Lawyers, setting up a trust
 

What's involved?

Will be trying to find an attorney to set one up for the children of my friend that passed this weekend.

What do I need to ask/know?

What are the pitfalls?

Is it pretty straight forward?

is your friend in TX?

goals for the trust?

Yes, TX.

Not sure what the goal is. It's all been very sudden.

Not sure yet if he had a life insurance policy or if he did how much.

Maybe an educational fund, maybe money for day to day expenses, maybe both.

Just starting to get a group together to see what we can reasonably provide.

I went through a person who is a legal asst for a lawyer here in town. Have a friend who has used this person for years now and she is good.

Cost me $1000 and that included a living will and so on.

After working/living with it for 3-4 years I could not get by without it and wish I had done it years ago. IMHO anyone who is 40 or older needs a trust in their life to protect their assets and to provide for their heirs in the future, especially with our current govt who is trying to put in place a 35 or 55% estate tax. With a trust there is ZERO estate tax.

Thanks Joe.

What we are looking to do is really set up a fund.

My friend's business went south with the recession a little over a year ago.

He was making 6 figures but business stopped almost like someone flipping a light switch.

He had to declare personal bankruptcy, they lost the house, had to move in with his mother in law. At first he canceled his medical, then the wife's and I think ultimately the kids as well.

Unless he had a life insurance policy I don't think the kids were left anything.

But I'd like to hear more about a trust as it may pertain to me.

That's not a simple question. There are all kinds of trusts.

Is the purpose to 'hold' funds until they reach a certain age?

A trust allows you to put assets in there and they become separate from you or your family or anyone in the trust. Your house, car or whatever you put in there is no longer yours, it is owned by the trust.

For instance you get stopped by the police and they ask you if its your car, no its not, its owned by the trust. You hand them the trust paperwork that says in every car owned by the trust and everything else you normally give them. It shows that you as trustee are allowed to do anything with the vehicle as long as its legal.

Say you are in an accident. You still do not own the vehicle, the trust does. Someone wants to sue you, they can sue the trust but thats it. While they are doing this you quietly move the other assets to another trust to protect them.

Friend of mine had a heart attack several years ago. He had put everything into a private trust, house, cars, airplane, everything. After things settled his wife called me and we chatted. She got out the trust and read it to me. He was the trustee and she was secondary trustee. As he was no long with us she was now the trustee and in charge of the trust. This saved her loads of $$$ and hassle to boot.

There was no estate, probate, nothing, the trust had not changed, only the trustee. It does a very good job of protecting you and your assets.

One last nice thing is that if your trust is based in an area that does not do smog checking, then every vehicle owned by the trust does not have to do this. You as trustee can move the trust where-ever you wish, so it gives you loads of options in many areas.

That's why I'm asking.

Right now I know enough to know that I just don't know.

There are several different kinds of trusts, so be careful which one you get. A living trust doesn't do much to protect your assets, but it's better than a will in directing them to the right people. And it does avoid probate, which takes 6% or so to administer.
Our current government put in place a 35% tax on estates worth more than $5 million for a single owner or $10 million for a married couple. Only a very few people would have to pay any federal estate tax under the new law.

The one I am involved with is a "private irrevocable trust."

Disagree with the "very few people" comment. Bet that there are 100 people or more on PPOT who are worth this much when you look at the family property. Many people are sitting on farms or property that their parents or grand parents farmed, and when you are talking about a couple of sections or more of land the $$ expand rapidly.

The Govt or IRS has absolutely no right to this money yet the new "death taxes" would require these owners to sell the property just to pay the 35% or 55% taxes. Its things like this that smoke my rear and need to be changed. Even the 6% probate tax is pure BS, so thankfully its been taken care of in my case and that of most of my friends.

That's the general idea right now.

I guess my 1st question really should have been, "what type of trust would be recommended if one were interested in helping the children"

We have not had a discussion with the widow yet as to what was left to provide for them.

My gut says not much.

Anyone setting up a trust had better get advice from a lawyer and NOT rely on some of the posts above.

Using a trust to avoid any legal responsibility - even one as minimal as smog compliance - can wind you in a lot of trouble. Every law student learns about "veil piercing" to go after the people behind a corporate form or a trust, so don't expect you can hide behind it.

There are numerous valid uses for trusts, and there are some loopholes in tax law.

So...

Trusts are a specialty. Based on the question posed, I'm not sure that it's really a trust that is needed, and not some sort of minor custodial account. It depends on the condition your friend left his estate in. If he didn't establish the trust before he died and now you're setting up an account for the chilldren that their trustee will oversee until they're 18, that's even more complicated.

Either way, you need to talk to a specialist. To someone who does wills, trusts and estates, and only does that kind of work, it will be an easy task and probably won't be real expensive. To someone who doesn't specialize in only wills, trusts & estates, it will be impossible, expensive, and he probably won't get it right.

You, as a consumer of legal services, are almost completely unable to tell the difference between a competent trusts and estate lawyer and a shyster (like me). The only way for you to be reasonably sure of what you are getting is by asking the right people the right questions for a referral.

First, get referrals from friends you trust to attorneys who have done good work for them in the past. Call those lawyers and ask them who they would use for their own trust work. Get three names, contact all three, and use the one you like best that checks out the best. Do not use anyone who cannot show that their entire practice is dedicated to wills, trusts & estate work. Those people exist. They don't cost any more. One of them will be the best fit for you.

There's some pretty good legal talent running around here on the board. But the only one who comes to mind off the top of my head as having demonstrated good knowledge of trusts & estates is Dueller. He has demonstrated a mastery of several complex areas of law that is truly impressive. If I ever needed a lawyer, I would trust him with my life. JYL is another person who would be a good resource for asking trust questions. I'm sure one of the usual suspects will chime in if you keep the topic toward the top of the board.

My deepest sympathies to you and your friend's family on the loss. It sounds like a tragic situation.

Can you set up a trust after the guy has died?

If you are looking to set up a trust specifically for his children with the assets left to them you have a couple of options, but, be very careful how and who you set this up with.
I am not a lawyer but have experience with this.
You can quickly run up lots of costs and regulations that are not really necessary as their Mother controls their assets until they turn 18 right now.
If you want to contact me off list I would be happy to tell you what I know, but I am sure one of the Lawyers on the board will offer to help

Steve

It's 35%.
You inherit land that anyone else would have to pay $10 million dollars to own and you pay $1.75 million for it. No wonder the wealth in this country is being concentrated at the top.
Except for 2010, which was a very good year to die, the new "death taxes" are lower than they've been in decades. Not only the rate is lower, but the exclusion is bigger. Call the current crop of dems socialists if you want, but they've been very good to rich people, especially dead ones. The past couple of decades have been very good times to be rich and it's getting better for us all the time.

Maybe I can get this back on topic.

So obviously more complicated than I thought.

What would you do and how would you do it if you wanted to put together a group of donors whose goal was to provide some level of financial support for the kids?

Its a bit difficult to get his signature on things...

Its 35% today. Who knows what it will be in the future. 55% was proposed I believe.

I have a revocable trust that is set up to provide an income to the two disabled persons I help support. I fund it and the trustee (who is me) manages the assets, and gives out the money monthly. When I croak the new trustee does the same until the money is gone or the people die. When the last of them passes on, any remainder goes to a charity that I have specified.
Something like that might work. You might want a board of trustees instead of a single trustee since the trust would be funded by a number of people. You will need to see a lawyer to set it up. He probably has better advice.

Only if you backdate it ;)

a not for profit corp. might be something to explore - they can be 501c3 org.s under the IRS code; you first set it up under state law, establish Articles of Incorp. & Bylaws, have 3 or more Directors (in Or.), then apply to IRS for an exemption as a 501c3

this is why we are telling you to see a lawyer in YOUR state; see a trust lawyer, if you need to do a trust

call and ask first as to what sorts of things they do - beware the guy who says everything...

you DO DO! need to see a good one

a large law firm will be set up to handle nearly anything but they charge a lot

see if there is an Elder Law specialist - call the Bar and ask for some names if you cannot find a reliable way to solve the conundrum re evaluation that MRM noted

Well, they earned it and if the family doesn't have the $$$ to pay the death tax, then they are forced to sell it.. You don't see that as wrong?? There was just such an area locally, a lake with picnic areas dock & slide, good clean family fun, was in the family for a very long time(they settled the area in 1859). Cost a whopping .50 to get in, very low dollar, family fun. The owner could have cashed it out at any time and set his family for life, but he was just a simple country gent, paid his bills, kids worked there, learned the value of hard work and honest wages, no drugs or alcohol permitted, or even cussing. He died, and even though he paid all his bills, used the money they earned to maintain the property, there wasn't any large amounts of cash, and thanks to the Death Tax, they had to sell just to pay the taxes. Now, private homes are there, no more low dollar, family friendly lake access, all because of the death tax.. And no, the closest option is over 60 miles away. Keep saying it only affects certain people, but it does affect more, lots more and since when does that make it right.. Sad thing is, it was low income people who have been hurt the most by this....

Stomachmonkey, invest the time & money on a LOCAL lawyer, as others have pointed out, law can very state to state & case to case..

Sorry for your loss good luck with this...