Revoke Living Trust?

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Average Investor
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Revoke Living Trust?

Post by Average Investor »

My parents moved from one state to another earlier this year and are currently living in an assisted care facility.

They have a revocable living trust from more than 20 years ago. During a recent estate planning review the attorney recommended revoking the living trust and updating financial accounts to individual/joint titling with POD beneficiary designations.

The underlying goal of this reccommendation seems to be to simplify the estate, avoid having to administer a trust, and dealing with the legal complexity of applying the laws of the state the trust was adopted in and the state in which they are now living.

My parents estate is relatively modest and straightforward (almost all assets are in cash now). Aside from a few specific $ amount gifts to grandchildren and great grandchildren, all beneficiary children are set to split any remaining assets equally.

It seems like a sound plan to me, is there anything I am missing?

Thank you.
Tomorrow never knows.
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Duckie
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Re: Revoke Living Trust?

Post by Duckie »

Average Investor wrote: Tue Nov 09, 2021 12:34 pm My parents moved from one state to another earlier this year and are currently living in an assisted care facility.
What state do they live in now?
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Average Investor
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Re: Revoke Living Trust?

Post by Average Investor »

Duckie wrote: Tue Nov 09, 2021 5:40 pm
Average Investor wrote: Tue Nov 09, 2021 12:34 pm My parents moved from one state to another earlier this year and are currently living in an assisted care facility.
What state do they live in now?
North Carolina.

Thank you.
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Gill
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Re: Revoke Living Trust?

Post by Gill »

Seems like strange advice. Where is the problem in administering the trust? Do they still want the dispositive provisions included in the trust?
Gill
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Re: Revoke Living Trust?

Post by bsteiner »

Average Investor wrote: Tue Nov 09, 2021 12:34 pm My parents moved from one state to another earlier this year and are currently living in an assisted care facility.

They have a revocable living trust from more than 20 years ago. During a recent estate planning review the attorney recommended revoking the living trust and updating financial accounts to individual/joint titling with POD beneficiary designations.

The underlying goal of this recommendation seems to be to simplify the estate, avoid having to administer a trust, and dealing with the legal complexity of applying the laws of the state the trust was adopted in and the state in which they are now living.

My parents estate is relatively modest and straightforward (almost all assets are in cash now). Aside from a few specific $ amount gifts to grandchildren and great grandchildren, all beneficiary children are set to split any remaining assets equally.

It seems like a sound plan to me, is there anything I am missing?
If "they" (plural) had "a" (singular) revocable trust, then presumably they used to live in a community property state, most likely California. If that's the case, they may want to keep it to segregate their community property, since it will get a full basis step-up at the first spouse's death.
2pedals
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Re: Revoke Living Trust?

Post by 2pedals »

I would think revoking a living trust would complicate things. I would think an update to the will would be needed. What's wrong with having to administer a trust? I would think that passing administration from trustee to successor trustee would be helpful if dementia or incapacitation occurs.
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Average Investor
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Re: Revoke Living Trust?

Post by Average Investor »

Thanks everyone.

To be clear the attorney recommended all of the following: creating a new Last Will and Testament, Health Care POA and HIPAA Authorization, and revoking the Revocable Trust to simplify.

I plan to reach out to the attorney to better understand the rationale underlying the revocation reccomendation.

Appreciate any further feedback.

Thank you.
Tomorrow never knows.
Whatyear?
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Re: Revoke Living Trust?

Post by Whatyear? »

I think it sounds like a good plan (focusing on keeping things simple/not having them be unnecessarily complex), and I'm sort of doing the same thing myself.

Neither me nor my husband have ever had a will (we're in early 60's) and are finally doing something about it. After consulting with an estate planning law firm we determined all we need was the Big 3 (Will, POA, Healthcare Proxy), but the firm kept insisting we also needed a trust. After reviewing the draft trust agreement I saw no real advantage to it, and pushed back. They wound up agreeing that in our situation (assets are mainly IRA's and don't need to be probated in our state, youngest child is 17 so won't be a minor for much longer, etc.) there was no need for the trust and it was really just belt-and-suspenders.

It sounds like maybe your parents are in the same boat (trust provides little benefit v. the hassle of maintaining it).
flarf
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Re: Revoke Living Trust?

Post by flarf »

I'm quite thankful that my parents had set up revocable living trusts. It made financial matters much easier when my father had dementia, and the trusts themselves had zero hassle.
Whatyear?
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Re: Revoke Living Trust?

Post by Whatyear? »

flarf wrote: Wed Nov 10, 2021 11:52 am I'm quite thankful that my parents had set up revocable living trusts. It made financial matters much easier when my father had dementia, and the trusts themselves had zero hassle.
Serious question (for my own benefit, since I'm the one that is in the process of opting out of setting up a trust, as well as for the OP) - how did the trust help with this? It seems like this is where a Power of Attorney would come in handy . . . .(?)
donall
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Re: Revoke Living Trust?

Post by donall »

If your parents have a living trust, why revoke it? You can achieve the same thing by not having accounts titled in the trust or changing beneficiaries to not include the trust.
But since your parents have a living trust, it is much easier when health fails or when death occurs.
student
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Re: Revoke Living Trust?

Post by student »

donall wrote: Thu Nov 11, 2021 10:43 am If your parents have a living trust, why revoke it? You can achieve the same thing by not having accounts titled in the trust or changing beneficiaries to not include the trust.
But since your parents have a living trust, it is much easier when health fails or when death occurs.
+1. Just move the stuff out of the trust and have POD. The trust can be a backup.
HomeStretch
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Re: Revoke Living Trust?

Post by HomeStretch »

Are your parents currently handling their investments and daily finances? Do they have a simple financial set up (1 bank, 1 brokerage, a couple accounts, a couple credit cards) or is it complex?

A Trust may make it easier for others to handle these matters for them, if needed. If they eliminate the Trust, whoever is named as their attorney-in-fact in their DPOAs should make sure to get everything set up while parents can still assist/are competent well in advance of needing to rely on the DPOA. This means getting every financial institution/insurer etc. to recognize the DPOA or to have your parents complete Agent Authorizations. It also means the attorney-in-fact/authorized agent should get online account access set up.

Also be aware that SSA, Medicare and the IRS have their own forms and processes for recognizing authorized agents.
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Re: Revoke Living Trust?

Post by bsteiner »

bsteiner wrote: Tue Nov 09, 2021 10:09 pm
Average Investor wrote: Tue Nov 09, 2021 12:34 pm My parents moved from one state to another earlier this year and are currently living in an assisted care facility.

They have a revocable living trust from more than 20 years ago. During a recent estate planning review the attorney recommended revoking the living trust and updating financial accounts to individual/joint titling with POD beneficiary designations.

The underlying goal of this recommendation seems to be to simplify the estate, avoid having to administer a trust, and dealing with the legal complexity of applying the laws of the state the trust was adopted in and the state in which they are now living.

My parents estate is relatively modest and straightforward (almost all assets are in cash now). Aside from a few specific $ amount gifts to grandchildren and great grandchildren, all beneficiary children are set to split any remaining assets equally.

It seems like a sound plan to me, is there anything I am missing?
If "they" (plural) had "a" (singular) revocable trust, then presumably they used to live in a community property state, most likely California. If that's the case, they may want to keep it to segregate their community property, since it will get a full basis step-up at the first spouse's death.
But if that's not the case, then what they have may not make sense in a common law state (one that's not a community property state).
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Re: Revoke Living Trust?

Post by Average Investor »

Thanks for the replies everyone.

I spoke with the attorney again and discussed various options. The family's current thinking is to keep the out of state trust as is and update key docs such as powers of attorney and healthcare directives only.

I am concerned that proceeding in this manner would end up being costly down the road (possibly needing to hire two sets of attorneys to administer the estate (one in the state of residence, and one in the state in which the trust was created).

Is it unreasonable to assume one can administer a living trust without professional legal assistance? No challenges or conflicts among the successor trustees or beneficiaries are anticipated.

Thank you.
Tomorrow never knows.
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Re: Revoke Living Trust?

Post by Grt2bOutdoors »

Average Investor wrote: Tue Dec 07, 2021 1:54 pm Thanks for the replies everyone.

I spoke with the attorney again and discussed various options. The family's current thinking is to keep the out of state trust as is and update key docs such as powers of attorney and healthcare directives only.

I am concerned that proceeding in this manner would end up being costly down the road (possibly needing to hire two sets of attorneys to administer the estate (one in the state of residence, and one in the state in which the trust was created).

Is it unreasonable to assume one can administer a living trust without professional legal assistance? No challenges or conflicts among the successor trustees or beneficiaries are anticipated.

Thank you.
No. Recommend you pick up a copy of this book if you want to learn the ins and outs of how to administer the trust after the grantor has either died or become incapacitated - Make Your Own Living Trust by Denis Clifford. You can find it on Amazon or Nolo.com. You should not need counsel unless you run into difficulties.
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Re: Revoke Living Trust?

Post by Average Investor »

Grt2bOutdoors wrote: Tue Dec 07, 2021 2:14 pm
Average Investor wrote: Tue Dec 07, 2021 1:54 pm Thanks for the replies everyone.

I spoke with the attorney again and discussed various options. The family's current thinking is to keep the out of state trust as is and update key docs such as powers of attorney and healthcare directives only.

I am concerned that proceeding in this manner would end up being costly down the road (possibly needing to hire two sets of attorneys to administer the estate (one in the state of residence, and one in the state in which the trust was created).

Is it unreasonable to assume one can administer a living trust without professional legal assistance? No challenges or conflicts among the successor trustees or beneficiaries are anticipated.

Thank you.
No. Recommend you pick up a copy of this book if you want to learn the ins and outs of how to administer the trust after the grantor has either died or become incapacitated - Make Your Own Living Trust by Denis Clifford. You can find it on Amazon or Nolo.com. You should not need counsel unless you run into difficulties.
Thank you!
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Re: Revoke Living Trust?

Post by Nestegg_User »

OP

couldn't you simply change the situs of the trust (the lawyer would surely know what to do), changing relevant state laws to your new domicile, and update will as well ? Then the former states laws have no effect.... and certainly no need for separate probate etc
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Re: Revoke Living Trust?

Post by Average Investor »

Nestegg_User wrote: Tue Dec 07, 2021 2:56 pm OP

couldn't you simply change the situs of the trust (the lawyer would surely know what to do), changing relevant state laws to your new domicile, and update will as well ? Then the former states laws have no effect.... and certainly no need for separate probate etc
This option is on the table, attorney quoted $5000 to restate the trust in the new state of residence, we are hoping to avoid this expenditure if possible. Thank you.
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afan
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Re: Revoke Living Trust?

Post by afan »

OK, it at least makes.sense why that was not the first move.

I would take seriously the problem of getting institutions to accept a durable power of attorney. When I was acting on behalf of someone who was in declining health, I had a perfectly valid DPOA, which not a single bank or broker would recognize. Not a one. They did not send it to legal and come back saying there was a problem. They simply declared that they did not accept POAs, period.

On the other hand, continuing to function as trustee was no problem at all. I would not get rid of the trust without a good reason.

Maybe the old and new state laws are different enough that it is really necessary to change the entire trust. Maybe not. Maybe you can find a good attorney who will do it for less. But it could be the best $5,000 they ever spent if avoids a long list of issues later.
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Re: Revoke Living Trust?

Post by Lee_WSP »

It’s a very fact specific question. If there are already a number of assets within the trust, regardless of anything else, the effort to retitle them may outweigh the benefit.

If the dispositive provisions of the trust have changed, it may be easier to revoke, but if other complicating factors are present then it may not make sense to revoke and an amendment might be the right choice.
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Re: Revoke Living Trust?

Post by Average Investor »

afan wrote: Tue Dec 07, 2021 3:28 pm OK, it at least makes.sense why that was not the first move.

I would take seriously the problem of getting institutions to accept a durable power of attorney. When I was acting on behalf of someone who was in declining health, I had a perfectly valid DPOA, which not a single bank or broker would recognize. Not a one. They did not send it to legal and come back saying there was a problem. They simply declared that they did not accept POAs, period.

On the other hand, continuing to function as trustee was no problem at all. I would not get rid of the trust without a good reason.

Maybe the old and new state laws are different enough that it is really necessary to change the entire trust. Maybe not. Maybe you can find a good attorney who will do it for less. But it could be the best $5,000 they ever spent if avoids a long list of issues later.
Thanks for the feedback. 90% of the assets are in trust accounts with Ally Bank and Schwab, I will check with them regarding requirements for Durable Power of Attorney.

This the second attorney we've spoken to about the estate, the first one wanted $7500 to restate the trust.

Thank you.
Tomorrow never knows.
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Re: Revoke Living Trust?

Post by Average Investor »

Lee_WSP wrote: Tue Dec 07, 2021 3:51 pm It’s a very fact specific question. If there are already a number of assets within the trust, regardless of anything else, the effort to retitle them may outweigh the benefit.

If the dispositive provisions of the trust have changed, it may be easier to revoke, but if other complicating factors are present then it may not make sense to revoke and an amendment might be the right choice.
I agree, it was a fair amount of work to get the trust accounts set up, it seems silly to unwind them now and basically start all over again.

Nothing has really changed other than their financial life is far simpler now than when the trust was created and they've recently moved to a new state.

Thank you.
Tomorrow never knows.
Luckywon
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Re: Revoke Living Trust?

Post by Luckywon »

If it were me, I'd have them consult with another attorney.
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Re: Revoke Living Trust?

Post by Joey Jo Jo Jr »

Average Investor wrote: Tue Dec 07, 2021 3:12 pm
Nestegg_User wrote: Tue Dec 07, 2021 2:56 pm OP

couldn't you simply change the situs of the trust (the lawyer would surely know what to do), changing relevant state laws to your new domicile, and update will as well ? Then the former states laws have no effect.... and certainly no need for separate probate etc
This option is on the table, attorney quoted $5000 to restate the trust in the new state of residence, we are hoping to avoid this expenditure if possible. Thank you.
That seems steep for a new revocable trust, which I’m not even sure is needed as opposed to simply amending the law applicable to the trust administration? Something to the effect of: “Pursuant to Article __ of the ____ Revocable Trust U/A/D ____, the undersigned Settlors hereby amend Article ___ of the Trust to provide that the Trust shall be governed by the law of North Carolina; provided, however, that any community property that is part of the Trust shall preserve its status as community property and that the law of ____ shall supersede the law of North Carolina to the extent necessary to preserve such status.”

And they wouldn’t need the last part if they didn’t live in a community property state. Granted I’m not your lawyer, haven’t seen the trust, and definitely didn’t get 5 grand off of you, so don’t sue me.
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Re: Revoke Living Trust?

Post by Lee_WSP »

Joey Jo Jo Jr wrote: Wed Dec 08, 2021 12:32 am
Average Investor wrote: Tue Dec 07, 2021 3:12 pm
Nestegg_User wrote: Tue Dec 07, 2021 2:56 pm OP

couldn't you simply change the situs of the trust (the lawyer would surely know what to do), changing relevant state laws to your new domicile, and update will as well ? Then the former states laws have no effect.... and certainly no need for separate probate etc
This option is on the table, attorney quoted $5000 to restate the trust in the new state of residence, we are hoping to avoid this expenditure if possible. Thank you.
That seems steep for a new revocable trust, which I’m not even sure is needed as opposed to simply amending the law applicable to the trust administration? Something to the effect of: “Pursuant to Article __ of the ____ Revocable Trust U/A/D ____, the undersigned Settlors hereby amend Article ___ of the Trust to provide that the Trust shall be governed by the law of North Carolina; provided, however, that any community property that is part of the Trust shall preserve its status as community property and that the law of ____ shall supersede the law of North Carolina to the extent necessary to preserve such status.”

And they wouldn’t need the last part if they didn’t live in a community property state. Granted I’m not your lawyer, haven’t seen the trust, and definitely didn’t get 5 grand off of you, so don’t sue me.
Would you do that or would you just keep the first community property trust separate? Professional curiosity.
Joey Jo Jo Jr
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Re: Revoke Living Trust?

Post by Joey Jo Jo Jr »

If it was created in a community property state it likely has language indicating that community property transferred to the trust shall retain its character and separate property transferred to the trust shall retain its character. So I would add that if not present, and if it’s even relevant to the settlors (not sure OP said?). If so, I’d also discuss the option of separate trusts for community vs separate property interests, but here it sounds like the existing trust may not even be used, so the cost/benefit would seem to favor a simple way to preserve the availability of the trust while trying to at least somewhat simply the applicable law. But I am far from a community property guru if anyone has different thoughts.
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Re: Revoke Living Trust?

Post by RudyS »

afan wrote: Tue Dec 07, 2021 3:28 pm ...
I would take seriously the problem of getting institutions to accept a durable power of attorney. When I was acting on behalf of someone who was in declining health, I had a perfectly valid DPOA, which not a single bank or broker would recognize. Not a one. They did not send it to legal and come back saying there was a problem. They simply declared that they did not accept POAs, period.
Hopefully you have by now resolved the POA issue. For my own possible future info, I found this on Google: https://www.agingcare.com/articles/what ... 178641.htm
I have also checked with my bank to ascertain their policy should my kid (agent) need to act. They will accept it but need to process through headquarters.
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Average Investor
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Re: Revoke Living Trust?

Post by Average Investor »

Thanks for the replies everyone.

FWIW, neither the former or current state of residence is a community property state.

Thank you.
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bsteiner
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Re: Revoke Living Trust?

Post by bsteiner »

Average Investor wrote: Wed Dec 08, 2021 4:57 pm
...
neither the former or current state of residence is a community property state.
That may explain the lawyer's recommendations, though without seeing the trust we can't be sure.
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Lee_WSP
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Re: Revoke Living Trust?

Post by Lee_WSP »

IMO, the under appreciated downside to revocable living trust, is that they or are that easy to dismantle?
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