Since this is a blog about finance and photography, I just checked and I have not written anything about finance related stuff. So here goes…this is going to be some heavy reading. Brace yourself!

I have been in the financial planning business for over 10 years now. I have seen a lot, heard a lot, and experienced a lot of financial related issues for the average family. One of the most important advice that I provide to families is to setup a Revocable Living Trust (Trust from now on). I am not an attorney, but as a financial planner, I recognize the need for such a document.

Ok, so what is a Living Trust ?

This definiation is a lay person’s definition. For a more legal answer, seek an attorney’s advice. Or Google it!

A Trust is a written legal document that is prepared with you and your spouses’ wishes incorporated in there. It is like a will, however, it is much more than that and is also more robust. A Will can be contested and defeated. A Trust, while can be contested(anybody can sue anybody here in the US), is usually a lot tougher to defeat.

A Trust enables a smoother transition for your loved ones after your passing or your incapacity. The courts do not necessarily have to be involved.

A good Trust has several documents within it that cover different eventualities. Consult an attorney and ask what is included in their trust that they do for you.

And why do you need one?

There are many circumstances where having a Trust helps than not. To make things simple, I am going to invent a family: Tom the husband, Tina the wife and little Sarah the 3 year-old daughter. They have a crazy brother Mark and a sane sister Kimberly.

1. Assume for a moment that while Tom is driving, he gets into an accident and is rushed to the hospital. Doctos declare that he is going to need some serious surgeries but Tom is incapacitated and not able to make decisions. Under most normal situations, Tina would be able to direct the doctors on whether to proceed or not. However, different hospitals, different doctors have their own rules when it comes to accepting the spouse’s instructions. Some will have no problem, while others will require court documents. As you can imagine the worse case scenario(since that is what I prepare my clients for), Tom would be suffering whilst Tina has to go get a court order if they didn’t have a Trust (specifically a Health care directive within it).I know what you are thinking…”What the hell??” Yes..its true. It can go either way unless you have something written and planned; a Healthcare Directive would help here. You remember the Terri Schiavo case? She didn’t have this written. That became very public, however there are cases like this going on everyday. I ask you, is it really necessary to go through all this in case the worst happens? While the legislative bodies are improving the law, by its own very nature, the law is written broadly and may have leave a lot of confusion. Is this what you want? 

2. Now assume that Tom and Tina are flying together and the plane crashes instantly killing both. Little Sarah was not with them but was with Kimberly the sister. Do you know who gets the guardianship if you do not have this written legally? In Calfornia, the judge will have to decided who gets to keep Sarah and be the guardian. To complicate the matter, both Tom and Tina have life insurance that will be paid out to little Sarah (or since she is under 18 to the legal guardian). Do you serisouly think that Mark, the crazy brother is not going to contest the guardianship? Especially when he knows there is life insurance proceeds at stake? If you think that, you certainly are living in a dream. Yes, I am being harsh here, but that is my job…to make you realize that there is a lot more at stake. And if you think that the court is going to realize Mark is crazy and not rule in his favor, you have got to be delirious! Mark can easily become the nicest person in the world in front of the judges eyes and pull out all sorts of dirt on Kimberly! It happens…again, I have first hand knowledge of such things. Is this what you want? 

3. Now assume that Tina passes away and has a life insurance policy that paid out $1 million for the benefit of husband (as the typical beneficiary designation in California). Everything is fine. Tina trusted Tom to take care of Sarah and it goes according to the unwritten plan. One day, Tom meets a new partner and after 6 months they get married. Tom loves Sarah still and the new wife(call her Tracy) cares for Sarah as well. Its 4 years now and Tracy decides that she wants to setup a new business. She needs funding and asks Tom to utilize “their” assets for it. Tom obliges and Tracy begins the business. After a year, Tracy needs more money cause the business needs it. Again Tom obliges. Sooner, rather later, the money has run out and Tracy has to shut her business down. Sarah turns 18 and now has no funds set aside for her specifically and thus has to borrow or forgo further education. Once again, this happens. Is this what you want?

I hope you get the point. Its important to get this done today rather than tomorrow. As I mentioned, I am not an attorney and you will have to seek one to get a Trust put in place.

Howver, just like everything in life, there will be people who will say that you do not need this and that you can get the same done cheaply or even free. While that may be true, what they don’t say is how hard it is and how many pieces you have to bring together to make this happen. Whilst a Trust will have all these pieces included as part of one package and can cover a lot more varied scenarios. Unfortunately, a Trust will cost you money..different attorneys charge differently. I have had attorneys charge $500, whilst others charge $2,500 or even higher. Trully, it is what you feel would be the right value for you.

I have a document that I can email you that will point out things to think about when setting up a trust. If you want it, please comment below or email me.

If you have questions, please email me or post here. My email is : info “at” fotomango . com . Sorry but due to spam, I have to write my email like that.