DOING
A LIVING TRUST?
THERE'S THE RIGHT WAY AND THE WRONG WAY
(36 issues to consider)
The following issues are meant to provoke some thought in the many areas
that need it in inheritance planning. To go on a guided tour through these
issues, click here, or click on the
link at the left of each question below.
Establishing a Living Trust puts on paper your plan to transfer your family wealth from the first spouse to die (usually husband)1 to surviving spouse (usually wife), then to children and ultimately grandchildren.
This inheritance plan is part of the Living Trust. The inheritance plan dictates what shall happen to the family wealth following the death of the first spouse/husband. The trust will say what are the rights of the surviving spouse/wife to the deceased's share; and then who gets the family wealth following the death of surviving spouse; usually the children and or grandchildren.
A task as broad as putting your inheritance plan in writing to cover three generations (yourselves, children, and grandchildren) may involve issues and concerns not previously considered, matters that you and your spouse were entirely unaware of. I recommend that before you put your plan in writing you consider the following 36 issues:
Issue 1: Do you want a plan that prohibits your surviving spouse from giving away your share of the family wealth to someone other than the children?
Issue 2: Do you want your plan to guarantee that your share must go to the children after your surviving spouse dies?
Issue 3: Do you want a plan that requires family wealth inherited by a child must go to that child's children when child dies (i.e. to your grandchildren)?
Issue 4: Who shall manage the family wealth if your surviving spouse (usually wife) cannot or becomes incapacitated or incompetent? (be mindful of the current statistic that before death of surviving spouse there is an 80% likelihood that one of the spouses shall become incompetent or incapacitated.)
Issue 5: Who shall manage the family wealth if your spouse is not capable or if after your death becomes incapable of solely managing the family money and property?
Issue 6: Should there be a co-trustee along with the surviving spouse?
Issue 7: Following your death (usually husband) do you wish to limit surviving spouse's access to your share of the family wealth? Shall it be limited to income only or allow consumption of principle? Shall you require surviving spouse to first exhaust his/her share before spending your share?
Issue 8: Do you wish to include a trust provision allowing the surviving spouse to change or alter which child or children shall inherit and how a child shall inherit? Shall this power include the right to disinherit a child?
Issue 9: Do you want the trust to allow only one spouse's signature to sell family real estate and/or other formerly jointly owned assets?
Issue 10: Do you want to protect your surviving spouse (wife) from "grasping children" and/or over bearing third parties?
Issue 11: Do you want to protect your children in the event of remarriage of your surviving spouse?
Issue 12: Do you want to protect a child's inheritance from a "grasping" son or daughter in law?
Issue 13: Do you want to protect your second spouse from your children; or protect your children from your second spouse?
Issue 14: Do you want to make unequal financial gifts to children? If, so, will unequal gifts create rancor or disharmony between your children?
Issue 15: Do you want "make up" gifts to a child or children for a gift or gifts made to a children while you were alive?
Issue 16: Do you want to give an equal gift to a child that owes you money? Do you want a child's debt to be off-set as part of the inheritance to that child?
Issue 17: Do you want to give an inheritance share to an immature or disabled child? How should that child's share be protected for that child?
Issue 18: Should you give an inheritance share to a child who has IRS or substantial creditor problems? Do you wish to protect the inheritance share allocated to a child with IRS or creditor problems from the IRS and/or creditors?
Issue 19: Should you leave an inheritance share to a child who is on SSI? Do you wish to protect the SSI benefits and at the same time give that child an inheritance share?
Issue 20: Do you wish to give an inheritance share to a "normal child" who has refused to obtain gainful employment and has shunned education?
Issue 21: Should you give an inheritance share to a child who has disassociated or separated him/her self from the family? How do you protect your other children from an inheritance claim lawsuit if you "cut out" that child?
Issue 22: Do the terms of your inheritance plan allow any possibility of creating rivalry or rancor, or of creating a power struggle between your children?
Issue 23: Should you leave a significant gift to a grandchild? Should you bypass a child and leave the inheritance share to a grandchild?
Issue 24: How much does your child really need? Should you leave a portion to charity or educational institution?
Issue 25: Will the inheritance diminish the child's pursuit of education or gainful employment? Will your child just become another "trust child".?
Issue 26: What is the best way to divide up family personal property and personal effects between your children?
Issue 27: Should the "family home" be preserved for the "stay at home" child or be one of the assets divided between all the children?
Issue 28: Should you exclude any child from acting as a successor co-trustee after death of the surviving spouse?
Issue 29: Your children may be the successor trustees and have the responsibility of carrying out your inheritance plan; will they carry it out, or substitute their own ideas?
Issue 30: Who should be the trustee of a sub-trust for a child or grandchild? Should it be a private person or an institution like a bank or other corporate trustee?
Issue 31: Should you have your child as trustee for his or her child?
Issue 32: Should you include in your inheritance plan a "generation skipping exemption" trust to benefit a grandchild?
Issue 33: . Do you want your living trust to be designed so that probate will be avoided as to your estate and probate by-passed a second time when a child dies and the inheritance share goes to that child's child?
Issue 34: Who should pay the estate tax on a specific property or other gift to a specific individual? Should the estate tax on that gift be paid by the one who received it, or should the tax be contributed to by all beneficiaries?
Issue 35: Should you have a "family inheritance planning" meeting with your children and your estate planning attorney? Should you disclose with your children the extent of your money and property? Should you talk about how the family real estate and money is to be allocated?
Issue 36: Your estate-planning attorney may bring to your attention other issues or concerns pertinent to your particular situation. However, the typical three generation family living trust will require your attention to some, if not all, of the above issues and/concerns and justifies your spending the time and effort to comprehend the distinctions and consequences of each pertinent issue.
Gerald
M. Condon can be reached by calling (310) 451-4139. E-Mail address is
geraldcondon@hotmail.com.
GERALD M. CONDON
1 in most cases it is the husband who precedes the wife in death, but
for these articles and throughout my book, the terms and case of the spouse
can be used interchangeably. (BACK TO TOP)
