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“Who do you trust?  Tell me who do you trust?”  – Papa Roach

In a previous post, “I No Longer Have Trust Issues! The Xrayvsn Estate Of Mind,” I chronicled my journey of creating an estate plan to make the transition of my assets to my heirs as simple as possible, and more importantly allowing them to be passed without going through probate, when it is my time to go.

Creating a will and purchasing life insurance policies was relatively simple and quickly accomplished in short succession after my daughter was born.

It was the final, and possibly most important, step that hung me up for almost a decade, creating an official trust for my estate.

Creating a living trust can seem daunting for anyone outside of the legal profession.

I will attempt to shed some light on the process I went through to have my trust officially created so that others might follow a similar strategy.

First decision point:  Revocable or Irrevocable.

One of the first decisions one faces when first contemplating creating a trust is what type of trust is actually needed.

A major designation of a living trust is whether it is a revocable trust or an irrevocable one.

In an irrevocable living trust, the grantor essentially signs all the assets into the trust and relinquishes control in the management of said assets.

In a revocable living trust, the grantor again places the desired assets into the living trust but retains management control of said assets while alive.

The moment the grantor of the trust passes away, the revocable trust transforms into an irrevocable one.

I would wager that the majority of us do not feel comfortable signing over full control of an asset to an irrevocable trust and therefore a revocable trust would be the best option.

You may wonder why anyone would then willingly choose to form an irrevocable living trust.

There are essentially three advantages an irrevocable trust has over its revocable counterpart:

• Reduce the amount of assets subject to an estate tax via an irrevocable life insurance trust or charitable remainder unitrust.
• Preserve eligibility for government social programs.
• More powerful asset protection.

 

I decided early on that I my living trust was going to be revocable.

The future is too unknown for me to comfortably make a permanent decision at this stage of my life.

What works for me now may not work for me in the future, hence revocable it was.

Second Decision Point: DIY vs Professional Help.

Although I pride myself doing the majority of my household financial matters without the assistance of professional help, I knew that creating a trust was outside my wheelhouse.

There are a multitude of online solutions out there for creating a trust at various price point levels.

If you decide to explore these options, it is imperative to make sure that the trust being created will be compliant with your state’s regulations.

Improper wording or not addressing a state-specific trust requirement can invalidate the trust which puts your heirs back at square one with the probate court likely having to settle the assets.

As mentioned in the “I No Longer Have Trust Issues! The Xrayvsn Estate Of Mind” post, I was impressed with a presentation by Clint Coons, Esq. during the Leverage And Growth Virtual Summit For Physicians hosted by Passive Income MD last year.

Clint Coons represented Anderson Legal, Business, and Tax Advisors, whom I subsequently contacted with regards to creating a trust.

[Disclaimer: I have now become an affiliate of Anderson Legal, Business, and Tax Advisors after becoming a client and being thoroughly impressed with the help they provided me in creating my trust.]

Although the business was located in a different state from mine, they assured me they were capable of creating a trust specifically tailored to my state regulations that would stand up in a court of law.

After discussing my specific desires for forming a trust, Anderson recommended a certain package that would hit all my needs.

After satisfying all my questions, I went ahead and gave them the green light to start on my living revocable trust.

The trust process.

Getting to know you.   Getting to know all about you. (for the younger generation/non lovers of the classics this is the source of this reference)

I was mailed a packet containing a living trust questionnaire which was relatively easy to fill out.

The purpose of this questionnaire was to list all the assets you wanted to place in the trust, designation for successors, as well as medical power of attorney information.

Another important question dealt with who you designated as trustee successor, the person who takes over the management of the trust once you are not able to.

Depending on when I pass, it could be decades before the trustee successor would be called upon.

Would the trustee successor even be around?

I could assign the role to my daughter but she is currently a minor and incapable of handling the complexities of my trust at this age.

It was a bit serendipitous, but while I was gathering all the required information to complete the questionnaire I received an email from a wealth management specialist from my bank (US Bank).

It really was serendipitous because this was the first time I ever received such an email, or even knew my bank had a wealth management specialist.

This specialist wanted to have a meeting via zoom and offered to analyze the state of my financials (with the obvious intent of me becoming a client).

During this meeting she actually confessed that there was not much she could offer to boost my financial state after reviewing what my assets were and what I was hoping to have as a draw when I retire.

I happened to mention that I was creating a trust during our conversation and then she mentioned that US Bank has a division that helps clients as a corporate trustee.

Given the issues I had with naming a successor trustee, I thought this could be a viable option.

I did speak to representatives of US Bank’s corporate trustee program and felt that for the time being this was the course I was going to take.

Choosing a corporate entity as a successor trustee is not without its negatives, namely the cost of administration.

Very similar to a financial advisor that charges an Accounts Under Management (AUM) fee, there is a similar fee system to have a corporation manage your trust for you.

Most companies offer a sliding scale payment system depending on the value of the assets in the trust at time of death.

The following is an example of the fee structure for my bank to assume a successor trust role:

 

Yes, it pained me to willingly sign up for a program that has AUM type fees but in the end I felt that the cost would be justified in the early years of managing my trust once I am gone.

I did put a stipulation in my trust documents stating that once my daughter turned 35 she could replace the corporate trust if she wanted to.

At that point of her life, I feel that she would be more than capable to handle any issues that arise in managing the trust.

If I passed before she turned 35, she would have a year or more of corporate trust management that hopefully she can gleam some tidbits to successfully take over the trust once she met the age requirement.

If she still felt overwhelmed in managing the trust, she had the flexibility to let the corporate trustee continue indefinitely.

If she is anything like me, I feel that she would be chomping at the bit to get rid of the corporate trustee in order to save on the AUM fees and preserve the value of the assets in the trust as much as possible.

Pro tip: Be selective which assets you place into the trust.

When I first indicated my desire to use US Bank as my corporate trustee, the representatives suggested that I assign all my assets into the trust so that everything would be conveniently located in one place and therefore would be easier to manage.

They proposed that I put all my retirement accounts, bank accounts, and life insurance policies into the trust.

I immediately recognized that this arrangement would be far more beneficial for the corporate trustee (more assets in the trust=more annual AUM fees) than it would be for my heirs.

The reason being is that those specific entities can have direct beneficiary designations that would obviate the need for probate and really do not need to be managed by a supervising corporate entity.

It is a relatively simple process to designate a beneficiary for retirement accounts and is essentially mandated when you buy a life insurance policy.

For checking and savings accounts it is wise to contact the bank and ask the steps needed to designate it as a Transfer On Death account.

Sit back and relax.

Within a few weeks after sending all my responses back to Anderson, I had a standard follow up phone call with a lawyer from the firm.

The phone conversation was incredibly beneficial as I was better able to convey what my overall desires were and then had immediate feedback of whether there were better ways to implement what I wanted or whether it was ill-advised to do so.

I believe the phone conversation was around 60 minutes and in the end we really did iron out all the kinks and came up with a concept for a living trust that I was quite pleased with.

After the phone conversation there was really nothing to do on my part.

Leave it to the hands of a professional.

A few more weeks passed and I was presented with a draft of the official documents which I was told to review for accuracy and see if everything I wanted was present.

I signed off on the draft and shortly thereafter I received a package from Anderson.

I have to admit I was quite impressed when I opened the box.

There was a very high quality 3 ring binder with a metal “Estate Planning Documents” Plaque on the side, making it quite obvious to anyone about its contents.

 

The binder was neatly organized into sections so you could quickly go to a relevant section when needed:

• Introduction
• Overview
• Revocable Living Trust
• Pour-Over Will
• Personal Information
• Funding Instructions
• Power Of Attorney
• Privacy Affidavit
• Trust Assets
• Healthcare
• Memorial Instructions
• Personal Effects
• Other Documents

 

 

The Home Stretch.

Although these documents officially reflect all your desires on how you want your assets to be distributed it is not legally binding until you finish the last few steps.

Fortunately there were instructions that came along with the binder as well as a link to watch a YouTube video especially prepared by Anderson to walk you through the process of making this Living Trust fully enforceable.

The process was relatively painless.

First I had to make the Living Trust entity I created legal by getting the various notarized signatures required from witnesses and myself.

Fortunately my workplace had a notary and I used members of the radiology department as witnesses.

With the Living Trust entity now legally created I still had a bit of work to do.

The Living Trust at that moment was a hollow shell in name only.

My next step was to fill that shell by transferring the titles of my assets from my individual name to the name of the trust.

I thought this would be a daunting process.

In fact several estate companies I had researched before offered free asset transfers up to 5 and then charge any after that (indicating that it must be a complicated process).

Because of all the real estate syndications I have invested in (11 currently) as well as other assets I wanted to transfer ownership, I thought this would be a time consuming or expensive process.

Much to my relief the transferring of title of ownership was an absolute breeze.

The easiest of these transfers was with one syndicator (37th Parallel which I held 7 individual investments in), where all I had to do was login to the investor portal and just change the ownership designation and it was instantaneous.

The other transfers were not that much more complicated.

I contacted each business and explained that I created a Living Trust and now wanted my ownership rights transferred into it.

They created the necessary paperwork which I then signed off via DocuSign.

In my Estate Binder I was even provided with templates to do any other asset transfers that could not be done by the above methods.

The last bit I needed to do was have a banking account under my trust.

Given how simple transferring assets was, I thought this was also going to be a piece of cake.

I ran into a snafu, however, as the bank I was trying to transfer title into the trust (Discover Bank) actually stated that it was not in their policy.

I just so happened to have recently opened an Ally Bank Account (I did so because I noticed it had a higher interest rate for savings as well as a larger limit for mobile check deposits than Discover Bank) and inquired if I could transfer that account into my living trust.

Fortunately the customer service agent was of great help and said it was no problem.

I filled out the necessary paperwork and it became official shortly thereafter.

The only issue now was that Discover Bank had been the designated account for all my transferred assets and now I had to go back and change the banking information to reflect that I wanted Ally Bank to receive proceeds/distributions for each investment.

Mission Accomplished.

About a month after getting my Living Trust officially created I finally had all the assets transferred and my estate plan was officially complete.

Although none of the work I have done directly benefits me, I still derived great satisfaction knowing that my heirs will benefit from the work I have put into it and that it can potentially provide for several generations after me.

 

 

Note:

If you are in search of financial help, please consider enlisting the service of any of the sponsors of this blog who I feel are part of the “good guys and gals of finance.”

Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.

 

 

-Xrayvsn