OT: Living Trust or Will?

[Dick Moore]

My father in law set up living trusts for himself and for my mother in law. Their commercial and income property was equally divided between the two trusts, except for their residence, which was deeded directly to six heirs jointly (and capital gains taxes paid) as a way to give the daughters and the sons in law some immediate goodies. The two trust arrangement kept each trust under the taxable minmum, so that on death, each trust's property aquired a new tax basis for the heirs, and so that no captial gains taxes or death taxes were owed. Probate was avoided, and all bank accounts had been held with joint tenancy with rights of survivorship for a number of years with all the heirs, so there were no problems with closing the accounts and disbursing the assets. In general, these situations have to have existed for a number of years so that the IRS can see that they are not hasty dodges to avoid taxes. All of this worked very smoothly, especially since one of the heirs was always a trustee on each trust.

The idea was to involve the county, state, and feds to the least possible degree, and that absolutely depends on a general understanding among the heirs that these arrangements are desirable and will be honored. If any one heirs disagrees and wants to contest the settlements, then the advantages of living trusts or family trusts go out the window. In that case, a clear and recent will for each parent, well attested, is the best protection.

There is no best way to deal with these issues, and probate is unneceassarily feared by many who think that the costs to lawyers will drain the assets. Probate is not a generally bad thing, and with minimal competent legal help is easily navigated at relatively low cost. The keys are current, well-attested wills for each parent, and heirs who all are on board with the program. If those situations don't obtain, then nothing you can do now will prevent a disaster.