TRUSTS: WHO NEEDS 'EM

When thinking of trusts, most Americans think that only people of great wealth need them. Not having an estate of huge proportions, most people think they do not need a trust.

After attending one of our estate planning seminars, a couple, in their early 60s came in for a personal estate planning session. With no children and an estate of about $1 million, their only heirs were these:

1. The lady's sister.

2. The lady's nephew (sister's son).

3. The son's wife

The lady explained that she cared dearly for her sister and that her sister was not in good financial circumstances. "So," she explained, "when we die, we want our estate to go to my sister."

She, evidently, wanted me to show her how to draft a will so that the sister would receive everything.

Continuing the dialog, I asked about her relationship with her nephew. "Oh, he's a wonderful young man and we really like him," she continued. Her husband nodded.

"But," and with this she leaned closer, "we don't like his wife very much."

"In fact," in a near whisper, "we absolutely hate her."

"And," the husband continued, "of course, we wouldn't want any of our money to go to her."

Recognizing that they had never made a mental chart of the disposition of their estate, I took out a piece of paper and said, "Let's outline how your estate will pass."

Then, while drawing a simple group of diagrammatic boxes, I explained that the most likely series of events was that:

1. They would leave the estate to sister.

2. Sister would, eventually, die and leave it to son.

3. He would die and leave it to his wife.

Revolted by the prospect of the younger woman receiving any of their hard-earned estate, they simultaneously asked, "How can we avoid this?"

I then showed them how to create two Living Revocable Trusts for themselves, how to care for the survivor of them at no tax on as much as $1.2 million and how to care for sister and son with no probate.

I then showed them how to create a Charitable Remainder Trust ... and to begin making annual contributions to it. They would receive a much-needed tax deduction each time they deposited funds into the trust.

Not needing the income that the trust could provide now, they would use it as a second retirement fund.

It would be a four-life trust; husband and wife would benefit for their joint and survivor lives. At the death of the last member of the couple, the sister would benefit for her life. At her death, the son would benefit for his life.

At the son's death, assets would go to "The Foundation".

The disliked niece-in-law would receive nothing.