Why is my attorney pushing for trust over will in an “easy” probate state (TX)?

[exces6]

I’ve read so many posts on trusts that it’s starting to make my head spin, and yet I’m no closer to feeling confident about the choice between a revocable living trust and a will with a testamentary trust that springs on death.

Are there any obvious benefits to choosing an RLT over normal wills early in a doctor’s career? I’m still a resident, but I’ve been really struggling with this decision. Our estate planning attorney (www.mytxwills.com) does both but has been pushing hard for the trust option, even offering to do it for the same price as a will when I told him I had decided on wills only (~$900). He seems genuine and was a recommendation from an attorney friend; he was also the only personal response I got to several email queries. Full disclosure he also is a life insurance agent and has a financial planning business. Normally that would set off red flags for me but he sent me the same quotes I got from Term4Sale and I was up front about not being interested in financial planning.

The prices seem reasonable, and we live in Texas (which is supposedly an easy probate state), so I’m a little confused on the hard push for an RLT, and the idea of retitling weirds me out a little bit. We have one child now and are planning for another sometime next year. We don’t own a house but hope to in a few years.

I imagine most of our wealth will lie in accounts that have beneficiaries and pass outside the probate process (like retirement/brokerage accounts), so I’m having trouble seeing the benefit of an RLT. I don’t want to stick my heirs with some complex thing that requires a lot of work and fees (like a trust tax return or any other complex legal matters that require paying an attorney).

Am I missing something here? Is a trust still an obvious yes, and regardless, is this guy trying to take advantage of me and I just can’t see it yet?

Thanks!

[bean1970]

wills and trusts are state specific (some states will honor interstate documents, but that is not a guarantee). as a resident i would go for the most seamless/cheapest option to appoint a guardian for your minors (which is a will), particularly if probate is cheap and fast.  Once you are settled with a stable job that you probably will never leave then i would readdress estate planning and RLT are a great way to avoid probate.  Until you have a job that you like I would consider yourself "mobile" with the potential to cross state lines. So if I were in your shoes i wouldn't have a trust as a resident.....

[exces6]

bean1970 wrote:

wills and trusts are state specific (some states will honor interstate documents, but that is not a guarantee). as a resident i would go for the most seamless/cheapest option to appoint a guardian for your minors (which is a will), particularly if probate is cheap and fast.  Once you are settled with a stable job that you probably will never leave then i would readdress estate planning and RLT are a great way to avoid probate.  Until you have a job that you like I would consider yourself “mobile” with the potential to cross state lines. So if I were in your shoes i wouldn’t have a trust as a resident…..

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Thanks for the reply! I’ve been in Texas so long (my entire life) that it completely slipped my mind that some people cross state lines for work. I should have included in my post that  I’m planning to stay here long term (though one never truly knows until the time comes).

I’m a senior now with a fellowship lined up here for next year, and I’ve gotten good feedback from the group where I’m doing my residency. Combined with a strong radiology job market (and the ability to do teleradiology if all else fails), I’m pretty confident that I’ll be sticking around Texas for as long as I can. Maybe that lends an edge to the trust now just to avoid paying for both a will and a trust in short order. Part of me just wishes there was one benefit of a trust that just screamed “this is the obvious choice for most people,” but maybe that’s just my analysis paralysis talking.

[NephronDon]

He is giving you a dirt cheap price for a RVT. Typically, he will need to create a pour-over will to complement RVT for assigning your kids guardians if you die. Retitling your assets to RVT is not that difficult. If your spouse is a doctor, retitling your assets separately also prevents your assets from being commingled and at risk in lawsuit.

[Steven Podnos MD CFP]

If you have a child, then having a trust is an excellent idea.  If both you and your spouse were to die prematurely, there should be a mechanism to control and protect the presumably millions of dollars in your estate (mostly life insurance at your age) for the benefit of your child(ren).  The trust should therefore be written now-but doesn't have to be funded.  personally, my wife and I have RLTs written but funded only at the second to die.  This means probate of our assets when we die to allow our "pourover" will to fund the trust, but that's not a big deal in Florida.

[Faithful Steward]

Here are a couple of articles that may help. Wish I know more about Texas estate law. If it were PA estate law we were talking about I could be of more help.

https://www.chron.com/life/health/article/Wills-vs-living-trusts-in-Texas-9781588.php

https://www.houstonchronicle.com/business/lipman/article/In-Texas-living-trusts-are-more-complicated-than-11209103.php

[afan]

The part about him selling life insurance is scary. In your situation, sure you are staying in TX, with a small child, a trust could be a good idea. Funding and retitling are trivial, particularly now when you may not own much. An unfunded trust is useless.

Once you have a real job you can do more complete estate planning. If you were to move that does not destroy your trust. If needed you simply restate it with new terms.

[Steven Podnos MD CFP]

Afan,  I'll disagree that an unfunded trust is useless.  The trust will only matter IF both exces6 and his spouse die prematurely.  At that point having a trust (whether funded by will at death or before death) is important to control and protect funds for their offspring.  But it is fine to have the trust funded at death (testamentary)

[exces6]

Steven Podnos MD CFP wrote:

Afan,  I’ll disagree that an unfunded trust is useless.  The trust will only matter IF both exces6 and his spouse die prematurely.  At that point having a trust (whether funded by will at death or before death) is important to control and protect funds for their offspring.  But it is fine to have the trust funded at death (testamentary)

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Just to be clear, you're talking about a revocable living trust that you just happen to not have funded yet, correct? I was under the impression that a testamentary trust is different from an RLT and can be set up with a normal will, and it "springs" into effect once you die.

I guess it seems like while it may not have a ton of benefits now, I could get an RLT set up for the same price as plain wills and not have to revisit estate planning for a while, or just make minor changes rather than redoing it all once I'm an attending. If I buy property or grow my assets significantly before revisiting my estate plan, great, I can title it in the name of the RLT. If I don't (or if I die in a freak accident tomorrow), no big deal, everything just pours over into the trust and is still protected for my child's benefit.

I only foresee placing one or two bank accounts into an RLT now if we go that route. Everything else is currently in retirement accounts which pass directly to my beneficiaries (and therefore avoid a trust). Life insurance will pass outside the trust directly to my beneficiary (my child).

So it seems like while I could go either way, perhaps I should just do the trust and avoid re-doing everything again in a few years (I assume minor changes to an existing trust will still be cheaper than paying for wills now and then starting over with a RLT in a few years.

[exces6]

afan wrote:

The part about him selling life insurance is scary. In your situation, sure you are staying in TX, with a small child, a trust could be a good idea. Funding and retitling are trivial, particularly now when you may not own much. An unfunded trust is useless.

Once you have a real job you can do more complete estate planning. If you were to move that does not destroy your trust. If needed you simply restate it with new terms.

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Agree 100%. Luckily he doesn't push anything fishy like whole life, and I was upfront about not looking for any type of AUM financial arrangement (not sure if that's how he's paid on that side, but it seems more common than not in people who want to sell you financial services). And he wasn't pushy when I fell off the face of the earth for 4 months studying for boards, which I respect. Definitely doing some comparison shopping online to make sure the quotes add up.

I'm still mixed on the idea of trust vs. will, but a lot of people seem to be on the same bandwagon as you: re-do it when I make attending money. But for the exact same price as I'd spend on wills (and he doesn't seem to be overcharging for those either), getting it all done in one go now certainly seems like a value proposition.

[afan]

An unfunded RLT is useless.

Remember, this is a revocable LIVING trust. If you don't fund it, then you have nothing that you could not get with a will that established one or more trusts at your death.

An unfunded RLT cannot do what a LIVING trust is designed to do:

It cannot bypass probate. Probate may or may not be difficult, depending on circumstances, but it is one more thing to be done when someone dies. A funded RLT takes this off the agenda. An unfunded RLT does nothing.

It cannot avoid ancillary administration if you own real estate in another state. An RLT that has title to the property can do this. An unfunded RLT cannot.

It cannot help someone take over and manage your affairs while you are alive- should you become incapacitated. If your assets are in a funded RLT, then the trustee can manage them. If your assets are not in the trust, then the trustee is powerless. You would have to rely on someone acting under a durable power of attorney. But many companies will not recognize a perfectly legal DPOA. Unfunded RLT cannot help here.

 

An unfunded RLT is essentially a will. But you should also have a will. So the unfunded RLT is useless.

Retitling assets is trivial. WAY, WAY easier than someone probating your estate because you were intimidated by filling out a few forms. There is no court involved in retitling your assets. Funding the RLT while you are young means that new assets you acquire during your career will be titled in the name of the trust as you go along. For example, once you establish the trust as the owner of your brokerage account, all holdings in the account will be owned by the trust. There is nothing else to do.

 

There are no costs associated with having a funded RLT. Trust income is reported on your personal income tax return. There is no need to pay someone to prepare the return. You can manage the money yourself, exactly as you would if you did not have a funded trust. There is no reason to pay anyone to manage them for you just because they are held by a trust.

Creating an RLT but not funding it has the same effect as a will, you get no benefits of the R LIVING T.

 

[Steven Podnos MD CFP]

I think the choice was between not having a trust or having an unfunded RLT (testamentary funding).  In that case much better to have the testamentary trust so you have the planning in place.  I've probated several estates, and it was relatively easy and inexpensive.  Having a funded RLT in some states negates asset protection offered by "as tenants by the entireties" titling.

[afan]

The choice described was will only vs will plus RLT. Creating a will and RLT but not funding the trust makes the trust superfluous. The same terms can be put in the will to create a trust that only comes into existence at your death. If you don't fund the RLT it does nothing.

Tenants by the entireties is a way to get protection for jointly held assets. Depending on the state this may be valuable enough to build an estate plan around it. Or not. In some states it is limited to the jointly owned residence of the married couple. Other states extend the protection to jointly held assets other than the family home. Some states don't offer particularly good protection for TBE property. Some states offer unlimited protection for the family home without TBE.

Depending on circumstances, it may or may not be a good idea to own your assets jointly.

None of that means that an unfunded RLT accomplishes anything. The trust only applies to the assets in the trust. If there are no assets then the trust does nothing.

You can include instructions to set up a testamentary trust in your will. It will do, after death, the same thing as if your will said to pour everything into the unfunded trust, then retain or dispose of assets as defined in the trust. But creating a LIVING trust and then not funding it does nothing that your will would not do.

[Steven Podnos MD CFP]

Having a will that forms a testamentary trust is the same as having an unfunded RLT funded at death.  They accomplish the same thing.  My point is that not having one of these is a mistake for a person with young children.

[Craigy]

Tough to say what the motivations are.

I suspect he is in the business of pushing and cranking out these revocable living trusts.  With a website name like that it sounds like he is catering to the lowest common denominator with a one-size-fits-all approach.

Very often attorneys will steer you toward the forms they use a lot and are comfortable with.  A "simpler" will may be shorter and less complex, but drafting would take more attorney time than dropping your names into a longer form they fill out daily (and know like the back of their hands).

Regardless, he should be able to tell you why, make you feel comfortable with why, and be willing to accept if you still want something else.

I would also be spooked by a dual attorney / insurance salesman.