A lawyer's help needed when trust adjusting
Q: My neighbor has a revocable living trust, which lists both him and his wife as cotrustees of all property and assets. None of the assets or property is specifically listed in the trust. He now wants to change the trust and to list me as the alternate trustee, replacing the former trustee, without going to the lawyer. Is this a good idea? Also, he thinks that none of his assets will ever need to go to probate since he has this trust. I am not so sure. It certainly is not like my own trust. What should I do?
W.B., Alexandria, Va.
A: "If you're going to modify a trust, which is a legal agreement, it makes sense to contact an attorney, just to make certain that you have taken every necessary measure to ward off possible legal objections to the document at a later time," says Gary Schatsky, an attorney and fee-only financial planner in New York.
"Since the trust is revocable, it can, of course, be modified," Mr. Schatsky says. "But modify it in a proper and legal way.
"And if the goal is to avoid probate, then you want to make certain that the trust contains all property, including personal property."
An attorney will be able to draft the language in a way to encompass all assets, Schatsky says. But items not contained in the trust may be required to go to probate.
Q: In 1999, money managers were warning me away from annuities, stating that due to my baby boomer status, paying the higher fees that insured a minimum return was not warranted. Since the economic bust, they've reversed positions, saying protecting the principal with a 5 percent insured annual guarantee for a 10-year period will help me sleep at night. During either period it would have been possible for my investment to exceed the 5 percent guarantee. So why did so many money managers fail to even consider annuities as an option during the recent bull market?
S.A.C., Bonita Springs, Fla.
A: "Most money managers would not recommend annuities because their exceptionally high expenses would have depressed your returns," says Schatsky.
Granted, many people like the certainty of annuities, he says. But before buying one returning 5 percent or so, check out potential returns and expenses from other asset types, including CDs, Treasury bonds, and top-rated corporate bonds, he says. The likelihood is that you will find a higher yield with a lower expense, he says.