M E R I D I A N     M A G A Z I N E

The Revocable Living Trust: Where there’s a Will, there’s a (Better) Way
By Jeff Sessions

I recently re-read the amazing account of the last week of Barbara Amussen’s (mother-in-law of President Ezra Taft Benson) life. She was visited in late September, 1942, by her deceased husband and was told that she would die and join him on the following Thursday. This is the account found in the biography of Ezra Taft Benson:

When Barbara described the incident (of her husband’s visit) to her daughter Mabel, she responded, “Oh, Mother, you’re in good health. You’ve been worrying about something. Are you ill?” Barbara insisted she was fine, but that she would leave mortality on the following Thursday.

On Monday Barbara withdrew her savings, paid her bills, and had the lights and telephone disconnected. She paid the boy who took care of her lawn, had the plumber turn off the water, selected her own casket and paid for it, and went to stay at Mabel’s home. On Wednesday evening, after visiting with Mabel … she said, “Now Mabel, I feel drowsy. Don’t disturb me if I sleep until the eventide.” Those were her last words. She passed away early Thursday morning. (Ezra Taft Benson, A Biography by Sheri L. Dew, 1987, p.166)

While few of us will have an experience like this to help us finalize the details of our lives, there are some important things we all can and should do to prepare whether we have a week, a month or years before we die. One of those things could include creating a Revocable Living Trust (RLT).

Do I Need a RLT?

A trust is not for everyone. The need for a trust should be determined by a competent, experienced estate planning attorney/advisor. However, if you have some of the following concerns, you may want to consider a revocable living trust.

• Do you want to virtually eliminate (or significantly reduce) probate, administrative costs and attorney fees when you die or if you become incapacitated?
• Do you want to assure that your assets will be distributed to your heirs with full control being given to those in whom you have full confidence?
• Do you want to protect your sizable estate from unnecessary taxes and expenses?
• Do you want to provide financial control, protection and assistance for the care of a handicapped child or grandchild?
• If your child were to die before you, would you want the assets designated for her (or him) to go to your grandchildren and not your son (or daughter)-in-law?

If you answered yes to any of these questions, then you may want to read on about the value of a RLT.

The Revocable Living Trust (RLT)

A RLT is an arrangement whereby money or personal property (real estate, home, life insurance, bank accounts, stocks, mutual funds, bonds — anything with a title) is owned and managed by one person (or persons/ organization) for the benefit of another. You keep control over your assets for as long as you live and are competent to manage them. If you are unable to do so then you give control to someone else you trust to handle your affairs. It is fairly uncomplicated and, although more expensive than a Last Will and Testament, is worth the investment many times over.

The Miller Family Trust

As you review the next few paragraphs you should get a better feel for what a trust is. My purpose is to simply provide an overview of what a trust could do for a fairly “traditional” family. However, a general rule is: the more complex a family becomes (having a blended family or remarriage or handicapped/dependent child), the greater the need for a trust.

There can be many applications for trusts but, for now, let’s look at a family called the “The Bill and Jane Miller” family who established a RLT in January 2007. They have three children: Brandon (age 28, married with two kids of his own), Jessica, age 24 (single), and Bill Jr., (BJ) age 14.

The RLT they created is named The Miller Family Trust. As an example, their investment account, which was once titled “Bill and Jane Miller,” now has changed to “The Miller Family Trust.”

As joint-owners (called Trustees), Bill and Jane can buy, sell, transfer, gift or do anything they want with the assets in their trust. There are no income tax consequences in making transfers because they still have control over each of their assets. If they wanted to buy other property or open another account they would simply title it “The Miller Family Trust, Bill Miller and/or Jane Miller, trustees.” Because the trust is revocable, they retain the right to modify, cancel, change or amend anything they own in the trust.

Managing the Trust

The Millers made sure that if they could not take care of their personal affairs, two of their children (Brandon and Jessica) would work together to represent them. Brandon and Jessica are known as successor trustees. If Bill passed away (actually, men die first more than 70% of the time), then Jane would continue on as trustee. If she were to become incapacitated (Alzheimer’s, stroke, coma, or something else), then either Brandon or Jessica, as successor trustees, could continue to take care of their mom and her assets.

Remember, the trust will continue to be owned and controlled by Bill and/or Jane. Only upon their both passing will the beneficiaries (the children) get the distribution according to the schedule they set up.

Care of Minors

Bill and Jane have also asked Brandon and his wife to serve as guardians should they pass away before BJ reaches age 18. If Mom and Dad were to die prematurely, then Brandon would put BJ’s 1/3 share of the total estate into a separate account to pay for his education, marriage or other basic needs. Brandon will then confer with Jessica to take out only what is needed. (If BJ needs braces, then Brandon or Jessica would write out a check, from BJ’s share, to the orthodontist — not to the guardian, who is Brandon).

Special Bequests in the Distribution of Assets

Bill and Jane have decided that should they die before BJ receives his college education, they wish to allocate extra money ($40,000) for his education. They helped with Brandon and Jessica’s education funding and want to make sure BJ doesn’t have to pay for it out of his 1/3 share.

This money is set aside first, before dividing up the total estate. Mom and Dad decided that if BJ does not to go to college or some other trade school by the time he reaches age 25, then that $40,000 will be divided up three ways as originally scheduled. (This could be used as an encouragement to get BJ to complete his education in a timely manner).

When do Heirs get Control of the Money?

When Bill and Jane created their trust, they made some decisions, in advance, as to when the children would get their money (savings, insurance proceeds, retirement funds) or other assets (home). Upon their passing, they elected to have their children receive one-half of their share at age 25 and the balance at age 35.

Their son BJ has multiple sclerosis (MS). At this point, everything seems to be under control, but if his health deteriorates and he is unable to handle his distribution, then the successor-trustees would retain his share for his benefit.

If at age 25, BJ’s health prospects are positive, then he would get his distribution on schedule.

What Happens if Mom (or Dad) Can’t Manage Their Trust?

When Bill and Jane went to meet with the attorney, they invited both Brandon and Jessica to attend the trust signing. They had each document explained to them as well as what their duties might be should a stroke, Alzheimer’s or other accident leave either parent unable to manage their affairs. A frank conversation was held regarding what assets they would use to pay bills. They also talked about what they wanted to have happen should an extreme health problem arise. Finally, Bill and Jane introduced them to their accountant and other trusted advisors should any questions regarding complex financial matters come up.

Let’s assume that there was an accident where Bill had died and Jane was in a coma, unable to manage the finances. Brandon and Jessica would then notify the bank and other advisors/institutions that they would be managing the assets (writing checks, asking for transfers into the bank accounts, and performing other tasks) as successor trustees. They would then be able to pay bills, file income taxes or make decisions on behalf of their mother for any personal, health or financial need.

Remember, Brandon and Jessica are going to simply take care of Mom and do whatever is necessary to meet her personal needs. They work together to keep everyone (each other and BJ) informed of the status of the trust from time to time.

Keeping the Money in the Bloodline

But what happens if one of the children dies before their parents? For example: Should Brandon die before both Mom and Dad, then Brandon’s two kids would divide up his one-third share (with the same distribution schedule as their Brandon would have received). Although Bill and Jane love their daughter-in-law, Brandon should be providing for her financial security. Bill and Jane simply want to keep the money intended for their children to go to their grandchildren — not a son- or daughter-in-law.

Taking Care of the Grandchildren and Charities

Bill and Jane have decided to leave 5% of their estate to their church and an additional $5,000 (or 1% of the estate, whichever is greater) to each of the grandchildren. They have specified that this money is to be used for college, missions or other worthwhile purposes to be decided by Brandon and Jessica.

You are Always in Control

Just as a reminder: The trustees (Bill and Jane) are always in control. They can, at any time, decide to make a change on how, when and to whom the allocations are to be distributed. They can also appoint new successor trustees, or make other changes. If children are in need of restrictions on how they get their share of the trust, then the timing and amount can be modified very easily by amending the trust.
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Other Recommended Documents:

The Millers had other documents that specifically came as part of their trust:

1. Durable Power of Attorney for assets — a document that nominates any of the children to manage or control any assets inadvertently left outside of the trust.
2. Durable Power of Attorney for Health Care — a document designating someone to make health care declarations for an incapacitated parent.
3. Living Will — instructions on how to handle the decision to end life support in the event there is a terminal condition or illness.
4. Last Will and Testament (or a Pour-Over Will).— a document that directs that, should Bill and Jane die after forgetting to transfer any asset into their trust, it will “pour-over” the trust estate. The durable power of attorney for assets gives authority to the person they nominate to get that asset into the trust (however, they may have to go through an informal probate first).

Take the Time to Investigate Your Options

Finally, establishing a RLT may not be for everyone. In some cases, you may find that you can use a durable power of attorney for assets, durable power of attorney for healthcare or living will to accomplish your goal if you have a modest estate. However, if you have assets that:

1. need to be managed for someone else
2. you want distributed at a future date
3. may be subject to federal estate taxes
4. would have to go through probate generating unnecessary fees and expenses, then you may find a Revocable Living Trust an ideal solution.

Most of us probably won’t know when we will die, but having a RLT comes about as close as it gets to being as perfectly prepared as was Barbara Amussen.

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