Does mom need a living trust?

Does mom need a living trust?

My mother is an elderly widow. Her total assets are approximately $300,000, mostly in bank accounts and CD's. She has a living will. Does she need a trust?


You ask a great question, and the answer is extraordinarily complicated depending on what you are trying to accomplish. First, and of critical importance, is that you must obtain the assistance of a competent estate and corporate legal specialist in your state. The laws differ dramatically from state to state and generic advice will simply not do. You had requested information about a book analyzing this issue under your particular state's law, but I am not aware of doing on a state-by-state basis. There are fairly comprehensive legal treatises that discuss partnership law and limited liability company law by state but these are not a reasonable substitute for obtaining legal counsel. The answer is complicated because it also depends on what your objectives are for using an FLP or LLC. For example, if an objective is sophisticated estate planning in order to obtain discounts for valuation purposes to structure gifts to your heirs, the state law default provisions under both the FLP and LLC statute are critical to avoiding problems with the Internal Revenue Service on the valuation under Chapter 14 of the Internal Revenue code. These rules are far to complex to address in this answer. These rules prevent you from using provisions of a partnership or operating agreement that are more restrictive than state law for purposes of determining value. Thus, picking a state whose laws are restrictive can be important. In some states, for example, an LLC alone may suffice. In many states estate planners will form these entities in another jurisdiction, Delaware as an example, and then have those entities authorized to do business in their home state where the transactions are actually occurring. This is done because some other state may actually more favorable laws if your home state laws are inadequate. In some instances a family limited partnership may be formed with a limited liability company as the general partner. This approach may give the best advantage of the supporting discounts for Federal estate tax purposes while using the LLC as the general partner provides a measure of limited liability protection. For many people, multiple out-of-state entities are simply too complex and expensive of a structure and then they opt for a somewhat less secure simpler approach such as simply a domestic LLC. If you want to do some more legwork before hiring an attorney, your best bet, if its even feasible, is to try to obtain the handout materials from a bar association in your state that presented a seminar on the topic you are addressing. It would appear from the sophistication of your question, however, that hiring a local specialist would be the only practical approach.

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