knowing, unfortunately, that the other beneficiaries would never really know. You have to know your family. Gratefully (and it gives me hope for humankind), the majority of the time, when a family member is named as trustee, the family is caring and does the right thing, and all works out. I’d use the level of trust, the sophistication of my family members, and the size of my estate as a guide. If level of trust is low, no one knows anything about finance, and the estate is larger – meaning it can bear the cost of a corporate trustee without that cost eating away at the principal (many corporate trustees have minimum fees which means as a % of the value of the trust it could be pretty high for smaller estates) – then a corporate trustee is likely warranted. Or if you are single and want an independent institution to make decisions for you if you are incapacitated later. This question warrants a deep discussion of pros/cons with someone who knows you and who you can talk freely with.
Dana
What is best way transfer home property to a child? We have put her on the deed With joint right of survivor . I’m thinking now that would not be the best way to inherit stepped up value?
Adding an adult child to the deed as a joint tenant can definitely have some unintended tax implications in that they may not get the step-up in cost basis of this asset upon your passing – so this is a great question. There are beneficiary deeds – equivalent to a transfer on death or payable on death designation – that name an adult child as the beneficiary of the property – but not a joint owner. This could be an option that I would explore if I were you.
As I am not an attorney, I have to (of course) suggest this is a great question to get personal legal advice on – someone who knows your entire situation.
I do see many people who add an adult child as a joint tenant to either a property or investment account simply because they are unaware that this has a negative tax implication for their beneficiary.
Dana
If a trust is established & listed as the beneficiary of a savings account is this sufficient or does the account need to be renamed?
Great question. Ok first, I am not an attorney and nothing I say should be construed as legal advice. With that out of the way, here is my understanding.
If the trust is named as the beneficiary through titling – meaning the account has a payable on death or transfer on death to the Trust, then at death, it should avoid probate and pass to the trust to then be disbursed according to the terms of the trust. However, during life, if you needed a successor or co-trustee to step in, it would not be set up for that. You would need the retitle the savings account into the trust so that those provisions could work while you are alive.
Dana
I moved to a different state after I retired (from MA to NC). I had a trust in MA do I need to update the trust in my new state?
It is always a wise idea to revisit this when you move states. Each state can have it’s own rule and nuances. To attempt to standardize things there is something called the Uniform Trust Code (UTC) but not all states have adopted it, and some states adopt it but with modifications.
Moving states does not invalidate your trust. But it may be the language needs to be modified – or it may be fine. An estate planning attorney would be your best guide on this.
Dana
i am planning to create TODI document for my house and file with my county. That allows me to pass my home without probate to my kids. it cost less than $100. i do have will and power of attorney for financial, medical etc. I would like to hear from others on this matter.
The TOD – or transfer on death document, can be a good approach for passing the asset at death and should avoid probate. With the power of attorney, you could run into issues later such as what I described in the article – depending on the financial institution and length of time between executing the power of attorney and when it is needed. (Hopefully far in the future.) The one aspect your structure may not cover is if having someone take over and manage things easily if you are incapacitated.
You’re doing great working to get all of this in order.
Dana
My brother with no wife or descendants was diagnosed with terminal cancer. He had been a lifetime federal employee. I worked with him to put a TOD title on his condo, name beneficiaries on retirement accounts and life insurance, and he named me as joint on his bank account. His estate was worth over $1 million and we didn’t need to go through probate and I had access to funds to pay funeral expenses and other expenses until all was transferred after his death. The only thing missed was naming beneficiaries of his pension so that the final month’s pension could go to his heirs; given there are 9 sibling beneficiaries we each had to submit paperwork to get a portion so it took almost a year. Retitling the condo to his TOD beneficiary was pretty easy (in Minnesota). It is unfortunate that not all states offer transfer-on-death (TOD) for property; I have a similar bachelor brother-in-law approaching age 80 who refuses to take any steps to arrange his estate (I think he is afraid of dying and making arrangements of this sort feel like he would be bringing it on) and his state doesn’t have TOD for his home.
Thank you for sharing your personal examples. Very helpful! -Dana
We set up a trust ten years ago but then didn’t do anything to fund it. Our attorney wasn’t very helpful with that. We tried to get back in touch with him in 2022 but he ghosted us. Turned out he was mainly a divorce attorney who did wills and trusts as a side hustle. We decided to start over and worked with the best estate attorney in town. It wasn’t cheap, but it was worth it.
Most of our money was in retirement accounts or life insurance, but we have an adult child in her early 30s who doesn’t manage spending well, and we knew that if we both suddenly passed, she wouldn’t handle a windfall well. So we set up a trust for her, and when the second of us goes, our trust will flow into hers. There are specifications as to how and when the money gets distributed, with the last of it not released until she hits 60. We also hired a local fiduciary to be our successor trustee. We didn’t want a family member to have to deal with the restrictions we put on our daughter’s trust and felt that the cost to the estate of having the fiduciary manage it was worth it.
My husband’s stepdad (83) just re-did his trust since my mother-in-law had passed. My husband was already the executor/successor trustee, but in the new version, he’s now a co-trustee for the reasons you mentioned.
My mother-in-law had Alzheimer’s and passed away in 2024. Seeing how chaotic their affairs were and how complicated things got as her cognitive decline progressed definitely pushed us to get our own affairs in better order. We don’t want our daughter and siblings to be as stressed out as we were.
You are on top of things and approaching it in a thoughtful way. Love hearing this. Thank you for sharing. Your example helps people see things in reality.
Dana
Thanks for the informative article.
We’ve setup a revocable living trust so that assets can be divided up per our wishes to both family and organizations. One downside is here we are five years later and we need to update the recipient list — so that will require a small cost to have the trust document updated properly.
Regarding the pre-tax assets, the IRA does have the Trust named as beneficiary, but I still have some concern that this will be complicated for the executor. The estate planning attorney handled all this in the verbiage, but still seems like it will cause some headache when we pass.
The Trust as the IRA beneficiary is a complicated decision. It does add complexity. If adding a layer of creditor protection or control for the next generation is key, than it makes sense. For example they could take the entire IRA out when inheriting it directly. Within the ‘Trust as the beneficiary structure’, the Trust still has to comply with the RMD requirements but those RMDs are disbursed to a Trust account, and money comes out of the Trust account according to the terms of the Trust. That is where the added layer of control comes from.
This is where it makes sense to look at the composition of your estate. If the bulk of funds are in the IRA, and control/creditor protection are things you see as essential for your heirs, having the Trust as beneficiary can make sense. Trusts can also be drafted to “see-through” to the underlying IRA beneficiaries which makes it easier.
There are times where the retirement assets are set to go directly to the beneficiaries while the remainder of the estate goes through the Trust – sometimes I see this in second marriage situations as an example. It makes sense to talk it through with your attorney and decide the pros/cons. Some attorneys default to the Trust as the beneficiary as by nature they gravitate to providing as much protection as possible. So you have to think about who is inheriting it and if it makes sense for them to be named directly in some cases.
Dana
My $.02 worth: I am NOT a lawyer nor a CPA. That said, I suggest revisiting the idea of naming your trust as beneficiary.
What I learned from handling my mother’s estate was that an IRA with people named as beneficiaries means those people receive their own separate “inherited IRA accounts” and benefit from delayed distribution rules, and they can move their individual accounts to whatever financial institution each person wishes and individually handle RMDs and other distribution amounts within the confines of IRS regulations for their inherited IRA. Meanwhile, a trust that is beneficiary of an IRA has a different set of rules to follow for RMDs and distributions and taxation, depending on the trust details, and care must be taken to not end up with the trust paying taxes on the IRA distributions, because trust tax rates are punishing to say the least.
My mom had her brokerage account containing a small amount of stocks and 3 annuities set up with her trust as beneficiary. This meant I as successor trustee had a lot of hassle managing annual disbursements from the annuities, and filing annual trust tax returns and sending out the K-1 tax forms to each beneficiary. We 3 daughters agreed as a group to handle the annuities on a max 5-year disbursement period so as to minimize the tax hit by spacing out payouts, and every year we’d have to have a group discussion about how much taxable income we could handle.
I appreciate the comment & agree with you regarding IRAs & brokerage accts. My original question was just regarding an online savings account. Thanks for the input.
Yes, smaller IRA accounts with the Trust as the beneficiary can be a big hassle. My personal opinion is it only makes sense for large accounts where creditor protection and/or control for the heirs is an important issue.
Dana
Given you note that assets are going to family and organizations (which I assume are charitable), if you haven’t already, consider having the funds that go to charity come from your IRAs. Withdrawals from IRAs are taxable to the beneficiary but if the beneficiary is a charitable organization it ends up being tax-free. For taxable beneficiaries IRA assets are not worth as much as assets coming your trust-owned assets as the IRA assets have a tax-obligation attached (unless, of course, it is a Roth IRA and if that is the case, the Roth is ideally left to family as they then have assets in a tax-free growth vehicle that can be drawn on over a ten year period).
My wife and I established our individual trusts in 1995. All of our assets, other than my IRAs and a small joint checking account, were in one of our trusts. They were totally rewritten a couple of times and the current one has been amended several times including conforming to our current state of residency statutes, adding grandchildren, dealing with changes in the law and a couple of contingencies to better fit our current situation. When my wife died in 2024 it was extremely quick and easy to transfer her assets to her beneficiaries. The only exception was the DMV refusing to transfer title of a car from her trust to my (identical) trust because I could not produce a copy of the original 1995 documents. Thus the car is in my name rather than my trust. And I have read/heard that having a car in the trust is not a good idea.
Prior to her death I was able to transfer another car title to a buyer without her being present as I was a co-trustee of her trust with specific language that either of us could act alone. I also had her durable power of attorney.
I did take her estate through what I think is called “no asset” probate to publish a notice of her death to any potential creditors. This would bar future claims once the 60- or 90-day window had closed.
Bottom line I am very glad that we had the trusts in place, and have had no problems other than the car title issue.
Tom, thank you for sharing your personal story. I am sorry to hear of your loss. I appreciate the thoroughness with which you prepared and had everything in order. 🙏🙏🙏Dana
We did wills, POA, etc about 10 years ago and need to relook at everything now. Our corporate counsel did them for me and spouse as a favor. We want to make some changes to executor, health proxy, etc so will be looking for new attorney to redo everything and will evaluate will vs trust.
We are childfree so that complicates things as to who is going to be our person now and if we can find a younger friend who has the expertise and integrity and wants to do this or if we have to find an entity to pay to handle these duties. It keeps me up at night. The person who agreed to be executor 10 years ago is really not capable any more.
We own a house (still has a small mortgage at 2% rate so we intentionally have not paid off) and brokerage/IRA/ROTH/HSA ( we will liquidate soon as we are in our 70’s) are with one investment firm. We keep under $100k in brick and mortar bank in joint account checking and savings. We have one car.
Currently we are each other’s beneficiaries. We plan to leave our assets – home and contents and whatever $ are left in accounts to about 55 different people – some family some friends.
I would appreciate some more clarity about the functionality of a trust if you become incapacitated as I am starting to research money or geriatric care managers who could make sure bills are paid, RMDs withdrawn, taxes, etc in conjunction with FA and CPA.
Are you saying that being childfree is a primary factor for going the trust route? We are in TX if that matters.
Thanks.
Great questions. There are many factors that could make the trust route a primary factor. If you are childless, and have all assets titled in the Trust, and you are paying a licensed fiduciary to serve as your co-trustee at such time as you may need assistance, it makes it easier on them rather than having to grant them authority over each asset individually. There are firms that serve in that capacity – they serve as guardians, conservators and executors. You are typically searching for “licensed fiduciary in X county”. This is different than an investment advisor fiduciary. These are people often named by the courts when there is no one to serve in this capacity – it is what they do for a living. For example, suppose you need temporary assisted living, and it turns into a permanent situation. What if this person needs to sell your home for you? If your home and accounts are all titled in the Trust, the person named as your co-trustee can make decisions with relative ease. Otherwise it involves paperwork for each asset.
But again, I am not making recommendations. These are issues best discussed with an attorney. The other posts here offer some very informative stories too!
Dana
We did wills, POA, etc about 10 years ago and need to relook at everything now. Our corporate counsel did them for me and spouse as a favor. We want to make some changes to executor, health proxy, etc so will be looking for new attorney to redo everything and will evaluate will vs trust.
We are childfree so that complicates things as to who is going to be our person now and if we can find a younger friend who has the expertise and integrity and wants to do this or if we have to find an entity to pay to handle these duties. It keeps me up at night. The person who agreed to be executor 10 years ago is really not capable any more.
We own a house (still has a small mortgage at 2% rate so we intentionally have not paid off) and brokerage/IRA/ROTH/HSA ( we will liquidate soon as we are in our 70’s) are with one investment firm. We keep under $100k in brick and mortar bank in joint account checking and savings. We have one car.
Currently we are each other’s beneficiaries. We plan to leave our assets – home and contents and whatever $ are left in accounts to about 55 different people – some family some friends.
I would appreciate some more clarity about the functionality of a trust if you become incapacitated as I am starting to research money or geriatric care managers who could make sure bills are paid, RMDs withdrawn, taxes, etc in conjunction with FA and CPA.
Are you saying that being childfree is a primary factor for going the trust route? We are in TX if that matters.
Thanks.
my wife and I have had Revocable living trusts for over 20 years now. We’ve revised them a number of times. if you do get a trust, it’s a good idea to sit down and have it reviewed with your estate planning attorney, probably at least every 5 years. Laws change and sometimes some tweaks are worth including in the trust. my wife and I don’t have kids so directing our assets was very important to us. Our attorney encouraged us to structure our trust so each heir would receive the inheritance in a Property trust that only they specifically could access. She explained that if you don’t do this, inheritance could end up in the wrong hands due to divorce and other unforeseen future events. Not something we had considered before.
So wonderful to hear from peope who stay on top of things and amend as needed. Thank you for sharing!
Dana
I am a fan of trusts simply because I have found it faster, cheaper and easier to settle a trust versus going through probate. And that’s not counting the additional protections.
My mom passed in 2020 and a friend’s mom passed in 2021. My mom had a trust and her mom had a simple will but they owned 3 pieces of real estate, including a business property.
I was able to put my mom’s house on the market and liquidated most of her assets within 6 months after getting the IRS trust EIN (big delay on that too because the online EIN application process didn’t work for me due to trust name, and IRS agents were barely working). Did not need a lawyer but did have to pay a CPA $450-550 annually for trust tax returns. Total cost for 4 years: around $2K. I did not bill the trust for my time since all 3 of us sisters had put in various efforts for Mom’s benefit. And the only reason her trust was open that long was because we opted to take annuity distributions over 4 years’ time instead of a lump sum payout.
My friend: Probate court was backed up due to Covid. Probate lawyer costs were somewhere between $15K and $20K because in our state the fee is based on estate size plus court costs. It took her at least two years for her to get her mom’s probate processed and closed.
Excellent real-life example. Thank you for sharing! -Dana
My wife and I set up a revocable living trust in 2017 with a corporate fiduciary successor trustee recommended by our attorney. Our kids were not established adults at the time but are now. Thankfully we reviewed the corporate fiduciary recently and discovered they went down hill and are horrible. We just performed a trust amendment removing the corporate fiduciary as successor trustee and named our two children as co successor trustees. We also had to create new durable POA’s. My recommendation is if you do decide to use a corporate fiduciary as your successor trustee, make sure you review them once per year or every other year. Things can change with them. Me and my wife were shocked when we reviewed them this year.
Great point. How did you review them? Looking at oneline ratings? Or anything else that you can share?
Dana
We read online customer reviews and also complaints to the Better Business Bureau. A lot of complaints about the company racking up tons of unnecessary fees. Also, lack of communication.
Thank you! Super useful to know.
Great post! Thanks Fritz. For once, I have nothing to add.
~gps
Hi GPS, it’s Dana who wrote this article, but I am very grateful to Fritz for the opportunity to guest blog for him!
Dana
Coincidentally, I just received an email from Suze Orman advertising for “4 Must-Have Documents” (Will, Living Revocable Trust, Financial Power of Attorney, Durable Power of Attorney for Healthcare) for $99.
Is this a viable option to an expensive estate lawyer?
Hi Neil, I am believer that most of the time, you get what you pay for. This option may be better than having no documents at all, but I would be very skeptical. For those who have assets, I think paying an experienced estate planning attorney is worth it. A good attorney educates and guides you through the process with great questions.
Dana
We live in a 55 community in Florida. We are buying our home. Upon the death of the last of us the home would be sold and distributed. For convenience sake what about taking a reverse mortgage then putting that money from our home in our brokerage account. When we are dead the bank gets the house and the kids get the brokerage with named beneficiaries.
Tom, my initial thoughts on this are, being a spreadsheet person, I’d have to run the numbers. Reverse mortgages require up-front fees and I’m not exactly sure where rates are right now, but I’d guess around 6%. You’d need to invest pretty aggressively to outpace that. There have been several times in history where a compound rate of return was 6% or less. And what if you needed assisted living? At that point you’d be selling the home yourself – or letting it go back to the bank if the mortgage and had outgrown the property value. I like reverse mortgages in many cases as part of a holistic plan and I tend to find them underutilized. I especially like them if there is some form of long term coverage in place. If no LTC coverage, then the home often becomes the reserve asset to cover those potential costs one day.
I spent 35 years as a financial advisor and am a huge fan of trusts for the reasons mentioned; privacy, speed of settling an estate, control of where the assets go, anticipation of capacity issues and cost. Oh, and flexibility – the ability to amend the trust as needed as circumstances change.
Whenever I had a client die with a trust there was little delay in getting the assets to where the deceased wanted them to go (death certificate, copy of the trust naming successor (if we didn’t have it already) followed by a letter of instruction from the successor trustee with direction with respect to the assets); whenever the probate court got involved it was always a very slow and relatively expensive process.
Very good article. I am trying to determine which assets I may want to place in a RLT. You mention several assets that bypass probate. (retirement accounts w/beneficiary named, life insurance policies, annuities, TOD, etc) What are some assets that do not bypass probate?
Ricky – this going to sound sarcastic, but I don’t mean it to be. Any asset that does not have a named beneficiary or isn’t titled to pass directly will be subject to probate. A few examples would be a home titled in a single name. Or a home titled with your spouse; one of you passes and the home seamlessly belongs to the surviving spouse. But then the second spouse passes, that home now goes through probate. Another example would be a bank account in a single name. Or accounts or insurance policies that have the estate named as a beneficiary. Real property too – such as a large collection of guns, jewelry, art, or precious metals (gold) would be another example.
Dana
Hello, I just learned of your site, which is certainly jam packed with good info. Here is a trust question. My wife and I, California residents with no kids, fall into the “setting up a trust is still on the To Do List” group. We like to keep things simple and had a difficult time resolving problems that arose from a relative’s poorly maintained trust. Here is what we have done while we consider a trust: 1) the deeds on our two properties have been updated to be held as “community property with a right of survivorship;” 2) we named beneficiaries on all of our investment accounts, so they will transfer upon death; and, 3) as allowed in California, we have holographic wills. How would a trust benefit us? I see two ways. First, if we passed simultaneously, the real estate assets alone would require probate. Second, after one of us is gone, a trust would make it easier for whoever inherits. Agree? Am I missing anything?
Casey, thank you for your question. It sounds like you’ve made a lot of progress on your planning! The other case where a trust often provides benefit is if both of you are incapacitated – for example in assisted living. Or one has passed and the other is in assisted living. Having a trust at that point often makes it much easier for a successor or co-trustee to manage your affairs for you.
-Dana
I suggest looking at http://www.freewill.com. Numerous nonprofit, charitable organizations partner with or refer their donors to this site. Plus, California happens to be the only state whose residents have the option to choose a simple revocable trust in addition to simple wills that are available to those in every state. The CA trust is simple, but also very comprehensive.
This looks like an interesting resource. Thank you for sharing! -Dana
We have drwan up a will, health POA, and finanical POA. But, based on our most recent experience when we have drawn up our separate financial POAs, our brokerage firm would still require us to do their in-house form, even those are very specific of the duties to be executed upon our death or decline.
I do have some questions regarding some personal property. We have very simple assets; namely everything are in investment & banking accounts with named beneficiaries. The only 2 assets without beneficiary or POD, or TOD are the paid for house and 2 cars. Should they be in a RLT? Does every county of each state have a so-called TOD Beneifiary title? Great article, great work, love your propestives.
Art, there can certainly be value in titling the home and autos in the trust. For the home, what if someone needed to sell it on your behalf? I’ve seen this occur with clients who’s parents are in assisted living. Having the successor trustee in place and the asset titled in the Trust make it easier. Autos are trickier – per another reader’s post – some states make this easier than others.
Regarding your question about if each state as a TOD beneficiary title… I don’t know. In general, each state has its own nuances and for property you can check with your assessor’s office to see what default forms or options are on file, and with the Dept of Motor Vehicles for autos.
Dana
We setup a living trust and moved the house and brokerage account under the trust. I still don’t think you can entirely expect the Financial POA to work. I added my wife as a limited power of attorney to my Vanguard IRA. Full access would be better but that requires notarization. This allows for a distribution request to an already established bank account link which I setup. I don’t have it on my other IRA/401k accounts but Vanguard IRA is our largest and would give her immediate fund access without going through the hoops if I would become incapacited. You can generally avoid probate in my state of Illinois without a trust because Illinois supports a life estate deed and you can TOD or POD accounts. If you just have auto left the small estate affidavit will generally work without probate.