I want to help my children avoid temptation when I die – here are 5 assets I can’t put in a living trust

If you will, allow us to introduce the fictional case of Pete Moneywise, a 78-year-old married father of three who wants to get his finances in order before he dies.

Although he is only there where this article ends, his situation reflects what many people of retirement age face when making a will and establishing trusts.

“I hate probate,” Pete tells us in an exclusive interview. (What else did you expect? We created him.) “I went through it when my father died and my family spent the next year talking to lawyers, trying to sort things out. news.”

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He shares how the probate process caused tension between his siblings. He was also perplexed by one unanswered question: “Why didn’t my father establish a living trust? It would have made things a lot easier.”

Credit Pete for following his advice. His living hope is about to help his children but now comes another worrying question: What if there is something he can give up? He did his homework and identified five things. This list can be very helpful as you consider the structure of your living trust.

Probate explained: You better not go there

Most people don’t even know what the word “probate” means until it’s pointed out to them.

This court-supervised process involves many steps and can create piles of paperwork. It includes (but is not limited to) probating a will if there is one, naming an executor if there is none, paying debts and distributing the remaining property.

Does it cost money in legal fees and take a lot of time? Yes, and yes, especially if the estate of the deceased is disputed. Although Prince died in 2016 [legal dogfight] (https://www.forbes.com/sites/matthewerskine/2024/01/17/the-battle-for-princes-estate-unending-conflict-legal-drama-and-lessons-for-family-business/) his legacy lives on to this day.

Another issue has to do with control. During a person’s lifetime, anyone “of sound mind and body” – a true legal phrase – can create a will. It takes about 20 minutes on FreeWill, a free, online writing service. Go a little further and you can create something called a revocable living trust.

The story continues

Don’t let the word “trust” scare you. Simply put, it’s a document that allows you to keep control of your money and assets and choose who will receive them once you die.

“Revocable” means that you can change the terms at any time, as long as you are “alive.” Since the property is not considered part of your estate, it bypasses the probate process.

It also allows you to continue to use assets transferred to the trust: for example, a house or money from investments. However, the benefits of this trust have their limits and certain things will only cause headaches if they are held there.

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Five things you should leave in a trustable living trust

While his grandchildren begged Pete not to keep his collection of Beanie Babies from a living trust and just give them away (such sweet babies), he turned his attention to other things. and he came up with this list of five important things that he should give up. .

Cars. Whether it’s a ’63 Corvette, a Harley chopper or a prop plane, all it takes to pass it on is a simple written directive to transfer title to a beneficiary. In trust, you face cases of accidents involving the car.

Annuities and retirement accounts. A trust can convert tax-free accounts into taxable accounts. But you can make the trust itself a beneficiary so that these accounts go directly to your trustees without another IRS agent wasting time.

Life insurance. Just name your beneficiaries in the policy. Or,​​​​ set up an irrevocable life insurance policy (ILIT) to avoid estate taxes.

Assets held in other countries. This becomes difficult because you may not be able to do it at first – and if you can, you will need to consult with a real estate lawyer in the country where your international property is located.

Checking and savings accounts. If you use these to pay monthly bills, you may have financial problems unless you are a trustee and have been given full control of the trust assets. There is an easy way out: Make these accounts untrustworthy.

All this resolved, Pete has found the peace of mind he deserves. As for the Beanie Baby thing, he’ll leave it for another day…or maybe probate.

And if Pete were real, he would definitely remind you that the information in this article does not constitute legal advice. Talk to your local trust attorney, financial advisor or other legal/financial professional before making decisions related to probate protection or any type of trust.

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This article provides information only and should not be considered advice. Offered without warranty of any kind.