article the living trust dilemma

8/10/2019 Article the Living Trust Dilemma

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5The fact is that the use of trusts is the trick which has helped to make families wealthyand kept them wealthy generation after generation.5 The Denver 0ost, December 67,

6879 24D '&2 see %uilding a 1amily Dynasty; below

T)e Li*i+ Tr-st Dile../by Maureen K. Terry

0assing on wealth has been tricky business since the time of ancient 2gypt and reece.

$naware of the inner workings of wealth, most people have little knowledge of this vastand fascinating sub<ect. %efore determining the fate of heirs, here are some checkpoints

to ensure property, cash =and even gold+> are handled properly and get into the hands of

the right people.

2asy to get and create, the Living Trust offers a way to pass on wealth without the

complications of going through 0robate *ourt. "ith a couple of witnesses, the simplestforms, available at stationery stores or from the nternet, solve the two most common problems:

6. To whom the assets pass.

?. dentification of these assets.

%ecause most people have not been educated in the art of passing on wealth, though, they

believe their Living Trust <ust goes into effect upon their passing. This is not, necessarily,true. The Trustors, those setting up the Trust, need to take the time to identify and transfer

into the Trust what they plan to pass to their heirs. This avoids confusion, and even

agony. Loved one can be well provided for, only 1 the assets have been handled

properly.

Nelectf a person has a Living Trust, signed it, then put it on the shelf without doing anything

else, he or she may have wasted time and money. 2ven a Living Trust needs attention and

proper administration.

f a person has a Living Trust have the following been handled(

6. f a %eneficiary is dissatisfied and wants to sue the Trustee for more of the assets,

does the Living Trust have in it a 5)o *ontest *lause(5 This means that shouldany %eneficiary sue, causing a dissipation of the Trust resources, the %eneficiary

automatically loses his or her inheritance.?. "hat happens if the original Trustors, those who set up the Trust, and then

became the initial Trustees, are unable to perform their duties( -ow should the

Trust funds be handled, and exactly when does the named !uccessor Trustee take

over(

9. s there a provision for amendments( That is, can the Trustor=s> change the terms

of the Trust during the lifetime(


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a. f there are any amendments to the original Living Trust, what is the

procedure(

b. !hould the %eneficiaries be told about the changes(

c. !hould the !uccessor Trustee be told about the changes(

@. -ave funds been earmarked as Trust funds(a. -as a separate checking account been put in the TrustAs name( f not, the

Trust was never funded and there is no Trust.

b. -as identified property, such as the residential home, been transferred at

the county to be in the Trust( f not, then the property is not part of the

Living Trust.

B. s there enough documentation in the Living Trust so the !uccessor Trustee can

open a checking account in the name of the Trust(

Acc-+ti+

4s the initial Trustee=s> of the Living Trust all the assets remain under the control of theTrustor=s>, who can spend the funds without discriminationC these initial Trustees, though,still need to keep records for the Living Trust. "hoever is !uccessor Trustee becomes

responsible to produce those records after the Trustor=s> pass, as well as keep accounting

records for how Trust funds are handled. The %eneficiaries have a right to know whathappened to the funds the Trustors said belong to them. = Evangelho v. Presoto =688> E7

*al.4pp. @th E6B , 78 *al.ptr.?d 6@E.>

The need to account to the %eneficiaries for Trust funds, keeps the !uccessor Trusteehonest. 4ny Trustee who will not share the accounting and have full communication with

the %eneficiaries is suspect and only adds to the family stress.

i*i+ A2/ t)e s

1urther, as the initial Trustee of the Living Trust, assets cannot arbitrarily be given away

if they have been earmarked as part of the Trust. This means the Trustors cannot give theresidential property to the nurse who is taking care of them while everyone else awaits

the funeral. The %eneficiaries can sue, and get the property back. )ot only that, but

caregivers cannot, by law, accept any gifts.

Assets

Ie+tiic/ti+

Disputes that can happen over assets are sometimes more awful than the worst nightmare.

*ataloging what belongs in Trust is necessary to ensure it stays in the Trust and is

properly handled. f an item is not in the Trust, that is, not listed and described as belonging to the Trust, then it is sub<ect to a freeforall, since the %eneficiaries can then

argue over it. The !uccessor Trustee named in the Trust documents is not responsible for

the item. 1or example, if a washer and dryer are not named as part of the original Trustassets, known as 5corpus,5 and two %eneficiaries want them, they need to decide without

involving the Trustee.



Assets Hel i+ Tr-st

f expensive <ewelry is listed and each item photographed or described as belonging tothe Trust, then the Trustee has the choice of cashing it in for current value and paying the

cash to the %eneficiaries or giving the <ewelry to the %eneficiary who is to have it, as

stated in the Trust documents.

The same applies to the stock account, or any other investment. &nce in the Trust, the

!uccessor Trustee decides how it is to be handled. "hen it is not in the Trust, lengthy

procedures to get it into the Trust can occur.

Resie+ti/l Pr6ert

The biggest asset is usually residential property. f the Trustors, acting as Trustees, havenot transferred the asset at the *ounty ecorderAs &ffice into the name of the Living

Trust, then it does not belong to the Trust and the !uccessor Trustee needs to transfer it

before it can be sold. This transfer process could be lengthy and expensive or relatively

simple.

Distri7-ti+4 Living Trust is designed to be parceled out to the %eneficiaries after the death of theTrustors. f they are in a nursing home and unable to function, the expenses for their care

come out of the Living Trust assets and the *ontingent %eneficiaries, those who receive

assets upon the death of the Trustor=s>, may not get anything.

"hen all goes well, assets have been properly transferred and identified in the Living

Trust, and the Trustors die fairly close together without exhausting Trust assets. The

!uccessor Trustee then delivers the assets by either cashing them out, such as selling the property, and disbursing the proceeds, or gives the assets to those named in the Trust

documents.

$nfortunately, most people are not educated about the ways of a Trust, and more oftenthan not, nothing has been identified and transferred, leaving a delay in distribution, and a

burden on the !uccessor Trustee, who is usually a close family member.

C..-+ic/ti+

U+i+is)e 7-si+ess

"hen parents die, family matters are often emotionally charged with unresolved needs,

and competition for assets or dominance may occur. The state of affairs of a Living Trust

can cause grief. This ranges from, 5'om said should get the . . .5 to 5#ou canAt do that, will not get my . . .5 The lack of trust in the Trust can become the ma<or issue.

C+s-lt/+ts%efore the assets become the responsibility of the !uccessor Trustee, who is usually

completely in the dark about the financial status of the Trust, the Trustors should consult

with professionals about how to handle the administrative needs of the Trust, and meet

with their !uccessor to go over important details.

"hen a family is dysfunctional, it is best to get the communication matters handled first.

1or the badgered, uninitiated and overwhelmed Trustee, consult with professionals before



trying to muddle through Trust documents and answer the family membersA Fuestions.

!uch time and money will be well spent, especially if complex financial matters need

sorting out. t is important the Trustee gets the accounting, legal and tax matters straight before communicating with family members about the Trust details.

8e/lt) B-ili+The Living Trust and all revocable Trusts are not built to last. Longrange wealth

building methods and procedures are not applied when planning solely to pass on assets

to untrained heirs. $nless oneAs children are oriented professionally about financialmatters, whatever wealth the Trustors accumulated during their lifetime is likely to be lost

by the next generation. This is well planned by those who want to ensure the family does

not gather any power as shown by the following:

50eople are kidding themselves. They donAt have the buying power they used to

have. 4 lot of the people living today donAt know what the buying power of

success was before we decided to use excessive income taxes to punish successand estate and gift taxes to force every generation to start from scratch.5

=2mphasis added.>

T. *oleman 4ndrews, ! *ommissioner, 68B9 to 68BB =5"hy The ncome Tax is%ad, nterview with T. *oleman 4ndrews, 1ormer *ommissioner of nternal

evenue,5 $.!. )ews and "orld eport, 'ay ?B, 68BE>

Irre*c/7le Tr-sts

"here wealth can be amassed, if properly managed, is when it is given to professional

third parties to act as Trustees for the untrained %eneficiaries, who lack financialexperience and have no longrange goals.

&nly those who are sufficiently educated, though, in Trust protocols should have a Trust

of this nature. &ne can get the information through a serious search on the nternet usingkeywords about nheritance, rrevocable Trusts, and *ommonLaw Trusts. The last

reFuires the more sophisticated knowledge, and is often the sub<ect of scam Truststhose

set up improperly by the uninitiated.

%y knowing the ob<ective of all Trusts is to pass wealth to %eneficiaries, it is easy to

<udge the correctly set up Trusts from those which are not. f anyone states a person can

be the Trustee of his or own rrevocable Trust, that person is either lying or dangerouslyignorant. 1urther, all *ommonLaw Trusts are rrevocable and reFuire a nonrelated

Trustee.

S-../r

0assing on wealth is an art form. Doing it casually causes dissipation of wealth. )eedingto keep personal control does not allow a buildup of wealth in the family, and eachgeneration must then start over to generate wealth.

The Trustor=s> can assign the assets in the Living Trust to an rrevocable Trust at the time

of his or her death, naming the Trustees in the Living Trust documents. t depends onwhat is needed and how plans for heirs are developed.



'aureen G. Terry is a member of a group of Trustees and Trust 4dministrators who have

combined their experiences in two revealing books, The Art of Passing the Buck, Volumes I an II .

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9B-il / /.il +/st:9That is what my lovely fiancHe responded when asked what her greatest dream was.

iven our common values, our commitment to each other and the relationship, and our

chemistry, didnAt see any problem with the family part of that.

But I in!t have a clue about the ynasty as"ect.

4ctually, did have a thought on the sub<ect. had a college buddy that came from an

5old money5 family. "e had both played on the $niversity golf team and still gottogether for the occasional round. called him and arranged a game for the following

week.n the cart between the third and fourth holes told him about what my fiancHe had said,and that felt that could use some help.

-e <oked that obviously didnAt need help with the family thing, and asked how my business was going(

5t couldnAt be better,5 answered.

5"ell,5 he said, 5with the income and a wife the only thing you seem to be missing is aTrust.5

5 thought Trusts were illegal,5 responded.

-e chuckled. 5ThatAs what most of the people who have them want you to think. Thetruth is that not only are they legal, but they are one of the most powerful tools for

building and maintaining wealth.5

%y the time we got back to the *lubhouse he had explained how a trust would not only

let me build my familyAs fortune, but also protect it from law suits, and preserve it by

avoiding probate and inheritance taxes when died. -e went on to tell me how coulduse a trust to benefit my favorite causes, as well as my family. 4nd then he mentioned

another advantage of a trust that had not thought aboutC it insured my family privacy in

our financial affairs.

)ot everyone has the good fortune that have had to have a friend who knows so much

about Trusts. n fact, most people never learn the truth about Trusts. The good news is

that you can, and you donAt need a friend with insider knowledge to teach you. This, upuntil now <ealously guarded, information is available in a new book, The Art of Passing

the Buck .

$sing the pen name, *harles 4rthur, a small group of people with over a half century ofexperience with Trusts has written The Art of Passing the Buck to tell the rest of us the

what and the why of Trusts. This book will teach you what the truly wealthy families

have known for decades =if not centuries>. #ou will learn how they have become





dynasties by legally reducing taxes, preventing law suits, avoiding inheritance taxes and

creating financial legacies for family members and charitable pro<ects.

article the living trust dilemma

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