Globe Syndicate

 

For release Friday December 03, 2004

 

 

The Sandwich Generation . . . Helping Your Aging Parents

 

by Carol Abaya, M.A.

 

 

IRS COUNTS ALL $$ IN REVOCABLE LIVING TRUSTS

1st of 2 parts

 

Question:  I (72) have attended several financial planning seminars, and the speakers recommend setting up a revocable living trust.  In the past, you have been against them.  Why?

 

Answer:  Financial planners are out to get business.  This is their #1 priority.  All too often they use information about probate and trusts developed in another state.  This information may have no relevance to the laws in your state.

 

 In some states, it is a way to avoid the paperwork and expenses of probate.  In other states, revocable trusts have few or no benefits. In some states ( like New Jersey), probate is a one-step, 20-minute “event,”, and not a “process.”  No one other than heirs knows a deceased’s assets.  The so-called “privacy” issue is therefore meaningless.  You need to  check with your local surrogate (county) office to get the true facts about probate in your state.  

 

The reasons I personally don’t favor revocable living trusts include:

            1.  Every single dollar in a revocable trust IS accountable to IRS for estate or inheritance tax purposes.  So, there is no financial benefit in reference to taxes.

            2.  All income from the assets in a trust must be included in the trustees’ annual IRS accounting, and appropriate income taxes must be paid.  So, there is no saving here.

            3.  A revocable living trust DOES NOT avoid guardianship issues.  In fact, it sets up a potential guardianship scenario that everyone should avoid!

            If both trustees (husband and wife) are alive and the husband (who may be handling things) gets ill, the wife can handle the finances if she can do so.  In many cases, unfortunately, the wife has no financial experience.  This is changing, but we are talking now about the eldest generation.  In cases where the well spouse cannot competently handle the finances, the alternate trustee CANNOT just take over.  The alternate must have the father legally declared mentally incompetent or incapacitated.  No financial institution or brokerage firm will just allow an alternate trustee to take over an account.

           

The fact that the man has been declared mentally incompetent then becomes public record.  Everyone knows that Mr. X has lost his mind.

 

If there is no trust and a trusted adult child has Durable Power of Attorney, the POA designee can help whenever needed with no trigger event (declaration of mental incompetency) having to be met.  The father’s mental condition remains private, and only family members know about it.

 

Question:  Our son wants us to include his name on our brokerage account so he “can handle things.”  He is mad that we refuse and hasn’t spoken to us for two months.  We’re upset both by his insistence to be on the account and his not talking with us.  We’re quite capable of “taking care of things” ourselves.

 

Answer:  Good decision on your part!  Parents should not have brokerage or bank accounts in their name together with a child on an ownership basis.  Such arrangements put the elders’ assets at great risk.

                                                                                                                                       

 

Are you juggling doing errands for your aging parents, your children, yourself and working at the same time?  Are you tired, stressed out and upset that your once vibrant parent is now frail and needy?

 

Do you feel alone?  Rest assured you are not alone!  The Sandwich Generation is dedicated to the 50 million Americans who may have elder/parent care concerns and/or responsibilities.

 

 

 

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Do you have a question? Send it in. Although letters cannot be answered individually, appropriate letters will be answered in this column whenever possible. Letters may be edited. Send letters to Ms. Carol Abaya, mail direct to her at PO Box 132, Wickatunk, NJ 07765-0132 or contact her through her web site: thesandwichgeneration.com.

 

Carol Abaya is an international-award-winning journalist and creator of the unique magazine The Sandwich Generation: You & Your Aging Parents.

 

NOTES TO EDITORS: text = 572 words; other material = 160 words

 

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