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I i 111 ;14'EA lTI :~l I I lI ,lk
Trust a trust
Have you set up a trust? If you haven't, get cracking .
No middle-c!ass family should be without one .
By Carolyn T. Geer
Jo ttN HaWtcY, 77, necer considered himself the trust fimd
type . A retired college itistonteacher <strong>and</strong> son of a high
school pr ;ncipal, lie grew up during the Depression . Trusts
Ncere for rich people .
They u,ed to be for rich people .'Vo v the° are very' much
for middle-class people like Ha%slec . After his wife died
three years ago, Hawley set up two trusts at Charles
Schwab & Co . to _nrovide tas <strong>and</strong> odier benefits :`or himself
<strong>and</strong> his heirs .
Think ofthat . A discount, mass-market stockbroker has
gotten into the trust <strong>business</strong> <strong>and</strong> has people like retired
teachers :is customers . From a st<strong>and</strong>ing start tive years ago,
Schwab now has S23 billion in personal trust assets .
Just since 1990 at least 60 indcpendent trust companies
have been founded to capture the new %eavc of trust
actiaitv-<strong>and</strong> t12at doesn't include all the brokeis <strong>and</strong> fund
operators, like I'aineWebber <strong>and</strong> Fidetin1, that are rushing
to set up trust companies . In Florida, revocable living
trusts are so ssidespread, "you can't get into a counm ° club
Niithout slto\~ing a copy of pour trust," jokes Gideon
Rothschild, a Ven York la~~ver u ith sonie Florida clients .
Trusts have been ~ staple of estate planning for dte likes
ofthe Rockefelles for a century . What's suddenlc pushing
trusts out into the mass market? Four things .
First, minimizing taxes . Inflation has made the tax
problems ofthe %cealthv into the tax problems of the upper
middle dass . As will he explained below, a kev role here is
played by the $600,000 estate tax exemption, which is not
indexed for inflation .
You can also saNe on income taaes iaith a trust, as
Hairle\ did, bp transferring appreciated assets to it <strong>and</strong>
naming a charinas a remainder benefician, . Yet another
varietv of trust is a must if rou %rant to leave life insurance
to your children \cidtout pa% ing wmecessan~ taxes .
Secood reason to set up a trust : avoiding probate .
Probate can be costlv <strong>and</strong> time-consuming . By opening a
living trust i -ou arrange to have some or all of your assets
delivered to heirs at your death iN ithout rel}'ing on a wiil . A
liN ing trust is no big deal . It simpk means a trvst i ou set up
~~hile rou m'e still alire .
By keeping your tiiilled assets to a minimum, cou can
save on la«~,ers' fees <strong>and</strong> probate court fees, <strong>and</strong> speed up
the h<strong>and</strong>ing-o% er process in the bargain . "In effect, Nchat
aou're doing is administering your estate before vou die,"
explains Richard Goldstein, a cPA in San 97ateo, Calif.
7ust hoW much time or money cou can sa%'e by aroiding
probate depends ou ~N here cou live-California, NewYork
<strong>and</strong> Florida being prime tercitories for probate avoidance .
But no matter where vou live, it is intperative to set up a
trust if you own real estate in another state, says New York
la«yer Edtcard Schlesinger. If ' vou make the mistake of
holding an ottt-o :`-stare racation home in your oun name
orvot¢spouse's name rather than through a trust, cou ~rill
subject your heirs to the torture of having your caill
probated in tseo places at once, using nvo sers of lau ~ ers .
Third motne : privacy . The proceedings of probate
courts are open to the public ; the doings oftrustees (unless
the trust is created'ov a will) are not . Iu similar fashion, real
estate deeds arc open to pubiic perusal in all states, %rhile
the trust documents that soell our the true o«ner of a
parcel held in trust are not. Trusts can keep others from
knowing what vou have nhile vou're alive, <strong>and</strong> u•hom you
leave it to cehen vou die .
Chen~l Holl<strong>and</strong>, a tinancial planner at I .E . Wilson
Adcisors in Columbia, S .C ., has a client whose son is
diw)rced . The client set up a trust to prevent her son's cawife
from knowing how much monet the son inherits <strong>and</strong>
hitting him up for more chiid support .
Fourth motive : protection from disgruntled heire . It's a
lot harder for a retatite who has been cut out to atta_kvour
trust than to attackaxcill . 1fian%, states restrictN our options
in a vvill-tvpically you can't tornlly disinherit a spouse, for
example . In some of these states (including Connecticut,
Florida, Illinois, Michigan <strong>and</strong> Ohio I, you can use a trust
to bypass the restrictions . If you want to minimize ~°our
spouse's share, this is the way to go .
Despite reffirms in sonic states, the probate system has
been bent to scne the interests of l'mcers as much as the
interest of participants . Trusts are your escape hatch .
Example of ho" the law makes rou run up legal bills :
You can't probate a will in Florida with an ourofstate
executor m less it's a blood relative . It's a full-emplovment
act for bankers <strong>and</strong> la«vers in Florida-the statutory
executor fee runs $55,000 on a 52 million esrate .
Ifyou plan to retire to Florida <strong>and</strong> don't «ant to name a
relative as executor, set up a revocable living trust to hoid
your assets-securities, real estate, whateeer . Make courself
trttstee <strong>and</strong> hire whomever cou u ant, at whate%cr fee
cou agree on, to be your successor trustee . When qou die,
the successor trustee h<strong>and</strong>s out the assets in accordance
with cour wishes, as spelled out in the trust document . If
cou later Ita% e misgiN ings, just amend or re\ oke the trust .
That's \% h-at uie °re~ocable" is all about .
In many states tou catt serce as bodt trustee uid
168 Forbrs A Ausust 14, 1995
204ti673424
http://legacy.library.ucsf.edu/tid/agf97d00/pdf