Estate Planning and DVC - Are You Costing Your Kids $$$??

[MouseOfCards]

Can anyone here share information about using an it revocable living trust? My understanding is that an irrevocable living trust will do the same thing and shield the assets (DVC) from lawsuits. Are there good reasons for not putting the DVC into an irrevocable living trust?

 

[mustinjourney]

Can anyone here share information about using an it revocable living trust? My understanding is that an irrevocable living trust will do the same thing and shield the assets (DVC) from lawsuits. Are there good reasons for not putting the DVC into an irrevocable living trust?

yeah -- you have way less control over it. Once it's in the irrevocable trust -- it can't be taken out. There are also tax benefits/consequences depending on which you choose.

I think changing beneficiaries might be a little more difficult in an irrevocable trust than a revocable trust -- but it's been 10 years since I studied for the bar exam -- so I am admittedly a little rusty on the topic. I do remember that the main advantage of using irrevocable trusts is to avoid the death tax. As you mentioned, you can also shield assets -- but you can also get an umbrella insurance policy to cover 99% of life's issues that might come up -- and a $2,000,000 umbrella policy is surprisingly cheap.

 

[mustinjourney]

Can anyone here share information about using an it revocable living trust? My understanding is that an irrevocable living trust will do the same thing and shield the assets (DVC) from lawsuits. Are there good reasons for not putting the DVC into an irrevocable living trust?

http://finance.zacks.com/can-irrevocable-trust-modified-terminated-1620.html

see this article on some of the issues.

 

[mustinjourney]

Can anyone here share information about using an it revocable living trust? My understanding is that an irrevocable living trust will do the same thing and shield the assets (DVC) from lawsuits. Are there good reasons for not putting the DVC into an irrevocable living trust?

regarding control -- you typically can't be the trustee of your irrevocable trust...

6. Appointment of Trustee
With an irrevocable trust, the Trustee generally is, and should be, an independent person chosen by the Grantor in order to create a fiduciary duty to protect the assets - family members as a Trustee does not offer this same benefit. The Trustee will manage the assets in the trust and is bound by its provisions. By having a Trustee who is a separate entity from the Grantor, it is apparent that the Trustee is exercising independent control over the trust assets. With a revocable trust, the Grantor often also serves as the Trustee, maintaining control over the assets in the trust.

 

[MouseOfCards]

regarding control -- you typically can't be the trustee of your irrevocable trust...

6. Appointment of Trustee
With an irrevocable trust, the Trustee generally is, and should be, an independent person chosen by the Grantor in order to create a fiduciary duty to protect the assets - family members as a Trustee does not offer this same benefit. The Trustee will manage the assets in the trust and is bound by its provisions. By having a Trustee who is a separate entity from the Grantor, it is apparent that the Trustee is exercising independent control over the trust assets. With a revocable trust, the Grantor often also serves as the Trustee, maintaining control over the assets in the trust.

Does this mean that relatives cannot or should not be the trustee?

 

[MouseOfCards]

yeah -- you have way less control over it. Once it's in the irrevocable trust -- it can't be taken out. There are also tax benefits/consequences depending on which you choose.

I think changing beneficiaries might be a little more difficult in an irrevocable trust than a revocable trust -- but it's been 10 years since I studied for the bar exam -- so I am admittedly a little rusty on the topic. I do remember that the main advantage of using irrevocable trusts is to avoid the death tax. As you mentioned, you can also shield assets -- but you can also get an umbrella insurance policy to cover 99% of life's issues that might come up -- and a $2,000,000 umbrella policy is surprisingly cheap.

Thanks for the umbrella policy suggestion. Will have to look into this.

 

[Paula Sedley-Burke]

Thanks for the post. We are from the UK I must read up on what would happen in our case!

 

[MouseOfCards]

yeah -- you have way less control over it. Once it's in the irrevocable trust -- it can't be taken out. There are also tax benefits/consequences depending on which you choose.

I think changing beneficiaries might be a little more difficult in an irrevocable trust than a revocable trust -- but it's been 10 years since I studied for the bar exam -- so I am admittedly a little rusty on the topic. I do remember that the main advantage of using irrevocable trusts is to avoid the death tax. As you mentioned, you can also shield assets -- but you can also get an umbrella insurance policy to cover 99% of life's issues that might come up -- and a $2,000,000 umbrella policy is surprisingly cheap.

Is there any situation where you do recommend an irrevocable trust?

 

[mustinjourney]

Is there any situation where you do recommend an irrevocable trust?

This is way beyond my area of expertise. I deal with patents and trademarks. I didn't even take Wills/Trusts in law school -- just studied enough to get through the bar exam, and like I said, that was 10 years ago....and in TX.

With all that said, the irrevocable trust is typically used for really rich people that want to shield their vast fortunes. The two biggest reasons to have one are to reduce your taxable estate (which is around $10million if you're married), and to prevent a creditor from coming after your personal assets.

Since the vast majority of people don't have $10,000,000 in assets, doing it for reduction in estate value is pointless. If this is a problem you have -- then shielding $50000 in disney properties is probably not your biggest concern.

As far as creditors -- this is largely dependent on what you do for a living. If you work in a high risk job (e.g., surgeon, OBGYN, etc...), then protecting your assets from creditors is going to be a big deal. Aside from that -- the only two other instances where you'd have unexpected creditors would be if you accidentally maimed/killed someone in a car wreck or you/family member have a ton of medical bills that you can't afford to pay (i.e., get cancer, young child has heart condition, etc...).

An umbrella policy can protect you from a lot of the negligence stuff. As far as unforeseen medical expenses -- that's probably the most likely reason.

I'm sure there are other reasons -- but those are the two biggies that I can think of that would affect most people.

 

[Disney Dad ADL]

Can anyone here share information about using an it revocable living trust? My understanding is that an irrevocable living trust will do the same thing and shield the assets (DVC) from lawsuits. Are there good reasons for not putting the DVC into an irrevocable living trust?

Our last contract purchase we deeded under our (revocable) trust, my wife and I are trustees. our first contract is not in the trust, just in our names. We haven't transferred our first contract into the trust because I wasn't sure how that would affect our DVC perks.

Our new Contract loaded into my DVC account automatically, and I don't see any appreciable difference between using the two contracts.

FWIW, our lawyer did not bring up the option of irrevocable trust (we are in California), so I suspect it's not a very common thing. But maybe she would have mentioned it if our assets were higher. I assume having the option of revoking the trust is very useful in cases where you want to change trustees or add beneficiaries. If we were to have another child, or if We needed to take care of my nieces or nephews if something happened to their parents. I believe divorce/marriage is a common reason why people will revoke a trust.