In his new book, The Living Trust Advisor, Jeffrey L. Condon believes that a little levity goes a long way toward helping financial advisors and their HNW clients slog through the often complex and challenging arena of the living trust.

“As complicated as this can get, it surely is easier to understand than the offside violation that I was required to know as a referee in my daughter’s soccer league,’’ quips Condon, an estate planning attorney who has practiced in trust, estate and probate law in Santa Monica, Calif. since 1987.

That’s Condon referring to understanding the proportional estate tax allocation provision of a living trust, just one of a trust’s many possible gradations and sublevels. Condon says the living trust is “the primary tool in the United States for the transfer of your assets after the deaths of both you and your spouse to your children, grandchildren or other heirs.’’

Although a will is most often inexpensive and can be uncomplicated, it incurs the cost of probate.

Living trusts avoid probate, and are especially appropriate for the older client who is married, has children and high net worth. But Condon’s rule about who needs a living trust is this: “If you own real estate of any value, whether $10,000 or $10 million, you need a living trust. You should establish your living trust and transfer title of your real estate to yourself as trustee of your living trust.’’

Condon writes that a living trust “is simply an after-death power of attorney,’’ and “the main purpose of the living trust is to provide you with the power to appoint the person or persons of your choice to sign your name to the title-transferring documents after you die.’’

He says that financial advisors play a key role in the maintenance and refining of a living trust.

“The financial planner is integral to the estate-planning process. While the estate-planning lawyer rarely sees or communicates with his living trust clients, you, the financial planner, are on the front line of your clients’ lives.’’

In 25 chapters, Condon includes more than 80 “Financial Advisor Alerts’’ connected to each chapter’s subject. These alerts range from urging clients to provide an annually updated list of assets; explaining to clients the dangers of joint tenancy home ownership; making sure title to property is vested in a client’s living trust; and drilling clients on whether the person they have selected as successor trustee (upon their death) is indeed trustworthy.

Twelve areas of creating, maintaining and refining the living trust are covered in detail, among them allocation of assets (real estate, stocks, bank accounts, personal effects, etc.); operation and management of the living trust when a spouse dies or a spouse remarries; and distribution of living trust assets to your children without creating conflict and chaos between siblings.

Condon does not mince words about the less-than-noble, destructive or just misguided behavior he has seen as an estate planning lawyer. One chapter is entitled, “Do Not Leave Your Child An Outright Inheritance (I’m Not Kidding!),’’ and he’s so insistent on this advice, he reiterates this exhortation in a Financial Advisor Alert.

Why so adamant?

“The money will be lost to the problems your children face in their lives,’’ he says, these problems including divorce, remarriage, income tax trouble, addiction, financial immaturity, creditors, mismanagement, bankruptcy and more. This is money that clients intended not just for their children but, he argues, often more so for their grandchildren. It must be protected and can be through so-called protection trusts. Condon outlines four such trusts in ascending order of austerity, beginning with the transparent trust (a “constant reminder of your wish to keep the family assets in the family’’) to the discretionary trust, which appoints a third party to distribute, or not, living trust assets to survivor children.

Here, Condon says, financial advisors must step in and “point out to your clients that their assets will one day be in their children’s hands and they have to take protective measures now in their living trust to ensure that those assets don’t slip through those hands.’’

In Condon’s eye-opening last chapter of true stories drawn from his law practice, “A Random Sampling of Cautionary Tales,’’ horror stories abound when a living trust has not been properly crafted: squabbles over equitable distribution of living trust assets destroy sibling and parent-child relationships; failure to update living trusts gives inheritance rights to the wrong person; ill-considered trusts have damaging effects on heirs; and elderly widows and widowers are forced out of homes not titled properly to a living trust.

Condon invites readers with questions to contact him, at no charge, and includes in his book his postal and email addresses, plus telephone numbers.
 
The Living Trust Advisor, second edition, by Jeffrey L. Condon. John Wiley & Sons, Inc.  $39.95

Eleanor O’Sullivan is an award-winning freelance journalist who writes for Financial Advisor magazine.