Family Will and Trusts

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
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ad2007
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Family Will and Trusts

Post by ad2007 »

We redid our wills and trusts in 2018. We are full time FL residents. My wife and I hold our taxable accounts jointly (as tenants in entireties) and real estates (rentals) are co-owned. One child in college, one in grade school. Estate tax is not a problem at the first death and may at second (per attorney).

Our attorney recommended that we NOT fund the trusts (though he created one for each of us), because he said it is very unlikely that we both die at the same time (if that does happen, understandably the estate will be probated). We should only fund the trust after the first death, something something about estate tax, but I couldn't recall or understand.

Is that sound advice? About not funding the trusts?
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mrpotatoheadsays
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Re: Family Will and Trusts

Post by mrpotatoheadsays »

I recommend you read Nolo's Make Your Own Living Trust. I doubt your attorney is giving sound advice.

You both could easily die at the same time or near the same time. Automotive accident is one scenario and you will find COVID-19 examples in the news.

When dividing among children, most people go with a 50/50 split, but when it comes to assets like real estate there could be conflicting views among the children: one wanting to sell; another wanting to hold. Arguments ensue; lawsuits ensue. In cases like this, it may be best to have the real estate (or other asset) sold upon death and have the resulting cash split 50/50.

There are also sometimes delays with probate. If your trust and your deaths are in order, transfers can quickly take place. Probate is also public; so if you don't want everyone in town knowing how much money you had, the trust keeps it private.
khunron
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Re: Family Will and Trusts

Post by khunron »

For your "attorney" to say that is just stupid. I recommend you find another.
interwebopinion
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Re: Family Will and Trusts

Post by interwebopinion »

Makes no sense. I'd agree with the others - find another attorney.

In our trust, both spouses are joint trustees. When one dies, their portion goes into another trust and is protected for the kids and support of the surviving spouse. So the process you allude to should be built-in into the trust. There's also verbiage on what happens when both spouses pass away simultaneously. Fairly boilerplate stuff.
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ad2007
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Re: Family Will and Trusts

Post by ad2007 »

Thank you for the responses.

I think the decision to not fund the trust was because of asset protection. Jointly held in tenancy is supposed to protect our assets best(most of our money is in taxable brokerage) in Florida. I was practicing at the time, owned a speedboat and sports car(s). Not sure if fund the trust negates the protection?? I hardly understand this stuff so I just listened and went along with the recommendation.
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Lee_WSP
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Re: Family Will and Trusts

Post by Lee_WSP »

Hard to say based on the limited information given. It also sounds like you don't understand the plan. I'd need to read at least the summary page to get a better understanding of which plan the attorney went with.
bsteiner
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Re: Family Will and Trusts

Post by bsteiner »

Probating a Will in Florida is generally not particularly difficult, expensive or burdensome. The forms are filed electronically and no court appearance is needed. There's usually no need to be concerned about it. The principal exception is that Florida requires a personal representative to be either a relative or a Florida resident. If your first choice for personal representative can't qualify, a revocable trust is a workaround.

The more important issue, since you're close to having a taxable estate, is the possible estate tax in the surviving spouse's estate. Since you own your assets as tenants by the entirety for creditor protection, you could include disclaimer trusts in your Wills. That would give the surviving spouse the option, if that makes sense at the time, to disclaim (waive) the deceased spouse's share of the assets. In that case, the disclaimed portion would go to a trust that would be out of the surviving spouse's estate, but in which the spouse would be a beneficiary. There are other choices as well.

Also more important, especially if you're close to having a taxable estate, is to provide for your children in trust rather than outright, to keep their inheritances out of their estates, and to protect their inheritances from their creditors and spouse.
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ad2007
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Re: Family Will and Trusts

Post by ad2007 »

Lee_WSP, you're right, this stuff is very confusing to me. But asset protection was important when we did this and I sort of remember that he said asset jointly held is pretty much impossible to lose if there was a judgement against one of us (most like me).

bsteiner, does the disclaimer for entireties savings provision in a trust/will really hold up if there is a judgement? I have an appointment to revisit this with our attorney and want to be more prepared this time.
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Lee_WSP
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Re: Family Will and Trusts

Post by Lee_WSP »

I don't know if he charges by the hour to explain your plan to you, personally I feel he/we shouldn't let the client leave without understanding the plan.

But to try to put it in context, one possibility is that you two have testamentary trusts, which will not avoid probate, but probate in FL is not hard or expensive from what I've heard. Upon the first death a family trust and possibly a bypass trust would be created. The bypass trust is designed to shelter the lifetime exemption left at the death of the first to die.

Another option is he created an unfunded living revocable trust. The trust is in existence during your life, but remains largely unfunded except for a token amount. In case of mental decline or any other reason you or your DPOA will fund the trust. Alternatively, the trust will be funded upon death of the first to die via the pour over will.

There are other less likely possibilities, but I surmise it is one of these two and most likely the first.
bsteiner
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Re: Family Will and Trusts

Post by bsteiner »

ad2007 wrote: Fri Oct 22, 2021 3:06 pm Lee_WSP, you're right, this stuff is very confusing to me. But asset protection was important when we did this and I sort of remember that he said asset jointly held is pretty much impossible to lose if there was a judgment against one of us (most like me).

bsteiner, does the disclaimer for entireties savings provision in a trust/will really hold up if there is a judgement? I have an appointment to revisit this with our attorney and want to be more prepared this time.
If asset protection is a concern, then it makes sense to hold assets as tenants by the entirety.

One lawyer has suggested that it may be possible to create a joint revocable trust in Florida that would hold property as tenants by the entirety: https://www.floridabar.org/the-florida- ... r-not-tbe/. However, even if it works (I have no opinion as to whether it works), it's a solution to a problem that you don't have.

Whatever you do, after one spouse dies, you'll no longer own it as tenants by the entirety. If the survivor disclaims the survivorship 50% interest, the disclaimer trust should be protected.
Lee_WSP wrote: Fri Oct 22, 2021 3:17 pm I don't know if he charges by the hour to explain your plan to you, personally I feel he/we shouldn't let the client leave without understanding the plan.

But to try to put it in context, one possibility is that you two have testamentary trusts, which will not avoid probate, but probate in FL is not hard or expensive from what I've heard. Upon the first death a family trust and possibly a bypass trust would be created. The bypass trust is designed to shelter the lifetime exemption left at the death of the first to die.

Another option is he created an unfunded living revocable trust. The trust is in existence during your life, but remains largely unfunded except for a token amount. In case of mental decline or any other reason you or your DPOA will fund the trust. Alternatively, the trust will be funded upon death of the first to die via the pour over will.

There are other less likely possibilities, but I surmise it is one of these two and most likely the first.
Most lawyers work on a time basis. Those who don't obviously want to minimize the amount of time that they spend on a matter.

On a time basis, this appears to be a medium size estate, possibly but not necessarily subject to estate tax. You've already run up additional fees by doing revocable trusts. The lawyer may be concerned about spending too much time on this.

However, I agree with Lee that before selecting a plan, you should understand the plan, as well as the other choices you could reasonably select. In this case, the reasonable choices include all to each other (whether by holding the assets as tenants by the entirely or having them go to each other by Will), with a disclaimer trust as backup, or dividing your assets and leaving them to each other in a credit shelter (bypass) (family) trust.

If there's a reasonable chance that you might have a taxable estate, you might consider making some gifts now, to a trust for your children, or for your spouse and children, to get the future income and growth out of your estate.
Topic Author
ad2007
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Re: Family Will and Trusts

Post by ad2007 »

bsteiner wrote: Fri Oct 22, 2021 4:00 pm

If asset protection is a concern, then it makes sense to hold assets as tenants by the entirety.

One lawyer has suggested that it may be possible to create a joint revocable trust in Florida that would hold property as tenants by the entirety: https://www.floridabar.org/the-florida- ... r-not-tbe/. However, even if it works (I have no opinion as to whether it works), it's a solution to a problem that you don't have.

Whatever you do, after one spouse dies, you'll no longer own it as tenants by the entirety. If the survivor disclaims the survivorship 50% interest, the disclaimer trust should be protected.

Thank you for this insight.

I had a sit down with the attorney few days ago. At this point, I'm satisfied with NOT funding the trusts. Our estate is NOT taxable at this point as a couple.

Again, thank you.
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