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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
A comprehensive guide to living trusts, with expert financial and legal guidance The Living Trust Advisor is an expert guide for both advisors and their clients on the complex process of establishing, living with, and maintaining a living trust. Written by renowned family inheritance attorney Jeffrey L. Condon, this book discusses the various aspects of this important document, and shows you how to manage a seamless transfer of assets to various beneficiaries. This new second edition has been fully updated and revised to reflect the extensive changes to the Estate Tax Law that have taken place since the initial publication, giving you the most up-to-date information and guidance on preserving your wealth and helping your heirs avoid estate tax liability. You'll develop a vision for your trust before you ever meet with an attorney or other key players, and learn how to establish and maintain a trust that remains rock-solid for your lifetime and beyond. As the living trust has replaced the will as the primary means of settling after-death estates, clear guidance and current legal information is of utmost importance for advisors and clients alike. This book is a valuable resource for every stage of planning and execution, helping you ensure that you provide for your beneficiaries the way you intend. * Know what to think about before your first meeting with a lawyer * Establish and manage your living trust to carry out your wishes * Identify potential inheritance problems and build solutions into the trust * Distribute assets to future generations, and protect them after the transfer Dealing with complex financial and legal issues while facing our own mortality is a difficult task, but making these decisions is critical to the future outcome of your estate. The Living Trust Advisor expertly guides you through the process so you can be confident that your wishes will be carried out.
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The Living Trust Advisor
Second Edition
Everything You (and Your Financial Planner) Need to Know about Your Living Trust
Jeffrey L. Condon, Esq.
Cover design: Wiley
Copyright © 2016 by Jeffrey L. Condon. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey. The first edition was published by Wiley in 2008. Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
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Library of Congress Cataloging-in-Publication Data:
Condon, Jeffrey L., author. The living trust advisor : everything you (and your financial planner) need to know about your living trust / Jeffrey L. Condon. — Second edition. pages cm Includes index. ISBN 978-1-119-07394-9 (cloth); ISBN 978-1-119-09328-2 (ePDF); ISBN 978-1-119-09331-2 (ePub) 1. Living trusts—United States—Popular works. 2. Estate planning—United States—Popular works. I. Title. KF734.C66 2016 346.7305'2—dc23
2015029526
For Kyle Collins. For my family and I, your name shall hereinafter be synonymous with resilience, courage, and strength of spirit.
CONTENTS
Pregame Warm-Up: Or, Read This Before You Read This Book
The Big Game: Living and Dying with Your Living Trust
A Few Things You Should Know about My Coaching Style
Your Final Locker Room Pep Talk Before Training Begins
Acknowledgments
For Those without Whom This Revised Edition Wouldn’t Exist
For Those Who Happen to Be My Children
For Those Who Made the Cut
The First Quarter: Establishing Your Living Trust
Chapter 1: How You Established Your Living Trust Without a Clear Understanding of What It Is and How It Works
What Does It All Mean?
The Self-Drafted Living Trust—Don’t Do It!
You Might Have Living Trust Training, but You Haven’t Been Trained My Way!
Chapter 2: What Does the Living Trust Do, and How Does It Do It?
A Simple Explanation
It’s an After-Death Power of Attorney, but It’s Not
Chapter 3: Do You Really Need a Living Trust?
The Reasons Why a Living Trust Is a No-Brainer
So, What’s Not to Like?
Putting Your House in Joint Tenancy with Your Child Is This Side of Insanity
In Summary
Chapter 4: Establishing Your Living Trust
Your First Homework Assignment: Selecting Your Living Trust Attorney
Your Second Homework Assignment: Making Sure Your Living Trust Document Contains the Bare Minimum of Requirements
After You Have Finished Your Homework
Chapter 5: Who Should You Select as the Lifetime Agent of Your Living Trust?
Your Lifetime Agent’s Duty to Accomplish the Three Ps of Asset Management
The Not Very Scientific Method of Selecting the Lifetime Agent of Your Living Trust
Do You Trust Your Children to Watch Your Back (Financially Speaking)?
Can You Trust Your Friend to Protect You?
A Good Alternative
Chapter 6: You Can Select Your Children as Your After-Death Agent, but Will They Carry Out Your Living Trust’s Inheritance Instructions?
Selecting Your Children as Your After-Death Agent
“My Properties . . . My Pyramid”
“Your Money Is Family Money”
“That Was Our Parents’ Wish . . . Not Our Wish”
“I Got Robbed—and My Own Kid Is the Bandit”
The Indelible Conclusion: Money Changes Everything
The Second Quarter: Living with Your Living Trust During the Lifetimes of You and Your Spouse
Chapter 7: Functions of Your Living Trust While Both You and Your Spouse Are Alive
Situation 1: Revoking Your Living Trust
Situation 2: Amending Your Living Trust
Situation 3: Either You or Your Spouse No Longer Acts as a Co-Trustee
The Low-Maintenance Living Trust
Chapter 8: The Five Concerns about the Real Estate You Transferred to Your Living Trust
First Concern: Owning Your Living Trust Real Estate
Second Concern: Transferring Real Estate to Your Living Trust without Risk of Property Tax Reassessment
Third Concern: Selling Living Trust Real Estate
Fourth Concern: Refinancing Living Trust Real Estate
Fifth Concern: Requiring the Signatures of Both You and Your Spouse to Sell Living Trust Real Estate
Concerning Yourself with the Five Concerns
Chapter 9: Should You Tell Your Children about Your Living Trust?
Why You Don’t Want to Conduct a Family Inheritance Meeting . . .
And Why I Don’t Respect Your Reasons as to Why You Don’t Want to Conduct a Family Inheritance Meeting
How to Conduct a Family Inheritance Meeting
Your Lawyer Should Not Charge for the Family Inheritance Meeting
The Third Quarter: Living with Your Living Trust after the Death of Your Spouse
Chapter 10: Will You Divert Your Deceased Spouse’s Half of the Living Trust Assets from Your Offspring?
The Three Goals of Living Trust Management after the Death of Your Spouse
Does Your Deceased Spouse Approve of Using Half of the Living Trust Assets to Support Your Second Spouse?
Fretting and Hoping—by Your First Children
Preventing Your First Children from Fretting and Hoping So They Can Get Some Sleep
Chapter 11: The Power to Change Your Deceased Spouse’s Inheritance Instructions . . . or Not!
The Tyranny of Unjustified Lifetime Control
Periscope from the Grave
What If You Don’t Want to Change the Inheritance Instruction?
Chapter 12: Dealing with Your Living Trust If You Remarry
The Clash of the Inheritors
Divide and Conquer
Chapter 13: Dealing with the Estate Tax Return, Splitting the Living Trust Assets, and Other Tax Stuff That You Would Rather Just Ignore after Your Spouse Dies
What Is the Estate Tax?
The lifetime exemption
Using Your Deceased Spouse’s Lifetime Exemption
The “Simple Something” You Must Do to Preserve Your Deceased Spouse’s Lifetime Exemption— the Federal Estate Tax Return
The “Complex Something” You Can Do to Preserve Your Deceased Spouse’s Lifetime Exemption Trust
The Real Name of the Smaller Bucket Is . . .
The Magic Trick
The Other Subtrust: The Survivor’s Trust
The Emergency Paragraph
Putting All of This Estate Tax Stuff Together
The Fourth Quarter: Dying with Your Living Trust
Chapter 14: Distribution of Your Living Trust after Both You and Your Spouse Are Dead
The Grim Reality
Beating the Odds
Chapter 15: Don’t Intentionally Leave Your Children Unequal Inheritances
But It’s Not So Simple
Touchy-Feely Advice: Talk to Your Richer Child Before You Leave Him Less
Chapter 16: The Accidental Unequal Inheritance
The Family Scorecard
You Live, You Learn
An Easier Pill to Swallow
Separate but Unequal
Chapter 17: Don’t Make a Child Who Owes You Money a Debtor to Your Other Children
What Else Can You Do to Get Your Money Back?
Consequences of the Unforgiven Loan
Resolving the Family Fallout over the “Forgiven” Loan That Wasn’t Really Forgiven
Chapter 18: Do Not Leave Your Child an Outright Inheritance
Category One: The Protection Trust That Offers Only a Hope of Protection—the Transparent Trust
Category Two: The Protection Trust That Is Just a Tad Less Liberal Than the Transparent Trust—the Self-Directed Irrevocable Protection Trust
Category Three: The Protection Trust That Gives Control of Your Child’s Inheritance to a Third Party—the Third-Party Irrevocable Protection Trust
Category Four: The Neutron Bomb of Protection Trusts—the Discretionary Trust
Chapter 19: Using Your Living Trust to Force Your Child into a Conventional Lifestyle
The Incentive Trust
The Incentive Trust That Creates a Real Incentive for Your Child to Find Employment
Striking a Balance between Competing Desires
Chapter 20: The Success of the Third-Party Irrevocable Protection Trust (PUPPET) Depends on Whom You’ve Selected as the Third Party
Who Will You Appoint as the Trustee of Your Child’s PUPPET?
Your First Choice: The Private Individual
Your Second Choice: The Better Choice
Chapter 21: Who Are Your Grandchildren?
Grandchildren 101
Two Certainties
The New and Protective Definition
Chapter 22: The IRS Is Back! And This Time, It’s for Real!
The Good News
The Estate Tax Return Process
Playing the Waiting Game after Your Estate Tax Return Is Filed
Seek Out Solutions to Reduce Your Estate Tax
Chapter 23: Who Pays the Estate Tax?
The Three Types of Estate Tax Allocation Provisions
Equal Estate Tax Allocation Provision
Proportional Estate Tax Allocation Provision
Specific Estate Tax Allocation Provision
Three Concepts You Must Know about Estate Tax Allocation
Forewarned Is Forearmed
Postgame: Review and Lessons Learned
Chapter 24: Question and Answer Time!
The Top Ten Questions I Receive from Real People
The Top Five Questions I Receive from Financial People
Chapter 25: A Random Sampling of Cautionary Tales from the Inheritance Arena
Cautionary Tale 1: The Last One on the Scene Gets the Money
Cautionary Tale 2: A New Marriage Requires a New Living Trust
Cautionary Tale 3: Sometimes Having Too Much Money Can Be a Curse
Cautionary Tale 4: Keep Your Opinions to Yourself If You Want to Inherit from Your Gay Relative
Cautionary Tale 5: Don’t Let the Law Write Your Inheritance Instructions
Cautionary Tale 6: Joint Tenancy Gone Wrong
Cautionary Tale 7: When It Comes to Money, Family Loyalty Goes out the Window
Cautionary Tale 8: “Probate Is the Lawyer’s Retirement Fund”
Cautionary Tale 9: “I Don’t Want to Be a Weekend Father”
Cautionary Tale 10: “It’s Just a Piece of Paper”
Cautionary Tale 11: I Don’t Want Him!”
Cautionary Tale 12:
“Si, Si!
Community Property!”
Cautionary Tale 13: “He’s Got Too Many Friends”
Cautionary Tale 14: “We Were Cheated!”
Cautionary Tale 15: “Am I My Brother’s Keeper?”
Cautionary Tale 16: “I Don’t Want to Die with My Daughters Mad at Each Other”
Cautionary Tale 17: “I Lost the Bet”
Cautionary Tale 18: “I Only Have the Children I Choose to Tell You About”
Cautionary Tale 19: “I Want My Money . . . So Hurry Up and Die!”
About the Author
Index
EULA
Guide
Cover
Table of Contents
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Pregame Warm-Up Or,Read This Before You Read This Book
If this book is in your hands, you are probably thinking about putting together a Living Trust, which is the primary tool in the United States for the transfer of your assets after the deaths of both you and your spouse to your children, grandchildren, or other heirs. Or perhaps you already have your Living Trust, which has collected dust on your bookshelf or in your safe-deposit box, and you somehow have been prompted into revisiting it.
For a combined 70 years, my late father, teacher, and mentor, Gerald Condon, and I set up thousands of Living Trusts for our clients. After all those years of advising clients on their inheritance instructions, I am left with this one conclusion: You really don’t know much about the Living Trust . . . or how it works . . . or what it should say or do . . . even if you have one!
Actually, perhaps that assessment is too broad to be of practical use. I do tend to speak in sweeping generalizations. Let me be more specific by lumping you into one of four categories of Living Trust clients:
You do not have a Living Trust, and you don’t really know much about the Living Trust other than it is some kind of inheritance document.
You already have a Living Trust, but you have no real or meaningful understanding of what it is or how it works beyond the basic function of transferring your assets to your children after your death without probate. In other words, you just signed it where your attorney told you to sign, threw it into your car, and have not thought about it since.
You have a Living Trust and you initially made a real and earnest effort to decipher its form and function. But many years have passed since you established it, and all you really recall is (a) you have a Living Trust and (b) it contains your inheritance instructions.
You have a Living Trust, and you refused to sign it until your lawyer explained every single paragraph and provision to your satisfaction. If you are such a person, I say to you: Your kind is so rare that you qualify as an urban legend.
Whether you are a Living Trust rookie or veteran, welcome to this revised edition of The Living Trust Advisor, and congratulations on dealing with the often unpleasant task of facing your mortality!
Now, for you readers who are in the financial planning and advising profession, I also extend my heartiest welcome. At first blush, you may say to yourself, “Self, why do you need an education in the nuts and bolts of the Living Trust? You’re not a lawyer. Your job description is to make as much money for your clients as safely possible. If your clients have any estate planning needs, you’ll simply advise them to see an estate planning attorney. Have a nice day, Self!”
That’s what I used to think as well. You financial people come up with a plan to make your clients money, and I’ll come up with a plan to leave your clients’ money to their children, grandchildren, and other heirs. And never the twain shall meet.
Let me tell you how I learned otherwise with the tale of the comeuppance that I received from a 300-plus group of your colleagues. It wasn’t pretty. But if it wasn’t for that experience, I would never have come to know about the importance of the financial advisor in my professional life.
About 10 years ago, I was invited to speak on “The Right Way and the Wrong Way of Leaving Money to Your Children (& Others)” before a national conference of the Financial Planning Association (FPA) in Colorado Springs. I gave this talk at a few previous regional FPA conferences (including Providence, Rhode Island, where I met an FPA member named . . . Jeff Condon. What are the odds?). I assume I was a big enough hit at those prior gigs to justify the FPA paying my speaking fee and travel expenses for the national gathering. Using baseball parlance, it was like going from the minor leagues to the Show.
When I am introduced at my talks, my “credits” never fail to strike a chord with the attendees. Although there are numerous estate planning attorneys with more impressive professional credentials than mine, none can claim that they wrote the best-selling inheritance-related book in American publishing history that the Wall Street Journal called the “best estate planning book in America” . . . or can say they have appeared on dozens of well-known television, radio, and Internet shows and outlets. As the conference’s program coordinator ran through my accomplishments, I heard the usual mutters of “Wow!” “Really?” “Impressive.” “Gee.” “This should be good.” Before I uttered word one, I had won over the 300 or so attendees—and I knew for certain that my presentation would leave them entertained and edified.
Yes, I was all full of myself. But that feeling was relatively short-lived.
After the (yet another successful) presentation, a standing microphone was placed on the floor near the dais for those who wanted to ask questions. The line quickly formed and snaked to the ballroom entrance. I believe it was the fourth person in line who asked me this: “Mr. Condon. I just want to say that was a terrific talk, and I learned a lot. Can you tell me how you use the financial planner in your practice?”
And this was my exact word-for-word response: “Ummm . . . I . . . uhhh . . . I don’t really use the financial planner at all. Why would I?”
Have you ever had the experience of being ostracized by a large gathering of people? You don’t want it. It’s the initial silence of incredulousness. Then the sounds of notebooks shutting, chairs backing away, barely disguised mutterings, and feet walking in a direction other than yours. The sight of faces who were moments before enraptured, now revealing disdain and disgust. The sudden feeling of warm sweat permeating throughout the body. I take great pride in making a great impression on my audience. Not just good, but great. But now I was doing the polar opposite.
This was one of those times when the truth—that bringing the financial planner into the estate planning process had never before crossed my mind—was not the best response. The financial planner helps the client make money; the estate planning lawyer helps the client transfer that money to their children, grandchildren, and other heirs. Two separate worlds. And I assumed that financial planners believed likewise. But at that nightmarish moment—where I undid in 3 seconds the goodwill I had established in the previous 90 minutes with my inadvertent diminishment of the entire financial planning industry—I discovered that such an assumption was erroneous.
There was no pulling up from this nosedive. The program ended with the en masse walkout. As I was about to trudge from the dais, the program coordinator stood in front of me, put his hands on my shoulders, and said, “Jeff, I can see you are about to go into a deep funk. But try to hear me. Instead of castigating you, I think they should be thanking you. You woke us up to the fact that your industry is totally in the dark about what we do and how we can be of service. What you said about not needing us—that should be our rallying cry to find ways to explain to you why and how you need us. Not as a reason to get out the tar and feathers.”
Those words talked me off the ledge. But more important, they were the impetus for my awakening to the fact that the financial planner is integral to the estate-planning process. While the estate-planning lawyer rarely sees or communicates with his Living Trust clients, you, the financial planner, are on the front line of your clients’ lives. You are in touch with them at least every few months with calls, statements, emails, and invitations to seminars. You make, at least, annual inquires about their financial health and status, which, typically, beget a discussion of their latest family goings-on. Births of grandchildren. Graduations. Deaths. Children’s employment status. What’s going on with the “problem” child. As part of that discussion, you invariably bring up their estate planning—because you recognize that a sound plan to leave their wealth after death is just as important as the investment strategy that creates that wealth.
So you ask the usual questions about your clients’ estate plan. Do they have one? If so, is it a Living Trust or a will? Was it prepared by an attorney? How old is it? When did they last have it reviewed? Does it speak to any of their current family dynamics and circumstances? And after this brief discussion, you advise them to see an attorney, which, most likely, will not be an easy sell. Why? Because your clients, like most people, are not accustomed to seeing lawyers. Most people go through almost their entire lives without anything “legal” happening to them. No divorces, arrests, lawsuits, or entity formations. Or, if your clients have had previous brushes with lawyers, those experiences may have been less than pleasant. Well, whether your clients go willingly or reluctantly, you, the financial planner, must strongly advise them to see an estate planning attorney about establishing or amending their Living Trust.
Is that it? Do I think you are just the shill for the estate planning attorney? Absolutely not. You are part of the estate planning team. While the attorney sits at his desk, you sit in front of your clients. You’re there with them . . . and their Living Trust. With the Financial Alerts peppered throughout this book, you will be able to confidently sift through your clients’ Living Trust and zero in on certain sections that could inadvertently cause harm to your clients’ children and their relationships with each other. These alerts will give you the knowledge you need to engage in a productive conversation about the effect and ramifications of certain provisions that they may have never before considered.
Your clients don’t know what they don’t know. They don’t know whether their Living Trust will solve inheritance problems . . . or create them. However, after you read this book—and after your clients regale you with their current family circumstances—you will have the ability to recognize whether certain provisions in their Living Trust should be changed or removed to ensure that your clients’ Living Trust applies to those family conditions.
These Financial Alerts do not ask you to practice law. They are educating you on recognizing problems. As my father taught me, 95 percent of the solution to any problem is recognizing the problem in the first place. Once you are able to point out the unwanted or unintended ramifications of certain provisions of your clients’ Living Trust, then your advice for them to see the lawyer is not just lip service to make you look good or protect your back.
Without you first reviewing your clients’ Living Trust . . . and without you first having taken the tour of your clients’ financial and family lives . . . and without you looking at important provisions in your clients’ Living Trust in the context of their present circumstances, it is highly unlikely they will ever see a lawyer for a Living Trust review and fix.
Maybe this isn’t a traditional part of the financial advisor job description; still, it’s an important function that helps to maintain family harmony in the inheritance arena, which can only enhance the valuable services you bring to your clients.
The Big Game: Living and Dying with Your Living Trust
The purpose of this book is quite simple. I want you to think of me as your Living Trust coach. Like any coach, I want to train you so you will be ready to play the big game, which, in this case, is living with your Living Trust with no financial, emotional, or practical upheaval in your life, and dying with a Living Trust that will adequately and effectively provide for your spouse, children, charities, and other heirs and beneficiaries with a minimum of conflict, diversion, tax, and expense.
Like any football or basketball game, this big game takes place in a special arena . . . the inheritance arena. The players are you, your spouse, your Living Trust lawyer, your assets, your children, your other beneficiaries, and, perhaps, the Internal Revenue Service (IRS). And like any game, there is a warm-up period (which is where you are right now), four quarters of play, and a cool-down period. Think of
Th
e
Living Trust Advisor
as your playbook that describes how to play the big game during those different periods, which are: The First Quarter: Establishing Your Living Trust.
The Second Quarter: Living with Your Living Trust during the Lifetimes of You and Your Spouse.
The Third Quarter: Living with Your Living Trust after the Death of Your Spouse.
The Fourth Quarter: Dying with Your Living Trust.
Postgame: Review and Lessons Learned.
The big game begins the moment the concept of doing your Living Trust pops in your mind. That is when the whistle blows to start play. It ends when both you and your spouse have died and your Living Trust assets are in the hands of your children or other beneficiaries.
Between the beginning and end of the big game, though, there is a lot that happens.
There is the selection of the Living Trust lawyer.
There is the understanding of the nuts and bolts of the Living Trust document.
There is the allocation of the assets—real estate, stocks, bank accounts, brokerage assets, businesses, personal effects—to the Living Trust.
There is the operation and management of the Living Trust during the lifetimes of both you and your spouse.
There is dealing with your Living Trust real estate when you sell or refinance that property.
There is the selection of key players—the managers, agents, and protectors—upon which depends the success or failure of your Living Trust and your inheritance instructions.
There is the operation and management of the Living Trust when the first spouse dies (the deceased spouse).
There is the protection of the surviving spouse’s ownership and control of the Living Trust assets during that spouse’s incapacity or incompetence.
There is the operation and management of the Living Trust when the last spouse (the surviving spouse) dies.
There is the filing of the last spouse’s estate tax return and payment of estate taxes.
There is the distribution of the Living Trust assets to your children without creating conflict and chaos between them.
And there is the protection of your children’s Living Trust inheritance from the winds of their fates: their addictions, divorces, remarriages, mental disabilities, financial immaturity, and creditors.
It does not matter whether you have played the big game before or whether you already have your Living Trust. After you read The Living Trust Advisor playbook, you will know how to play the big game the way it should be played. If you follow my training and listen to my advice, I believe you will walk away from the big game a winner. In my book, winning means:
Having a clearer understanding of your Living Trust.
Opening your eyes to the numerous problems and issues in the inheritance arena that you must consider before your first meeting with your Living Trust lawyer.
Maintaining ownership and control of your Living Trust assets while you and your spouse are both alive, and then after the death of one spouse.
Facilitating the smooth transfer of your Living Trust assets to your children, grandchildren, and other heirs after your death.
Identifying potential inheritance problem areas now so you have the opportunity to build solutions into your Living Trust in order to prevent those problems from arising during your life and after your death.
A Few Things You Should Know about My Coaching Style
Before I say something trite right now like “Let the big game begin!” I must first convey a few things you should know about my style of coaching in order to help you follow the instructions in this playbook.
Bringing You into My Personal Life
Throughout this book, I will pepper you with numerous examples that illustrate a key point or demonstrate how you can do something. While many of these examples may be drawn from experiences with clients, others may provide you with an occasional glimpse into my personal life. Whether I allude to my business history, divorce, girlfriend, or likes and dislikes, I use these personal anecdotes as a device to support certain issues or emphasize particular concepts that arise in this book.
While I understand the viewpoint that divulging one’s personal anecdotes and professional experiences may be unprofessional, I have always disagreed with it. I believe that providing examples and sharing details that have arisen in my personal life and law practice bring this nonfiction book about estate planning alive and make the advice offered applicable to your life, too.
Therefore, you are not getting a technical lecture filled with charts, graphs, and PowerPoint slides within this book. Instead, you are receiving the advice and opinions of one attorney based on his observations and experiences—both professional and personal. With such a subjective approach, it is near impossible to convey effective lessons by keeping the private life out of the process.
Making Sweeping Generalizations
I am fond of broad and superlative statements that appear to be intended to apply universally to every reader of this book. Of course, I know that for every person who embodies such an absolute, there is another person for whom that absolute does not apply. Nonetheless, in order to help convey information and emphasize a particular point, a statement must come across as somewhat dogmatic without reference to exceptions. Therefore, the sweeping generalization is a literary device I often employ in The Living Trust Advisor.
Using Everyday Language to Explain Technical Ideas
The Living Trust, family inheritance planning, and estate taxes involve complex personal and financial issues. But discussing these issues in a legal manner would ensure this book’s quick demise and bargain- basement status, as it would render the book a somewhat lackluster and uninteresting read. Moreover, if I used fancy legal jargon, I fear that many readers might not understand what I was saying. Therefore, I use nontechnical language to explain many technical concepts throughout this book. For example, the person whom you appoint to carry out your instructions after your death is called the successor trustee. In this book, I refer to that person as the after-death agent. Since your attorney might wonder what you are talking about if you mention appointing your after-death agent, I also supply the technical term.
Getting My Sense of Humor
At my seminars, there are two compliments that I can never get enough of. The first: “Gee, Mr. Condon, are you sure you’re a lawyer? I understood every word you said.” The second: “Mr. Condon, I never thought I would find myself laughing at a seminar on death and taxes. I was really entertained.”
I’m not using these comments to wow you into buying this book or attending my seminars. I’m just trying to show you that I have found success in using humor as the medicine to help folks digest this material more easily, and that this book follows suit with my usual comedic approach.
I have an absurd sense of humor, and this book is riddled with it. With a title like The Living Trust Advisor, you probably would not expect to find such a quality in an inheritance planning book. I am aware that some readers may not find it appropriate to address death-and-taxes-type matters with a comedic approach. However, I could not restrain myself, for two reasons. First, I just gotta be me. Second, approaching such a tedious subject as the Living Trust with humor simply makes that matter less tedious and, if I have my way, even entertaining.
Consulting Your Own Living Trust Lawyer
This book is designed to identify situations, problems, and conflicts that arise in the establishment, maintenance, and distribution of your Living Trust. However, because your set of circumstances may differ from the scenarios I describe, it is critical that you do not include any of my suggestions in your own Living Trust without first consulting your own Living Trust attorney.
Your Final Locker Room Pep Talk Before Training Begins
I was on water polo and swim teams throughout high school and college. I remember some amazing locker room pep talks made by my coaches that took us from lackadaisical (“What are we doing here?”) to motivated and focused on the mission (“Let’s go get ‘em!”). Inspired by those sessions in those days of yore, I now want to give you my pep talk to motivate you throughout your training.
You are about to embark on a process that is more than just dollars and cents. Your Living Trust is the last great lesson you will give to your spouse, children, and other beneficiaries. It is the vehicle by which you transfer your lifetime of accumulations to them. If your Living Trust lesson goes sour—by leaving your beneficiaries in conflict, or by causing your assets to be depleted by taxes and expenses, or by requiring that your beneficiaries go through probate to obtain ownership of your Living Trust assets, or by causing your Living Trust assets to become depleted once they are in the hands of your beneficiaries—so too will the memory of you be impaired.
But it does not have to be that way. That’s what I—your Living Trust coach—am here for. That’s why you have this Living Trust Advisor playbook in your hands. With this book, you will learn all you ever need to know about how to play the Living Trust game—from the time the concept of the Living Trust enters your head to the time its inheritance instructions are carried out after you and your spouse are gone.
Here it comes: Let the big game begin!
Acknowledgments
Writing can be a very rewarding experience. But, when the writing involves trying to turn a subject as complex and tedious as the Living Trust into (one hopes) a lighthearted and entertaining romp, it can also be exasperating. No one thinks of the estate planning attorney as a tortured artist; but, after multiple occasions of spending hours on a single paragraph attempting to be informative and witty, I felt I was Van Gogh.
With the three editions of my other book and this second edition of the Living Trust Advisor, this is the fifth opportunity I’ve had to publicly acknowledge in a real book the important persons in my life and the ones who were integral in producing this book. Such mentions just don’t seem as special and permanent in social media, do they? On the Internet, anyone can acknowledge anyone for anything. Just the other day on Facebook I posted my congratulations to my mother’s dog, Molly, for successfully jumping off the couch. Just too easy (both the posting and the couch-jumping)! But when folks see their name in print in a real, old-fashioned book that they can see and feel, that must be a thrill for them, yes? Well, at least it’s still a thrill for me to have this platform.
In keeping with my lawyer-like penchant to compartmentalize, I shall break my acknowledgments into three separate and distinct categories.
For Those without Whom This Revised Edition Wouldn’t Exist
Stacey Rivera and Tula Batanchiev. Stacey is my manuscript editor at Wiley, and Tula is the acquiring editor who originated and championed the idea of this revised edition of Living Trust Advisor. Both are not only brilliant and industrious, they are masters of the lost art of editor-author diplomacy. Painful cuts and edits in my precious manuscript and rejections of my inspired cover design ideas (such as a Pomeranian sitting on a wad of cash) were almost a pleasure with their pleasant and engaging manner. From now on, whenever bad news about anything has to be delivered to me, I want Stacey and Tula to be the messengers.
For Those Who Happen to Be My Children
I have previously used my acknowledgments to impart awesome and incredible fatherly advice to my three children, Bradley, Hayley, and Carly. Why should this one be any different? So if you happen to be a child of Jeffrey Condon, listen up (read up?) to this Top Ten List of Things You Need to Do, Not Do or Know:
A gift is for the giver.
In any non-life-threatening heated discussion or argument with anyone, think before you speak and stay on point.
Don’t text and drive.
Conduct all your interactions and interpersonal relations with the Golden Rule in mind.
Although it was really cool to see Han Solo and Chewbacca back in action,
Star Trek
STILL RULES over
Star Wars
.
Do not loan money to a friend, and do not borrow money from a friend. The money relationship will end the friendship.
When I die,
don’t
sell my comic book collection. It’s worth more than the three of you combined. Preserve and protect it.
As Coach used to say: If you can’t do what you want, do what you can.
Do some kind of athletic activity every day. Getting the blood pumping energizes you and makes a tangible difference in how you approach and handle the day. Don’t wait until you feel like it because no one ever feels like it.
I love you all.
For Those Who Made the Cut
In all of my prior acknowledgments, I had fun mentioning everyone with some connection to me. It was fun to see their reactions to their names in my book, especially when they had no reason to expect to ever see their names in my book. Distant relatives. Friends. Acquaintances. My children’s friends. My children’s friends’ parents. My children’s coaches and teachers. If I saw somebody once a week who had even a small role in my existence or the lives of my children, they made it in.
Now with my children grown and gone, those old social spheres have disappeared, and I have practically no connection to most of those people. Which leaves the ones who remain whom I am fortunate to have. These are the most meaningful and important people in my life . . . and who made me a happy (or at least, pacified) camper during the arduous process of writing this revision. So if you happen to see your name here, congrats! You made the cut!
My fun, beautiful, charismatic, cookie-pushing, and just plain nice girlfriend, Kimberly Klaskin, and her daughter, Jenna. Best of luck to both of you in your next adventure—life with Jessie!
My closest buddies since elementary and middle school: Bret Donnelly, Brad Wheeler, Mark Beede, Milton Stumpus, Eric Fonkalsrud, and Paul Cooke.
My old law school buddies: Kenneth Aslan and Anthony Caronna.
My secretary, Marbelis Garcia.
My Atlanta cousins: Phillip and Gilda Franklyn, and the majority of their four reasonably well-behaved daughters, Stephanie, Rachel, Sarah, and Julia. I’ll leave it up to them to figure out which one did not make the cut. And with regard to Stephanie’s and Rachel’s upcoming nuptials, please inform your respective fiancés that your top wedding-day priority shall be the care and comfort of your Uncle/Cousin Frizz.
My lovely, venerable, and age-defying mother Esther Condon.
The First QuarterEstablishing Your Living Trust
If you have picked up this book, my hope is that you are finally at the point where the concept of actually establishing your Living Trust has entered the combined minds of you and your spouse. No more procrastination or excuses for not getting to it. You’re here! You can’t get more here than right here.
This is the beginning of your Living Trust training. Do you want to cross the goal line, spike that football, and revel in the roar of the crowd? Well, you know the drill. You first have to learn what a football is. To get to point Z, you must get to—and through—point A, which is getting you to understand what the Living Trust is, what it does, and how it works.
I wish I had the ability to get you through your Living Trust training in a 30-second workout montage, à la Rocky. But with this being real life, I can only offer you this mundane instruction: Turn the page and introduce yourself to the various components and players that make up your Living Trust.
CHAPTER 1How You Established Your Living Trust Without a Clear Understanding of What It Is and How It Works Or,You Don’t Know What You Don’t Know about Your Living Trust
Before your real Living Trust training begins in Chapter 2, I feel the need to address a point that is somewhat obvious, which I will state in your first person: “I already have a Living Trust. Why do I need your training session on the Living Trust when I have already received that information?”
In the Pregame Warm-Up, I made the bold and very broad assumption that you do not know much about your Living Trust, even if you have one. How did you react to such a presumptive assertion? Did you nod your head in recognition? Or did you fling this book across the room (or the bookstore) in disbelief and anger?
Let me tell you how I came to the assumption that you know very little, if anything at all, about your Living Trust, the document that your lawyer prepared, or you drafted yourself with LegalZoom and that you believe you already know all about.
What Does It All Mean?
I am an estate planning attorney. I am in the business of putting together inheritance plans. In the old days, you would have set forth your inheritance instructions in a will. Nowadays, those instructions will be set forth in a Living Trust. In effect, this makes me a Living Trust lawyer.
I learned this business from my father, Gerald M. Condon, who, in the early 1970s, was perhaps the first lawyer in the United States to conduct Living Trust seminars. This was a real homespun family operation. I manned the check-in table, my father gave the talk, and my mother made the brownies that the attendees devoured during the break.
About a decade after my father conducted his first seminar, Living Trust seminars became ubiquitous. They were seemingly everywhere, offered by attorneys, insurance companies, real estate firms, banks, and brokerage firms. You could not open your newspaper or mailbox without receiving a solicitation to attend one.
In the 1990s, the market for the Living Trust business had become farmed out. It was dog-eat-dog for the same potential pool of clients. Living Trusts became so cheap that reputable attorneys advertised their Living Trust services for as low as $499.
You get what you pay for in this world of ours, and the Living Trust consumer often experienced firsthand that old adage. Some Living Trust attorneys offered a good price, but at the expense of customer service. Practices became about volume. People never met the attorney who purportedly prepared their document. Instead, they saw paralegals who rushed them through the draft reviews. People felt like numbers instead of clients, and were too cowed by the manic process to ask questions. Ultimately, they signed their Living Trust without any meaningful understanding of the effect and function of the document and were politely shown the door. Next!
At his seminars, my father consistently gave what I believe, in my less-than-objective opinion, was the best presentation on the Living Trust since the world was a ball of molten lava. But the Living Trust world had changed, and we had to change with it. The client base for Living Trust business had been tapped out, and people were weary of being bombarded with flyers, advertisements, and seminar invitations for low-cost Living Trusts.
As a result, our Living Trust seminars became “Family Inheritance Planning” seminars. Instead of talking about Living Trust mechanics, we focused on the human side of inheritances, such as how your children can share an inheritance when they could not even share their toys, and how you can prevent your surviving spouse from losing control of her money and property if the children are grasping for an early inheritance. Eventually, this new emphasis on the human and personal element in the inheritance arena comprised the theme of the first book my father and I co-wrote in 1996, Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (and Others), which has since become the most widely distributed inheritance planning book in American publishing history.
Financial Advisor Alert
In connection with the marketing of the book, my father and I appeared on more than 100 radio talk shows throughout the United States, where we answered hundreds of questions from listeners about a wide range of inheritance planning issues—from succession of the family business, to protecting a widow from her own children grasping for an early inheritance, to leaving money to the family dog. Yet, of all the questions asked by callers, 90 percent of them were about the basics of the Living Trust. What is it? How does it work? What does it do? Why should I have one? What happens to it after I die? Where should I keep it? Why does it have so many pages? Moreover, these questions were asked by callers who informed us that they have Living Trusts that were prepared by lawyers!
So . . . consider presenting an inheritance planning seminar for your present and prospective clients with an experienced trusts and estates attorney as the guest speaker. By doing so, you will provide yourself with the opportunity to press the flesh and enhance your reputation as one who takes the time to make available information that the attendees will find absolutely invaluable.
I have been conducting Family Inheritance Planning seminars on my own for about 15 years. Although my style is certainly more freewheeling than my father’s horse-sense suffer-no-fools approach, I proudly walk in his footsteps to offer invaluable information about family inheritance planning to audiences around the country. And as they did years ago, folks come up to me after my talks with their Living Trusts in hand, pointing to certain pages and asking me, “What the hell does this mean?”
And if you think there is a lot of ignorance out there with lawyer-drafted Living Trusts, don’t get me started on the misconceptions and misinformation that arise in Living Trusts that are prepared without lawyers.
Too late! You got me started!
The Self-Drafted Living Trust—Don’t Do It!
This book’s title may have given you the impression that I am going to tell you how to establish your Living Trust on your own—without having to pay for a lawyer.
I hope I did not get your hopes up. This is not a “how to become your own lawyer” book. You would never consider being your own doctor. Why would you even think about being your own lawyer?
Certainly, taking the lawyer out of the process probably sounds pretty good to you. After all, if you are like most people, you have never before met with a lawyer, because, quite simply, you never had to. You have never been sued or divorced. You have never sued anyone. You have never been charged with a crime. You have not set up a corporation or partnership or engaged in a complex business transaction.
Indeed, you may have gone almost your entire life without the need to consult with a lawyer. I said “almost,” because now you face the prospect of an inheritance document that, while simple in concept, can be quite daunting to construct. If you have seen a Living Trust before, you have found that they are somewhat lengthy. In my office, the typical Living Trust is 50 pages long.
But even though your head says you need a lawyer to help you through the minefield, your heart may be urging you to do it alone. Why? Because you have heard the lawyer horror stories from your family, friends, and co-workers. “My lawyer charges too much.” “My lawyer never returns my calls.” “I paid my lawyer a retainer months ago, and I haven’t seen any documents yet.” And on and on . . .
Of course, there is nothing to stop you from giving it the old college try. In fact, you will find a lot of help. There are a host of how-to books, software programs, and stationery forms, replete with terms and provisions that you can pick and choose to incorporate into your own Living Trust.
In all my years as an inheritance-planning lawyer, I have met with hundreds of do-it-yourselfers who have paid me a fee to review their efforts. Yes, that does sound inconsistent. Why would they want to pay me a fee to review their self-drafted Living Trusts when their main goal was to avoid paying me a fee in the first place? Their answers were universally the same: “I just wanted to be sure that everything is legal.”
Let me tell you something, and please consider this your first piece of my advice. If you prepare your own Living Trust, it will be wrong in some way, shape, or form.
Maybe it will be a harmless error, such as explaining estate tax concepts with outdated language. Does your Living Trust use the term A-B Trust to incorporate the plan of preserving the deceased spouse’s applicable exclusion amount? That is the right concept, but the wrong words. The use of the wrong language will not be fatal to that tax-saving plan, but the Living Trust is, technically, still wrong.
Maybe the mistake will be overkill. Several times a year, I review self-drafted Living Trusts that contain complex tax-reduction plans that would be appropriate only for the heads of Fortune 500 companies. But the persons who drafted those Living Trusts are nowhere near that wealth category. If those persons die with those plans in place, their beneficiaries will be stuck in a morass of expensive and unnecessary processes.
Maybe the mistake will be fatal to your children. One man came into my office explaining that his son was a drug addict. After reviewing the Living Trust he prepared with the help of the Trustmaker software program, I said to him with all the sarcasm I could muster: “Why does your Living Trust leave your drug-addicted son his inheritance share outright and under his full control? The second he gets his inheritance, he’s going to turn it over to his pusher!”
After having reviewed hundreds of self-attempted Living Trusts, I have never seen one that has been correct, complete, or appropriate for the circumstances. It doesn’t matter how smart you are, and what you do for a living is irrelevant (unless you are an inheritance planning attorney). There are too many subtleties and intricacies concerning your inheritance instructions in the Living Trust that the how-to books just don’t pick up. You don’t realize this because, in a circular bit of reasoning, the how-to books have not made you aware of them. In other words, you don’t know what you don’t know.
Financial Advisor Alert
When your clients tell you that they have a Living Trust, your follow-up question should always be, “Did an attorney prepare that Living Trust?” If the answer is no, tell them that out of an abundance of caution, they should have it reviewed by an attorney. Expect the response to be of the “We did this on our own to avoid attorney fees” variety. To that you say, “No matter how much energy you poured into your self-drafted Living Trust, you just don’t know if you drafted it correctly. One mistake could lead your family into post-death chaos. One meeting with an attorney to review your Living Trust will give you the peace of mind that you didn’t miss anything.”
The only true way to learn about the dos and don’ts of the Living Trust is the hard way—from on-the-job training. That is why my profession is called the “practice” of law. We get to practice this stuff until we get it right.
For example, when I was a young attorney, I was innocent in my approach to drafting my clients’ inheritance instructions in the Living Trust. When my clients told me there would never be any inheritance conflicts between their children, I believed them. After all, who was I to dispute my clients’ conclusions about their children?
Nothing, however, prepared me for the harsh reality of human conflict when my clients’ perfect children divided their inheritance. Lawyers are not taught to recognize inheritance conflicts in law school. There are no advice books or classes on this subject. The only way I learned about inheritance conflicts was from having a number of clients die and then dealing with their children when they divided the family money. Having observed what happens between children following their parents’ deaths, I have arrived at this indelible conclusion: Your children might seem perfect—but you really don’t know them until they divide your money.
You Might Have Living Trust Training, but You Haven’t Been Trained My Way!
These experiences with both lawyer-prepared and self-drafted Living Trusts caused me to arrive at the sweeping generalization about how little you know about the Living Trust, even if you have one. A ton of people have been to Living Trust seminars, read Living Trust books, downloaded Living Trust software, and attended complimentary Living Trust consultations. Another ton of people have Living Trusts. But, those same tons of people still possess a definite and palpable thirst for knowledge about Living Trust basics.
In order to answer the questions of these many bewildered, misinformed, and mistaken people, I’m back with this, the revised edition of my second book, which is about living and dying with a Living Trust. I like to refer to it as “The Living Trust’s Greatest Hits.” In other words, this book presents everything you need to know about the establishment, maintenance, and management of a Living Trust at all stages of the game. Why should you pay thousands of dollars for a Living Trust just to have no meaningful and practical understanding of what may be the most important document of your life?
If you think you know everything about your Living Trust because your lawyer explained it to you—or you read the guidebook that came with the software—you don’t!
If you think you don’t need training on your Living Trust because you’ve already received that training—you do!
You have not been trained in your Living Trust my way. My way is to show you what you need to know before your Living Trust is set in stone. It will follow the flow of your money and property in the Living Trust at all stages of the game: while both you and your spouse are alive, then after the first spouse dies, and then when the last spouse dies and distribution is made to your children and grandchildren. The chapters that lie ahead explore aspects about your Living Trust that your lawyer—or software—never or inadequately explained to you.
