'Go To' Greg: A Discussion on Living Trusts

Dear Greg,

I have been told that we don’t need a Living Trust because our estate is under $1 Million.  We have friends with less that we have and they have a trust?  Who do we believe?  

Bill and Margaret B.

Dear Margaret and Bill,

This is one of the most common questions I am asked.  When is a Living Trust the right thing for a family to do?  It is a common question because it is a tough one and there is no single correct answer.  Lets start by identifying the situations where a trust is not needed:

•   If the estate is less than $100K.  You probably don’t need a trust.
•   If you don’t own real estate.  You may not need a trust.

So, If your estate is greater than $100K and you own real estate chances are your family could benefit from a Living Trust in some way.  Most people benefit from Living Trusts by avoiding probate and are not necessarily concerned with estate taxes.  The other big benefit of the Living Trust is the fact that you should also receive a Pour Over Will, Durable Power of Attorney, Health Care Power of Attorney and Medical Directive or Living Will.

The real power of a properly drafted Living Trust is the protection it provides for beneficiaries.  In simple terms you can control the distribution of funds.  Let me explain what I mean.  With a Life Insurance policy or an IRA, upon death the beneficiary files the claim and the benefits are paid.  Most of the time this is all right. 

What if one of your children, who was to receive this inheritance was in the midst of a divorce or lawsuit?  The funds might be at risk.  With the Living Trust a Trustee can normally hold the distribution until a better time for that beneficiary.  Properly drafted Living Trusts give families a lot of options that they would not otherwise have.

All the best-Greg

Dear Greg,

Which assets do I leave out of my Living Trust?

Marilyn W.

Dear Marilyn,

Here is the way we normally fund a trust.  All assets of value should eventually find their way to your trust.  The timing of this is the only thing in question. 

Real Estate should always be transferred to your Living Trust.  IRA’s, Annuities and Life Insurance Policies are not probateable assets.  That is to say that they all have beneficiary designations and will pay directly to claimants.  For the reasons I stated above you may want to pass Life Insurance and annuities through your trust. 

IRA’s are a tricky subject.  In most cases one spouse will name the other spouse as primary beneficiary and the Trust as contingent beneficiary.  Your trust needs to have language that allows it to act as a beneficiary of an IRA or Pension Plan.  It’s always best to check with your attorney and accountant on any personal matters. 

Best Wishes-Greg

Dear Greg,

I have a Will and a Living Trust.  Do I really need both?

Steve Z.

Dear Steve,

My short answer is YES.  Most well drafted Living Trust packages will come with a Trust document and a Pour Over Will.  The pour over will is used like the safety net in a highwire act.  Anything that falls out of the Trust or was never put in will be governed by the Pour Over Will.  This Will simply says that any asset that ends up in Probate Court should be promptly placed in your Living Trust.  It is a good protective measure for your heirs. 

Good Luck-Greg

Do you have a question about anything related to Finances?  You may mail, email or fax your questions.  Here’s how to contact Greg: gkurinec@bentron.com; Fax:  630-505-8376; Phone: 630-505-8375; Mail:  1833 Centre Point Circle Suite 135 Naperville, IL 60563

The fine print:

Greg Kurinec is a well-known Chicago-area financial educator who specializes in helping people prepare for retirement. Greg is a Certified Estate Advisor with the National Association of Financial and Estate Planning. Greg is a graduate of Purdue University where he earned his degree in Financial Planning and Counseling from the school of Consumer and Family Sciences. He works at Bentron Financial Group, Inc., a firm dedicated to helping people that are at or near retirement with offices in Naperville and Oak Park. Feel free to contact Greg with any estate planning or investment advisory needs. Greg is a Registered Representative offering securities and advisory services through Independent Financial Group, LLC, a registered broker-dealer and investment advisor. Member FINRA and SIPC.  Bentron Financial Group, Inc. is not affiliated with Independent Financial Group, LLC. OSJ: 1755 Park St., Suite 200, Naperville, IL 60563