Living Trusts Take the Pressure Off of Families
Dale Rollings is a financial planner, he works with individuals after the death of a loved one to help them determine how best to protect their estate. He provides options for investing and managing your money. This article is filled with ideas, suggestions and help. He encourages everyone to take their time in making money decisions after a loved one dies because of the high emotions and lack of concentration that accompany grief.
by Dale R. Rollings
Thirty years ago an old estate attorney gave me some advice: “Don’t let your clients make any major decisions with their assets within nine months of death of a spouse or close loved one.” Today, his words still ring in my ears. I give the same advice to my own clients as their lawyer, counsel, and one they turn to for directions in administering an estate.
It does not take a psychologist to see how grief affects the decision-making process. Concentration is diminished and decision-making is skewed. Decisions made in depth of grieving often turn out to be not the best or just plain wrong. Decisions made while working away from loved ones, moving major investments, or giving away assets-are often a source of regret.
Unfortunately, the probate laws of many states force a grieving spouse or children to make decisions quickly that they might otherwise spend significantly more time considering, deadlines are placed on personal representatives and executors for such things as filing inventories, notifying creditors and paying bills, filing reports, paying taxes, and a host of other legal tasks. This extra pressure placed on people in grief often results in bad decisions. And, grievers tell us, even good decisions often “just don’t feel right.”
For these reason, our firm recommends using living trusts rather than wills as the primary estate planning vehicle for most families, even for estates which are smaller than those that would require a trust for tax avoidance purposes. We are not alone in this regard because many attorneys, years ago, recognized that a trust can be used to avoid the probate process, its deadlines, and its pressures.
Many attorneys tout that the use of trusts to speed up the distribution of assets to beneficiaries because they can be used to avoid all of the administrative requirements of probate administration. But for the grieving family, the trust has another, far more reaching benefit: It can actually be used to slow down the process and maintain the status quo until the family works its way through the deepest grief and is ready to return to making business decisions.
I had an example of this very benefit in my own family upon the death of my dad a few years ago. All of my parents’ assets had been placed into living trusts. On my dad’s death it was clear that mom just was not thinking right. She was a sharp, healthy, intelligent woman whose intellect had not been blunted by age, but whose decision-making process was made painful by grief. The truth was, she would just rather not address some of the issues surrounding the estate, and she put those off while she focused on her own issues of losing her husband of 60 years. We could have forced her to make decisions during that time. Had Dad’s estate been in probate she would have had to make those decisions. But because we had living trusts, she was not forced to do so. We simply used Dad’s trust as a holding vehicle until Mom could come back to the table.
The day that happened is indelibly etched in my mind. About eight months after Dad’s death I received a call from Mom. “I think it’s about time we deal with these real estate issues,” she said. Mom was back and ready to play. She had come through the grieving process on her own schedule without lawyers, children, and other people pressuring her to make decisions on real estate. Her subsequent decisions to sell real estate, move investments, and clear up unfinished issues were her own. Today, at age 93 and sharp as ever, she will tell you that not making business decisions in the height of her grieving was one of the best decisions she ever made.
Living trusts also can be very beneficial to a survivor whose spouse has died and where children or other beneficiaries are pressuring mom or dad to make decisions, many of which result in the loss of independence, loss of control, or further subjugation to the wishes of the children. Surviving parents are often encouraged to put the property in joint names with their children or add children to the bank accounts, etc. Our office frequently deals with perfectly normal people who, during a period of grieving, have been enticed to place all of their real estate in their children’s names, or who have added a child’s signature or name to a bank or brokerage account, “just in case something happens.”
We seldom find this to be to the grieving person’s benefit. Frequently such action, taken during a moment of deep grief or depression, is met with severe regret when judged in the clear light of hindsight. With a living trust, these decisions are not necessary. Control remains with the survivor, who is frequently his or her own trustee, or with the survivor or close relative or friend who can act as a co-trustee if necessary. A trust establishes an orderly process for decision-making without removing rights from the survivor.
Placing someone else’s name on an account, real estate deed, or similar asset is not an easy thing to reverse. In most instances, the person whose name has been added must consent to their removal. Where real estate is involved, a new deed must usually be created with the person whose name is being removed signing the deed to give up the interest.
A classic example of the problem created by placing someone else’s name on the deed is that of a widow who approached our office several years ago complaining that three years after the death of her husband she wanted to sell their small farm. It had become too much for her to maintain even though she was healthy, and she needed the funds from the sale to live comfortably in her house in town. But she had added her two children to the farm deed shortly after her husband’s death. The children loved their mom, but they loved their farm as well. They had grown up there and had special feelings for the place. They would not agree to the sale and mom found herself stuck with a major asset that could not be sold without the consent of the daughters, and with strong-minded daughters unwilling to see their mom’s side of the story.
In a time when people are living longer, healthier lives, the decision to change titles on real estate, bank accounts, and vehicles is risky business. Frequently, to do so at a time when the decision-maker is grieving is to take advantage. Property placed into a well-drafted living trust does not need its titles changed to add others. The trust becomes the vehicle by which the survivor is protected, and additional names on deeds, bank accounts, and vehicles are not required to give the survivor the protection he or she seeks.
We are seeing more and more widows and widowers who, after experiencing the administration of an estate without a living trust, recognize the benefits. Once the grieving process has lightened, responsible survivors often recognize what their spouse could have done, and plan their estate using living trusts to make if easier for those who follow them to administer their estates.