Trust Tips
Last Updated on Tuesday, 27 October 2020 06:39 Written by Chris Griswold Friday, 1 January 2010 08:39
I confess. I took advantage of all the blizzard snow by sledding down some large hills with my son Troy (just like Clark W. Griswold did in the well known Christmas Vacation movie). Hopefully, some of you got a chance to do likewise…. This time of year, a lot of people are cleaning up clutter and making resolutions for the New Year. As an attorney, this “new-leaf” activity equates to people calling in to either create a trust or to look over one that has previously been created (just to keep it up to date). Accordingly, I want to pass along some important information about some common errors and omissions that I routinely observe when reviewing peoples’ trusts.
Trust Tips
If you’ve already formed up a trust or are thinking about having one created in the near future, be sure to watch out for the following:
Cars. A lot of people like to routinely put their cars, trucks, boats, recreational vehicles, etc… into their trusts. Why? Unless it’s some type of a collectible or a family heirloom piece, I really don’t know…. If you get into an accident with the vehicle and you’re determined to be at fault for causing the accident, the fact that the vehicle is titled in the very name of your trust doesn’t help with preserving the wealth you’ve amassed and placed into your trust. True, you might lose a lot of money whether or not the vehicle is titled in the name of your trust. However, it’s less than ideal to patently integrate such a huge liability into the fabric of what is supposed to be a wealth preservation tool.
IRA’s, Pensions, Annuities, Life Insurance Policies, etc. A good number of people actually transfer these tax deferred investment vehicles into their trusts. While sometimes beneficial, oftentimes it’s not. Why? Transferring the tax deferred investment vehicle into the trust is actually a “trigger” to a “taxable event” which carries with it adverse tax consequences. Rather than transferring these investments into the name of the trust, you should instead change the designated beneficiary(ies) on these vehicles to the name of the trust.
Follow Through. It’s great to create a trust, but, does it really accomplish anything? Many people have paid good money for their trust just to find out they haven’t really done anything. Remember, a trust is effective only if it (among other things) both: i) has your stuff in it, and ii) legally exists with the relevant authorities. For example, if you own real estate and desire for that real estate to be held in the name of your trust, you have to: a) deed the real estate into the trust (not just name the real estate in your trust agreement), and b) file the existence of your trust with the relevant authorities. Don’t be a Clark W. Griswold when it comes to your trust…. Happy New Year!
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How Trusts Save Your Estate Money
Last Updated on Tuesday, 27 October 2020 06:39 Written by Chris Griswold Sunday, 1 February 2009 08:38
I know things are crazy right now in light of the current economic conditions we’re facing. If you’re like me, you get a little scared about your financial future from time to time. However, there are certain things we all can do to protect our families, ourselves and our assets. The best of these is the creation of a living, revocable trust. Among other good things, this vehicle minimizes or, in certain circumstances, even eliminates estate (i.e., inheritance) taxes. Even if you currently have a living, revocable trust in place, valuations on your assets are rapidly changing which, in turn, impacts the inter-workings of your trust so take a quick look below.
How Trusts Save Your Estate Money
Put simply, we all have an expiration date. If that time comes and you don’t have a trust in place (unless your net worth falls below a certain threshold amount), someone is going to figure up what you’re worth, take out 35%-70% of that amount for state and federal taxes, and give the rest to your family. As a commercial real estate attorney who regularly creates and deals with trusts within the context of a wide range of transactional stereotypes, I’m here to say it really doesn’t take that much time to put a trust together – a few e-mails and phone calls take care of the brunt of the work. In any event, I want you to take away three, basic things about living, revocable trusts:
First, every year the Federal Government and the State of Oklahoma set threshold amounts called “estate tax exemptions.” These change every year and any estate worth more than these set amounts is taxed at the rates set forth above (i.e., the 35%-70%). Depending on whether you create a simple or more complex trust, your estate can be created to distribute your net worth in such a way so that these threshold amounts are not exceeded, thus, saving your estate from sizable taxation.
Second, if you already have a trust in place, keep in mind that stock prices, property valuations, and other commodity indexes are rapidly fluctuating. Right now, these values might be down. In a year or two, they will probably go up. Either way, in times like these where there is sharp volatility in the marketplace, make sure your trust is structured in such a way so that these market changes don’t ultimately wind up costing you a third to two-thirds of what you’re worth.
Third, in addition to just the tax dollars saved, creating a trust will ensure the automatic transfer of your assets to your family in the way which you intended – without the further cost, expense and uncertainty that accompanies the typical probate of a Will. True, setting up a trust is more involved and expensive than merely setting up a Will. However, a Will needs to be probated and administered upon your death at a price tag which will far exceed the price of creating your living, revocable trust. Furthermore, you have to hope that the probate judge will do as you directed in your Will versus knowing that things will go the way you directed as you set forth in your trust. Last of all, how long will that probate last? Who knows. Food for thought.
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