Trust me, you probably should. At our monthly Campbell Chamber luncheon last Wednesday, a local trust attorney spoke on the importance of holding your assets in a Living Trust. This subject hit a particular nerve. I've been seeing an increase of clients having to go through the act of finalizing their parents' estates. I can not tell you how important making sure your trust or your parents trust is current and updated is. On a personal level, my husband and I have been married for six years. I've asked both my mother in law, 82 as well as my husband, if her assets were in a trust. Her home has been paid off for years and she has a good investment of stocks. They both had told me the many times I've asked, that yes we've seen an attorney and it's been taken care of. Last year, when 6 clients, over a two month period of time lost their remaining parent, I persisted in asking when the trust was created, and if it been reviewed by an attorney to make sure it was up to date and not subject to changes in our tax laws. My mother in law pulled out her paperwork for me to look at. I sat in shock as I saw at a document that was not a trust, but a will. It was not even filled out properly. Moral of the story, be persistent, double check. I'll make an attempt to define a few terms when dealing with wills and trusts. First, my disclaimer, I am not an attorney or certified public accountant. You should always seek the advice of a competent licensed professional when ever possible. I do have a list of service providers should you need a referral.

What does a Will do?

A Will is the legal document that allows you to distribute your property to those you choose. A Will allows you to designate beneficiaries to receive specific items from your estate. For example, if you want your house, your car, or your antique sewing machine that's been in the family for 100 yrs to go to a certain person or organization, you designate that person or organization as the beneficiary.

Who's going to make sure that your antique sewing machine goes to the proper person? The executor of your Will. The executor is the person you designate to carry out your wishes.

A Will also gives parents of minor children the chance to nominate a guardian. The court makes the final decision when appointing a guardian for your children after your death, but the court will usually accept your nomination. A guardian's legal responsibility is to provide for your child's physical welfare.

What does a Living Trust do?

A Will comes into play only after you die, but a living trust can actually start benefiting you while you are still alive. A living trust is a trust established during your lifetime. It is revocable, which allows for you to make changes. You will transfer all of your property into your living trust.

A living trust will be used as the mechanism to manage your property before and after your death, as well as provide how those assets, and the income earned by the trust, are distributed after your death. If you should become incapacitated or disabled, the trust is a place to manage your financial affairs, usually by a successor trustee, if you were serving as trustee. A living trust is not subject to probate, and therefore, all provisions of the trust will remain private.

Joint living trusts are also possible. They simply combine the assets of a husband and wife into a single trust, governed by a single trust document. However, if estate tax minimization is important, the joint living trust must be very carefully drafted with the help of an attorney in order to achieve the desired goals.

What Happens if I Don't have a Will or Living Trust?

The legal term for dying without a Will is dying intestate. If you do not specify through a valid Will or Living Trust who will receive your property, state law controls and generally distributes your property to your spouse and/or your closest heirs. This may or may not be what you intended. Furthermore, if you fail to nominate a guardian for your minor children, the state could appoint someone you don't trust as a legal guardian for your minor children. By failing to appoint someone to carry out your wishes, the state can appoint anyone to be the administrator of your property, and the administrator may have to pay certain fees or post a bond at the expense of your estate, before he or she can begin to distribute your assets. When you have a will only, you are subject to probate. Probate is the legal process through which a Will is activated and the executor acts for the estate.

One of the most important steps when creating a Living Trust is the "funding" of the trust. The trust creator MUST transfer the assets into the name of the trustee. For example, any real estate owned by the trust creator should have been deeded to the trustee at about the same time the trust was created.

A comment on refinancing when your property is held in a revocable living trust. It is common to transfers the property out of the trust, by Grant Deed, record the new Deed of Trust, then transfer the property back into the Trust via Grant Deed. If you have recently refinanced, please double check to make sure your property was properly transferred back into your trust. I can not tell you how many times new clients have come to me thinking their property was transferred back into their trust when someone had dropped the ball.

While Wills are less expensive initially, but usually require probate. Living Trusts are more expensive initially, but usually avoid probate. They are two different roads to the same destination. Which road you select depends on your individual needs and preferences. In this writer's opinion, avoiding probate at any cost is the best decision.

 

I can’t tell you how many times I’m asked the question, “I have my credit report I’ve ordered on-line, can I use this for applying for a loan?” The answer is “No”. The credit report from an on-line service is only for you to review for accuracy and possible identity theft.

 

When you apply for a mortgage loan, auto loan, credit card or employment, the entities will order a credit report based on different credit risk models.   One size does not fit all.

 

The Fair Isaac Model is available in four industry-specific versions: Auto Loan Model, Installment Loan Model, Personal Finance Model, and Bankcard Model.

 

The Experian/Fair Isaac Insurance Score allows different entities to choose from six score models - Four auto insurance models and two homeowner insurance models are available to guide underwriting decisions:

 

National Risk Model - Predicts the probability of seriously derogatory behavior, including charge-offs, repossessions, foreclosures, collections and bankruptcies.

 

Bankruptcy Risk Model - This model can help avoid bankruptcy losses.

 

Collect Score - Identify accounts with greater repayment potential. Segments collection accounts into actionable groups.

 

Recovery Score - This model predicts the relative dollar repayment amount on bankcard accounts that have been charged-off. Recovery Score is positioned as a cost effective recovery management tool.

 

Auto Risk Model - The Auto Risk Model is tailored for the auto lending industry. The Auto Risk Model will assess credit worthiness better on both prime and non-prime consumers than traditional generic risk models. The model is able to identify and approve more low-risk accounts, thereby increasing overall portfolio profitability for the credit grantor.

 

Credit Union Risk Model - The Credit Union Risk Model analyzes a consumer's credit profile report and calculates a numerical score that identifies the likelihood of serious delinquent or derogatory behavior on a credit union account. This performance outcome is different than traditional risk models that predict performance outcome on any type of tradeline.

 

 

The credit report mortgage lender use is called a Residential Mortgage Credit Report (RMCR). The RMCR provides fully researched tradelines, credit data, public records data and employment and residence records from all three bureaus. Each mortgage broker or lender must pull their own RMCR for each borrower who applies for a loan. I can’t use another broker’s credit report when I submit a loan to the lender. When I do submit the loan to the lender, they will pull their own report to verify accuracy and prevent possible fraud.

Friday, February 2, 2007 I accepted the opportunity to participate in the Job Shadowing program. Job Shadowing is a coordinated effort of Junior Achievement, City of Campbell and the Campbell Chamber of Commerce. The purpose for the program is to acquaint the student with an understanding of how their academic studies will help their futures. It’s kind of a link between schoolwork and the “real life”.

  

When I was asked to participate, I was a bit concerned because of the privacy issues with client information. Through coordinated measures, this was not a problem. Another concern was the one and a half hour time frame. Real estate and mortgage loans are not an easy topic to explain to a seventh grader. Sometimes it’s hard enough to explaining the basics to the general public.

 

One of the first subjects I tackled with my two Rolling Hills students, Page and Alyssa, was credit. Breaking down what credit is in terms they can relate to, was very important. The second area was real estate. Explaining what mortgages are and why we have them was a challenge. But it did allow me to make a connection between good grades, obtaining a college degree and not filling out credit card applications at the age of sixteen. These two girls were fairly savvy. They caught on very quickly. 

  

Sometimes, I feel we unwittingly set our kids up in a less than positive fashion. We give our kids those little plastic gift cards for their birthday or Christmas, to me they seem like training wheels for credit cards. 

  

Financial literacy is important to every single person who is going to leave our school system. Don’t get me wrong, I don’t feel it’s the sole responsibility of the schools to teach these kids important issues such as saving and spending. I feel it should start at home. The problem is most parents were never taught by their parents. It’s like a trickle down effect.   

  

While I don’t believe it takes a village to raise a child, I do feel that as a member of our community I not only have something to offer, but I should get involved.

   

What do you think?  Did your parents teach you the fundamentals of saving or budgeting money?  Would you have listened to them?  Would you have listened to a school teacher or would learning in a professional setting be more advantageous?