Not Quite Six Feet Under
Creating a living trust
Kiplinger's John Ventura returns to bring us up to speed on living trusts. Host Tess Vigeland asks how a trust is different than a will and what you need to do to establish one.
John Ventura, author of "Kiplinger's Estate Planning." (University of Houston)
TEXT OF INTERVIEW
Tess Vigeland: And now we're joined again by John Ventura. He's the author of "Kiplinger's Estate Planning." Last week he helped us with writing a will.
Welcome back, John.
John Ventura: Thank you Tess.
Vigeland: Let's go through a living trust and earlier in the series, we talked about the differences between a will and a living trust, but let's review again: What is it? What does it do? How does it work?
Ventura: Well, what it is is a legal entity that's created, a trust, where assets of yours are put into the trust and that actually means that the assets become property of that trust, like for instance, if you have a car or real estate and its transferred in the trust, the actual title of the car and the real estate is changed so that the trust becomes the owner of that property. You designate somebody that's going to be the executor or the trustee of that trust who's going to follow your directions on how those assets are to be managed and what's to happen to them in your lifetime and also what's to happen to them if something happens to you -- when you die.
Vigeland: Who should use these?
Ventura: Anybody with, I think -- and nowadays, this is a lot of people -- anybody who has a home, a car, especially people that are in business for themselves should have this. If they have a certain amount of wealth in stocks, bonds, a considerable amount of property should look at a living trust.
Vigeland: What's the difference between a living trust and a testamentary trust?
Ventura: The living trust is created while you're alive and you're directing things. You can change the trust, you can shut down the trust, you can do a lot of different things while you're alive and that trust is created while you're alive. A testamentary trust is something that is created in your will and an example of that is like in Marilyn Monroe's will, she had a testamentary trust that came into existance that allowed her estate to take care of her mother and a friend during their lifetime and then the corpus of her estate to be given to some other person for a different purpose after they were taken care of.
Vigeland: How do you decide which kind is best for you and your spouse and your family?
Ventura: This is an important issue. You know, there's an instinct to, again, try to do these things yourself or try to find the cheapest way to create a trust. Really, a trust should be created based upon a lot of different factors, not only your assets and what you wan to have done with them but consideration about the people that you want to benefit from that trust. For instance, I'll give you an example of how unique a trust can be. Say that you have a relative, a child, that has medical problems and they're totally disabled and one of the things you want to achieve is that after you die, you want that child to be eligable for benefits from the government to help them in their disability. You don't want your wealth given to them in such a way that would not permit them to receive those benefits. Well, in a trust, you can create a certain kind of trust with the help of an estate attorney that actually allows that person to receive benefits from the government and still get the benefit from your assets as well. You have to have an expert to be able to do that.
Vigeland: I think a lot of people, their first exposure to the idea of a living trust comes from flyers that you see where companies are inviting you to a hotel to sit down and hear about this wonderful way of estate planning. Any cautionary notes there?
Ventura: Yes, absolutely. You know, these companies that invite people in and sell them on the idea of a living trust, you know, a lot of times they make exaggerated claims like this is going to save you taxes or do other things that actually living trusts do not do, and what they do is they try to sell you a pre-packaged living trust that's one type for everybody and unfortunately, I think it's a big disservice for the people that buy into that. Every person's life is different, every person's estate, property, the heirs that they want to benefit are all different, so the living trust has to be customized to the individual to make sure that their goals are achieved and you can't do that< I think, from a one-size fits all trust document.
Vigeland: John Ventura is the author of "Kiplinger's Estate Planning" and John, we'll talk to you again next week.
Ventura: Thanks Tess.
Vigeland: Next week: power of attorney.
Keep sending us your estate planning questions. John will help answer them at the end of our series.
Comments
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From Hemet,, CA, 07/21/2008
If a sister's trust document(I'm the executor0 divides her assets equally 3 ways for 3 sons currently in jail, may the executor set up a new trust to hold and pay out assets in monthly allotments when any son is released?
From New York, NY, 06/24/2008
I moved to New York City and was told that my living trust from California was no longer valid. Are there states that do not allow living trusts? This would be good to point out....My father had a living trust (from California) and moved to New Hampshire....I am trustee. Do I have to dissolve his trust or can I keep it going as a separate entity...
From Riverside, CA, 06/23/2008
Do you recommend leaving autos out of a Living Trust? I have a living trust but it was recommended to leave autos out because if I was in an accident the trust could be sued because the auto was part of the trust. Otherwise, it was not likely possible to sue the trust.
From Cinti., OH, 06/22/2008
A question reguarding living trust, or, granters trust. We have our home inside one of these granters trust in the state of Ohio. If i need to go into a nurseing home and need to be put on medicaid, will my wife be able to keep our family home that we have inside of a living trust or granters trust as the tax people call it. we have owned our home over 25 years and it is ours.
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