Tag: will

The Pros and Cons of Living Trusts

This is always a great time of the year to review your financial picture.

One of the items that you might be considering, or have considered before, is whether or not to establish a revocable living trust to hold your assets.

A revocable living trust is a legal document created by you (the grantor) while you are alive and of sound mind and body. Just like a will, a living trust spells out exactly what your desires are with regard to your assets, your dependents, and your heirs. But a won’t go into effect until after you die, whereas a living trust is already in effect.

There is little difference to owning your assets in your name or in your living trust’s name while you are alive and well. The benefits occur after you die or if you become incapable of handling your own affairs.

Here is a list of some of the benefits of having a living trust:

  • Avoids probate – This is probably the biggest reason people have a living trust. The trust bypasses the costly and time-consuming process of probate, which is conducted by the state courts of your residence when you die and has the authority to decide how to divvy up your assets.
  • Provides privacy – a living trust is not made public, so upon your death, your estate will be distributed in private. A will, on the other hand, is public record and so all transactions will be public as well.
  • Maintains control – If you become incapacitated in a way that you can no longer manage your assets, your handpicked successor trustee can manage your affairs without court intervention, and since the trust is revocable, if you dispute your incapacity, you can retain control yourself.

There are disadvantages as well:

  • Cost – A living trust can cost anywhere between $500 – $4,000, depending on the complexity. This is the price that you pay for the money saved by avoiding probate, which can typically run around 4% of your total estate value.
  • Bookkeeping – In order for your living trust to be of use, you have to transfer your assets into it. That means opening new accounts with the trust as owner for your bank and investment accounts. Also, transferring deeds and title for property into the trust name, which can be time consuming.

In summary, if you have a large family and/or a large number of assets, you may want to consider establishing a revocable living trust. It could save you and your family not just a lot of money, but also a ton of undue stress and strain on you and your family during difficult times.

If you have questions or want to know if you should establish a living trust, just shoot me an email.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com

Letter of Final Instruction – Don’t Leave This World Without It

The Letter of Final Instruction (LOFI) should be a major part of everyone’s estate plan.  Unfortunately, I rarely see one when reviewing a client’s financial documents.

The LOFI isn’t a legal document like a will or trust.  It is simply a document that provides your family with guidance upon your death on little things that wouldn’t necessarily go into a legal document.  It is a godsend for family members, especially after a sudden, unexpected death.  I have seen many a family become completely stressed out and overwhelmed when dealing with the aftermath of a death of a loved one.

The LOFI provides important information to heirs, such as location of safe deposit box keys, insurance policy info, financial account numbers, online passwords, etc.  It also allows you to direct where you want your personal belongings to go to, such as your 100-year-old china set or your vintage ‘65 Mustang.  These items typically aren’t specified in a will or trust.  However, you can reference a LOFI in a will or living trust.  That way, if you need to make changes, you can simply change the LOFI without having to amend the will or trust, since that takes the assistance of an attorney.

The LOFI should be distributed to all immediate family members and updated annually, if needed.  I keep mine as a pdf file on my computer as well as a hard copy that I leave on my desk when I travel.

If you want to get started on writing up your LOFI, here is a link to a very comprehensive checklist of what you should include: https://www.cals.uidaho.edu/edcomm/pdf/CIS/CIS0958.pdf.

You can also just do an internet search for letters of final instructions, and you’ll find a bunch of resources to use.

Get going on this, even if you don’t have a will.  Something is better than nothing.  Having a LOFI for your family will give you peace of mind and will help your heirs deal with settling your estate without all the stress and confusion.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com