Living Trust - Determining the Need

Q. My husband, a pharmacist, is almost 70 and we will soon have to draw out from our IRA. Our financial advisor is helping us plan how best to plan for retirement. We own our home and cottage on an acre of land. He and I both have a ten year term life policy. I have a 91 year old aunt that has me as heir and executor of her estate at the time which is appraised a little under $200,000 (property and house) and probably $100,00 in savings and bank account.

I believe that it would be good for us and her to have a living trust. Of course, we have a will that was recently updated as was my aunt's after the death of her husband. My husband is still working as it would be hard for us to live just on our Social Security checks. Our IRA lost more than $20,000 a couple of years ago. Our financial advisor is checking on that to get us in less aggressive funds. He has suggested that my aunt have a living trust. I would like any other suggestions that you might have. I have read all articles on your site and have printed most of them. Thanks for your helpful site.


A. There are several issues that are raised in your question.

Concerning a living trust...It is almost always easier to settle an estate that has the assets in a revocable living trust. Without a trust, many of the assets will have to go through probate which will increase the time required and add to the headaches. If you aunt had her home and bank accounts in a living trust and you were named as the successor trustee, the settlment of her estate will be much simpler.

For instance, you could use the funds in the trust bank accounts to cover funeral expenses, pay for ongoing bills and to fund any needed repairs on the house. You could place the house on the market and sell it right away. Available funds could be distributed from the trust to its beneficiaries very quickly. You will still need to file a state and federal tax return on her estate but that is done fairly simply.

All these things I just mentioned can be done without the need for a lawyer. You will need an attorney to be involved in the initial drafting of the legal documents but not in the settlement.

Additionally, if you aunt has her assets in a living trust and she becomes incapacitated, it is very easy for you to step in and manage her assets without interruption or involvement from the courts. That in itself is enough reason to have a living trust!

The downside is that it can be difficult to convince someone of their need for a living trust. Those who are unfamiliar with them feel like they are losing control of their assets, although they are actually gaining greater control. If your aunt is open to the idea of a living trust it might be worth pursuing.

Concerning you and your husband's situation...The investments that you should be in depends on the amount of assets you have and how much income you are going to need from those investments. At age 70, growth probably shouldn't be as high of a priority because of the risk associated with it. You mentioned that you lost $20,000. It's going to be very difficult to earn that back.

It may be more important for you to hang on to what you have and to use lower risk income oriented investments. There are many different options where you can earn more than on a CD but without taking the degree of risk you currently have in the portfolio. Unfortunately, your advisor may not be familiar with many of these opportunities (few are).

I am happy to make additional recommendations, but I will need to know more about your situation. How much do you have invested? What is it invested in? How much income do you want/need to supplement your Social Security? How is you and your husband's health?

Your posted comments on this and other questions are welcome.
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