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"I need a trust."

5/26/2012

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      It is remarkable how many people tell me "I need a trust," even though they can't tell me why they need a trust.  

     Here's a little bit of information on trusts that I prepared for the "Preparing for Departure"(TM) seminar that we're giving right now:





Trusts and Living Trusts

      Trusts (and living trusts) are often sold (hard) as an alternative to wills and probate, even for people with modest amounts of property.  Despite any hype via the media or that you may hear at an "estate planning seminar," living trusts are not for everyone.  It depends on what you own and how you own it, as well as what you intend to happen when you die.

     Trusts avoid probate (for the property held by the trust only) because the trust, not you, owns the property.  In living trusts, you (the grantor) usually set yourself up as both the beneficiary and administrator (the trustee) of the trust, with a successor trustee and successor beneficiaries.  While you're alive, you are the business agent of the trust, and you use the trust for your own benefit, such as to pay your bills.  If you can’t act as trustee, the successor trustee uses the trust assets for your benefit while you are alive.  Then, on your death, the trust assets are used for the benefit of, or turned over to, your successor beneficiaries.  Because you did not own the assets solely in your name at your death, they do not need to go through probate.

     One downside of trusts is that you need to spend money up front to have the trust created by an attorney and to prepare all the legal documents to change the ownership of your assets (your home, stocks, bank accounts, etc.) to the trust.  If you miss something, and you die with assets in your name, a probate may still be required on your death, which is why you still need a pour-over will to "pour" any remaining assets you forgot about into your trust. 

     The main problem with living trusts is that it's more complex for you to pay taxes, buy and sell things, and just generally to have this separate legal entity in place owning your stuff.  It can also just be more expensive. 


     In fact, in one sense, trusts really don’t avoid probate—they just let you do it yourself while you are still alive, with the extra burden of making sure that every time some circumstance changes in your property or wishes, you do a little bit more probating.

     I'm not saying nobody needs a trust.  And trusts aren't all bad.  I'm just saying that you shouldn't have a trust until you know what problem you are solving by having one, and what the alternatives were, and how much they cost, so that you could compare those alternatives to the care and feeding of the trust. 


      One reason that some people use them is that they learned about the big, big problems that can result from I call “home brew estate planning,” where people make their someone else a joint owner of their major property, just so that they can "avoid probate."  This is often a disastrously bad idea, so if a trust keeps you from doing that, it's a good thing.

     For example, if you make your daughter a joint owner with right of survivorship, she can move in with you, she can stop you from selling by refusing to sign off on the deed of sale, and you cannot change your mind and take her off the deed unless she agrees.  And if she gets into trouble with debt or legal judgments against her for accidentally injuring someone, you may find yourself co-owning property with someone you never intended.


     But you don't need a trust to avoid the home brew estate planning problem.  Between Oregon's recently adopted "Transfer on Death Deeds" and a will, you can pretty much do everything you need to do without the bother of a trust.



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Speaking of Student Loans

5/17/2012

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THE SCOOP ON STUDENT LOANS
      Whether you saw the cover story in the New York Times, or chuckled as President Obama advocated the issue on Late Night with Jimmy Fallon, student loans continue making headlines. With interest rates for Stafford Loans possibly doubling in July, now is an excellent time to inform yourself about this issue.
     For further reading, try The Student Loan Scam. This analysis of the $85-billion industry covers the history of student loans, exposes how universities have profited at students’ expense, and shares the stories of people whose lives have been shattered as a result. The Boston Globe calls “The Student Loan Scam passionate and informed.”
     Also: Read chapter 3, "Collection Abuses" from The Student Loan Scam. Read a recent Salon.com article featuring Alan Michael Collinge. Visit Alan's website for more information.
    $20.00 Paperback

(Blurb above from a Beacon Press promo email.  Beacon Press is one of the best.)

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College no sure road to security any longer

5/17/2012

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No one is immune from bankruptcy. That's the message of a national survey released today by a South-Portland-based financial nonprofit. High-earners and college graduates are among the fastest-growing group of debtors filing for bankruptcy, according to the Institute for Financial Literacy. Bankrupty filing rates for people making $60,000-plus increased by more than 66 percent; college graduates by 20 percent. -- Maine Public Broadcasting report

Since "get a college education" is so often prescribed as the cure-all for all our ills, the warning photo to the left is apt -- the higher ed bubble is showing all the same signs as the housing bubble did in its last, frantic moments.  Here's a good example of how cut-throat the student loan business (and it IS very much a business) has become.  Colleges are holding transcripts hostage, which makes it difficult for the borrowers to get the job they need to pay the loans:

     This is happening at a time when recent grads are finding it particularly hard to find work, not just in their chosen fields, but anywhere. About half of recent college degree-holders were unemployed or underemployed last year, according to a recent Associated Press study. And the federal Consumer Financial Protection Bureau estimates student loan debt has passed $1 trillion, an amount greater than all outstanding credit card debt. The Department of Education put the default rate at 8.8 percent of student borrowers as of September 2010.

     It's no accident that colleges are using the withholding of official transcripts to punish students behind in their loan payments. It turns out the federal government encourages the practice. Schools are not required by law to withhold transcripts, but a spokeswoman at the Department of Education confirmed that the department "encourages" them to use the draconian tactic, saying that the policy "has resulted in numerous loan repayments."

     It is a strange position for colleges to take, however, because the schools themselves are not owed any money. Student loan funds come from private banks or the federal government. For federal Perkins loans, schools get a pool of federal money to apply to students' financial aid, and if students don't pay, that pool gets smaller. But the creditor is still the government, not the college. And in the case of so-called Stafford loans, schools are not on the hook in any way; they are simply acting as collection agencies, and in fact may get paid for their efforts at collection.



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Resources for Nonprofits available for loan

5/8/2012

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     I've been especially gratified by the response to the services I offer for nonprofit organizations.  When I went into practice, I knew that there were lots of places where many hardworking folks needed a hand, but I also know that too many nonprofits wait until it's very hard to help them to reach out and ask for it.  Some of the most satisfying work I do is to help groups of volunteers who have formed (or are thinking about forming) an organization to pursue their vision for a better community.  I love being able to share some of what I've learned over the years. 

      And one reason I founded the Nonprofit Organizations Law Section as a professional practice section in the Oregon State Bar was that I saw that there wasn't enough sharing of resources among people who support the sector.  Sometimes it seems like competitors in the for-profit sector were doing more sharing than nonprofits who don't even compete with each other.

     Then, today, it occurred to me that I could do more, because I have a lot of great resources on my shelf that could benefit more groups than just my clients.  So, to continue with the sharing theme, I would like to offer to make my bookshelf available to nonprofits here in Salem (or with board members willing to come to Salem).  Just call or send me an email to make an appointment to have your executive director or a couple board members come by to check out what's available -- when I got to looking at it today, I realized it's quite a decent collection of current materials.

     I hope I can share some with you soon. 
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John Gear Law Office LLC and Salem Consumer Law.  John Gear Law Office is in Suite 208B of the Security Building in downtown Salem at 161 High St. SE, across from the Elsinore Theater, a half-block south of Marion County Courthouse, just south of State Street. There is abundant, free 3-hour on-street parking throughout downtown Salem, and three multi-story parking ramps that offer free customer parking in downtown Salem too.

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