Older couple discussing paperwork <\/p>\n
If you will, allow us to present the hypothetical case of Pete Moneywise, a married 78-year-old father of three who wants to get his financial affairs in order before he dies.<\/p>\n
Though he exists only in the confines of this article, his situation reflects what countless retirement-age people face as they draw up their wills and create their trusts.<\/p>\n
\u201cI hate probate,\u201d Pete tells us in an exclusive interview (what else did you expect? We created him). \u201cI went through it when my father died, and my family spent the next year talking to lawyers, trying to get things squared away.\u201d<\/p>\n
He shares how the probate process caused tension between his sibling, while also harbouring frustration over one unanswerable question: \u201cWhy didn\u2019t Dad create a living trust? It would\u2019ve made things so much simpler.\u201d<\/p>\n
Credit Pete for following his own advice: He has set up a living trust. Now, he must decide what, if anything, to leave out of it. He\u2019s done the homework for you \u2014 here are some considerations as you structure your living trust.<\/p>\n
Many folks don\u2019t even know what the word \u201cprobate\u201d means until they\u2019re in the thick of it.<\/p>\n
Sometimes \u2014 but not always \u2014 when a person dies, a legal process is required to validate their will, including:<\/p>\n
It may sound straightforward enough, but the process can sometimes take years, plus there\u2019s the piles of paperwork and legal fees. For example<\/a>, when American model and actress Anna Nicole Smith died in 2007, her will specifically stated that the majority of her estate would go to her son, Daniel. Smith\u2019s will was contested by her mother, her former partner and her late husband\u2019s estate in a complex legal battle that spanned 20 years.<\/p>\n If you are \u201cof sound mind and body,\u201d then you can make a will \u2014 and it\u2019s a good idea to do that, so you don\u2019t leave your friends and family scrambling to guess at your wishes. If you want an extra layer of security and peace of mind, you can create a revocable living trust. A trust would have helped Pete\u2019s family avoid probate, protect their privacy and minimize estate taxes when his father died. A trust is a document that allows you to keep control of your money and property, designating who receives it once you die.<\/p>\n Story Continues <\/p>\n Vehicles. Whether it\u2019s a 1963 Corvette, a Harley chopper or a prop plane, all that\u2019s required to pass it on is a simple written instruction to transfer the title to a beneficiary. If it\u2019s held in a trust, you could be vulnerable to lawsuits over accidents involving the vehicle.<\/p>\n Annuities and retirement accounts. A trust can turn non-taxed accounts into taxable ones. However, you can make the trust itself the beneficiary, so that these accounts pass directly to your trustees without a CRA agent crashing the wake.<\/p>\n Life insurance. No need to put this in a revocable trust. Simply name your beneficiaries within the policy or create an irrevocable life insurance trust (ILIT) to avoid estate taxes. If you\u2019re worried about your loved ones having access to funds to cover your funeral expenses, or other costs and debts immediately after your passing, life insurance<\/a> can offer a versatile solution to help support your family, providing coverage to potentially replace lost income or settle outstanding debts in the event of your death.<\/p>\n Assets held in other countries. This gets complicated, as you may not be permitted to place international assets in a trust. To find out if it\u2019s possible, consult an estate attorney licensed in the country where your international assets are located.<\/p>\n Chequing accounts<\/a> and savings accounts<\/a>. If you use these to pay monthly bills, you may run into financial complications unless you\u2019re the trustee and granted full control of its assets. There\u2019s a much easier route to take: Keep these accounts out of the trust.<\/p>\n And if Pete were real, he\u2019d surely remind you that the information in this article does not constitute legal advice. Talk to a trust lawyer in your state, financial adviser or other professional before making any decisions. Pete\u2019s imaginary kids \u2014 and your real ones \u2014 will be grateful you did.<\/p>\n Read more: I’m in my early 60s and I want to retire in 3 years or less \u2014 what are 5 financial boxes I need to check right now?<\/a><\/p>\n