by Archie M. Richards, Jr.
November 20, 2006

Don writes, "Many people I've encountered have prepared a living trust and failed to place their property into it. Creating a trust is easy. Putting property into the trust is the hard part."

I wouldn't call creating a trust easy, Don. An estate planning attorney should be familiar with federal and state trust laws, probate laws, civil laws, tax laws, real estate laws, and debtor-creditor laws. You wouldn't ask a bone doctor to operate on your brain. Neither should a specialist in real estate law be asked to write a living trust.

But you're correct about the importance of transferring property into a trust. Too many attorneys prepare a trust and say, "Okay, go ahead and put your property into it."

Nonsense! The attorney should do as much transferring as he can, or at least make sure that the job is done completely and correctly. All real estate, no matter where situated, should be transferred to the trust. So should closely-held corporations and investment accounts. Annuity policies owned by the individual should be owned by the trust. IRAs and retirement account should be made at least the secondary beneficiary (to inherit if the primary beneficiary has predeceased the original owner).

One caveat: The attorney probably can't go to the registry of motor vehicles and change the ownership of a car. That the owner must do.

Ask an experienced estate planning attorney to write a living trust for you. Both of you working together should then transfer all of your property into it.

Jessica asks a related question: "Do I have to pay a lawyer $1500 or so to write a living trust, or can I download instructions and forms from the internet?"

An experienced estate planning attorney may cost a couple of thousand dollars, Jessica, but the cost is worthwhile. Forms you obtain from the internet or buy in a stationery store will probably lead to difficulties and conflicts that end up in the probate court you're trying to avoid. Get it right the first time.

Frank writes, "My sister passed away some years ago, leaving two properties to me and my three brothers. Since then, one of the brothers also passed away. Am I correct that the properties are no longer part of the deceased brother's estate and are now owned by the three surviving brothers?"

Yes, you're correct, Frank. Assuming your sister left the properties in joint name with rights of survivorship and the properties are not sold, no single person owns them until the last of the four brothers remains alive.

It's a different story if the ownership is tenancy in common. Let's say that you and your three brothers inherited one-quarter each. On the death of one brother, the inheritance of his share is controlled by his will.

Assume that the will leaves his property equally to his three children, each child would then own one-third of their father's one-quarter share of the property, giving them 8.33 percent each.

Jean writes, "My husband and I are 74. Our home, worth about $400,000, is paid up. Should we borrow part of the equity to make an investment that would pay good returns, instead of the home's equity earning nothing?"

Here's a question, Jean: Will the cash income from the investment equal the mortgage payments? With income that high, the investment may not have much potential for growth. Growth is the reason for incurring the loan in the first place, isn't it?

Can you handle the periods when the investment performs badly, and even the income falters? Your mortgage payments, mind you, will continue steady as a rock.

"Good returns" means good in the past, I suppose. If investments that were good in the past were always equally good in the future, we'd all be millionaires.

I'm bullish about the stock market. But don't go whole hog with borrowed money. Depending on your financial circumstances, you might follow the recommendations in archierichards.com > Suggested Portfolios, but borrow no more than one-third of the home's value.