The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: jeromedawg on December 11, 2014, 12:07:35 PM
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Hey all,
I am looking more into opening a trust and will - even though it's just my wife and I, and we're relatively young (or like to think so haha), we figure it's a good idea and if we can get started early on that why not.
So there is one resource through my church who offered to do our will and trust (up to a 2 property limit, which doesn't apply to us anyway) for $750. I also have a friend/attorney, who offered $1200 for the trust, will, durable power of attorney, health care directive, and deed for home transfer. Of course, I'm not going to do any price battling here, but just wanted to see if either of these are good deals. I'm not sure if the resource through church also does the durable power of attorney, health care directive, and deed for home transfer, but I'm also not sure if those things are just cumulative of wills and or trusts.
I'm leaning towards doing the $750 deal just to get started. I know it costs money too every time you want to make amendments, but I wouldn't think that would be *too* often (unless we plan on having one kid every year or something major LOL)
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Personally since you are young, healthy(?), have a uncomplicated financial life (?) and have no dependents I would suggest a simple will. As long as both of you are joint on everything and have each other as beneficiaries on IRAs, 401ks etc. the will won't even kick in although we all need one as back up for the thing we forgot to make joint.
Really the only situation in which you would really need a will is if you both died at once. Go for cheap and simple.
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Personally since you are young, healthy(?), have a uncomplicated financial life (?) and have no dependents I would suggest a simple will. As long as both of you are joint on everything and have each other as beneficiaries on IRAs, 401ks etc. the will won't even kick in although we all need one as back up for the thing we forgot to make joint.
Really the only situation in which you would really need a will is if you both died at once. Go for cheap and simple.
What about having a trust though? That seems like a pretty good idea to have regardless, to avoid any probate issues, etc.
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It's never too soon to do a will package: will, extreme care directives, springing POA for health & finances, possible organ donor directive. We recently revised our own now that DS is 21, & he has his own as well. It's especially important for a single to grant permission in advance in case s/he cannot communicate. Spouses have each other, but accidents can occur to both.
You can keep the revisions down by making your will package broad enough to include "all children", not just named children. Specify multiple executors, beneficiaries, & trustees in serial order, i.e. those who you next want to serve if your #1 choice cannot.
Provide for 3 scenarios: 1) what happens when you die -- usually your spouse inherits, 2) what happens if you both die "together" -- this should be defined within a specific period of time. With #2, you decide what happens to your 50% without your spouse, usually to the benefit of any children. #3 addresses what happens if the entire family including any children dies together.
Do some reading about will options before you hire anyone to do this. I'm not suggesting DIY; being informed will let you drive what you get as opposed to an off the shelf or inadequate set of documents. You want a professional who understands your state laws to do the final package, but you should be very comfortable about what it does.
Plan on reviewing your wills at least every 10 years or when a significant life event occurs.
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Only you and your wife I would go with a DIY will and health care directives from NOLO or some online template provider.
What do you need a trust for? Are you leaving instructions on how to manage your assets for a minor? If not then a will be sufficient to leave instruction on who get's what from your estate.
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@ jplee3: I think you are doing the prudent thing by seeking out legal options now. There is no perfect time to begin putting legal plans in place (durable power of attorney, advanced medical directives, etc) if for no other reason IMO than to protect your hard earned assets from frivolous litigation. If you don't have umbrella insurance yet consider bundling that with your car and home.
Questions for the community:
How does a living or revocable trust help in the case of divorce? I am mainly wondering about the division of assets earned prior to the marriage. Thanks.
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@ jplee3:
Questions for the community:
How does a living or revocable trust help in the case of divorce? I am mainly wondering about the division of assets earned prior to the marriage.
A trust establishes that your property is separate from any divorce. You want to establish the trust & fund it before marriage & keep it completely separate after. You make yourself the trustee and the beneficiary. Money can go out of the trust to fund your community property if you want, but it can never be added to by earnings from either spouse. You can choose to keep your trust secret or add your spouse as a beneficiary, but never as a trustee or owner. At any time, you can quietly remove your spouse as a beneficiary. I believe a trust is preferable to a pre-nup.
For any accounts not in your trust, keep them in your name alone, & never make deposits to them after your marriage. Open new accounts for joint finances in both names.
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Questions for the community:
How does a living or revocable trust help in the case of divorce? I am mainly wondering about the division of assets earned prior to the marriage.
A trust establishes that your property is separate from any divorce. You want to establish the trust & fund it before marriage & keep it completely separate after. You make yourself the trustee and the beneficiary. Money can go out of the trust to fund your community property if you want, but it can never be added to by earnings from either spouse. You can choose to keep your trust secret or add your spouse as a beneficiary, but never as a trustee or owner. At any time, you can quietly remove your spouse as a beneficiary. I believe a trust is preferable to a pre-nup.
For any accounts not in your trust, keep them in your name alone, & never make deposits to them after your marriage. Open new accounts for joint finances in both names.
@ GizmoTX and everyone else: So it sounds like if I establish a trust and fund it before marriage I must keep everything in it separate from my future spouse. That makes sense. However, why is it that I cannot add any of my future earnings or retirement contributions to the trust after marriage? That part confuses me especially when there is a sizable difference in assets brought in prior to marriage. Also, I envision my retirement accounts will not be merged after marriage especially since my investment strategies are much more aggressive.
So can anyone explain further what options are available if I want to open a trust, fund it before marriage and continue to fund if after? Is this even possible with any trusts? Thanks.
And yes for the record I am still going to consult with an estate planning attorney. Thanks! :)
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We did ours about 10yrs ago. A lawyer charged us about $750 for all the docs you listed, although he setup a contingent trust instead of a living trust. Having gone through the experience, I would definitely use a lawyer again instead of the DIY route. He provided details about Colorado law that I would not have gotten through online forms.
Good reminder, I need to setup an appointment with him again, to revisit things. The stache has grown quite a bit in the past 10yrs.
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"Why is it that I cannot add any of my future earnings or retirement contributions to the trust after marriage?"
It co-mingles your assets. In a community property state, adding anything earned during a marriage to an account converts the entire account to community property, including retirement accounts. However, property that was acquired before marriage & kept completely separate is not included in a divorce.
The answer is to wall off assets acquired while single & open new ones after marriage, including retirement accounts. All accounts should continue to compound within themselves. Of course you'll want to check with an estate lawyer who understands your state laws.
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"Why is it that I cannot add any of my future earnings or retirement contributions to the trust after marriage?"
It co-mingles your assets. In a community property state, adding anything earned during a marriage to an account converts the entire account to community property, including retirement accounts. However, property that was acquired before marriage & kept completely separate is not included in a divorce.
The answer is to wall off assets acquired while single & open new ones after marriage, including retirement accounts. All accounts should continue to compound within themselves. Of course you'll want to check with an estate lawyer who understands your state laws.
Oh that is so sad. I live in California so unfortunately it is a community property state. Curses!
I will combine some assets (earnings) for shared purchases like a home and expenses, but is there a way to wall off a portion of assets acquired after marriage outside of a trust? Thanks for sharing.
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"I will combine some assets (earnings) for shared purchases like a home and expenses, but is there a way to wall off a portion of assets acquired after marriage outside of a trust?"
Generally no. I am not a lawyer but I too live in a community property state. I believe an inheritance could be separate property if not co-mingled, but anything earned or purchased after a marriage is community property, regardless of how it is titled.
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Thanks GizmoTX, appreciate your ideas which will help me better prepare for my upcoming meetings with estate planning attorneys. Cheers!
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I will combine some assets (earnings) for shared purchases like a home and expenses, but is there a way to wall off a portion of assets acquired after marriage outside of a trust?
Convert it to cash, get a shovel and mark where you buried. Plus don't tell anyone. That's about the only way community property can be sheltered in the event of a divorce. Ask all the billionaires that had to give up billions after separating from their spouse, if they couldn't figure out a way to save a billion or two then I don't think a typical person can.
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I think you're on the right track, but the prices sound too high!
My husband and I just had wills drawn up last summer (through our credit union), and we paid $250 -- is that right? Now it doesn't sound right; but, anyway, it was quite a bit cheaper than your prices.
We each have a will, a living will for health decisions, and a power of attorney. They're done right so that we don't have to ever do it again, though it would be wise to update them when we reach "life changing events" -- our next one will probably be grandchildren, and that's still years and years away. The lawyer with whom we worked was great; he brought up a number of thought-provoking questions that we hadn't considered on our own. We didn't take his advice on everything, but he did lay out all the possibilities for us.
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Forgot to update this thread so here's some information if anyone cares.
If you set up a revocable trust it cannot include retirement accounts (401k and IRAs). So basically the trust can only hold brokerage and liquid accounts like checking and savings. Not sure if others were aware of this little wrinkle when setting up trusts but it was news to me. If anyone has more information or if you have experience with a family law attorney or sheltering assets please chime in!
Thanks!