Estate planning also addresses your welfare and needs, planning for your own personal and health care if you are no longer able to care for yourself. Like many people, you may at first think that estate planning is simply the writing of a will. However, it encompasses much more. As you will see, estate planning may involve financial, tax, medical and business planning. A Will is only one part of that planning process and often other documents are needed to fully address your estate planning needs. Estate planning is a dynamic process. Just as people, assets and laws change, it may well be necessary to adjust your estate plan every so often to reflect those changes.
Q. What is Probate and why do most people want to avoid it?
A. Probate is the legal process of changing title to a decedent’s estate assets to the legal heirs of the estate. With a Will alone or no estate plan, probate is necessary for assets totally over $100,000 (based on the gross value of the estate not the net value). Most people want to avoid this process because it is timely, costly and is a public process. Probate can take several months to several years, making heirs wait longer than they usually would with a trust administration. Probate is also very costly. The probate fees are mandated by statute and include 4% for Executor/Estate Administrator and 4% to attorney on the first $100,000, 3% each on the next $100,000, 2% on the next $800,000, etc. For example, on an estate valued at $1,000,000 before debt off-set, the fees to the attorney and estate administrator would be $46,000. Additionally, if there are any complications in the administration, there may be extra attorney’s fees ordered by the Court. Lastly, most people want to avoid probate because it is a process that is open to public inspection. Unfortunately, there are some unscrupulous solicitors out there that try to get estate administrators to invest the estates they are managing with them. Not to mention that everyone will know what you had, who you owed money to and who you left your property to.
Q. What are some common elements in most estate plans?
A. Today, a smart estate plans should contain the following:
• A Revocable Living Trust
• A Pour-Over Will
• A Durable Power of Attorney for Financial Management
• An Advance Health Care Directive with HIPPA release
• A Guardianship Provision document (if appropriate)
• A Community Property (Marital Property) Declaration (if appropriate)
• An Assignment of Personal Tangible Property to the • A Grant Deed transferring title to the family home to the trust
• A Preliminary Change of Ownership Report to accompany the new Grant Deed
• Certification of Trust
Q. What is a Living Trust?
A.
A living trust is a legal document that holds title to your assets that may be amended or revoked by you (commonly known as a "trustor," "grantor" or "settlor"), at any time during your lifetime, as long as you are competent. It is a written legal agreement between the individual creating the trust and the person or institution named to manage the assets held in the trust (the "trustee"—usually you during your lifetime). In most cases, it is appropriate for you to be the initial trustee of your living trust, until management assistance is anticipated or required (at incapacity or death).
In a living trust agreement:
• The trustee is given the legal right to manage and control the assets held in the trust.
• The trust provides for the persons or charitable organizations ("beneficiaries") who are to receive the income and principal on or after the trustor's death.
• The trustee is given guidance and certain powers and authority to manage and distribute the trust property in a prudent fashion. The trustee is a "fiduciary."
A fiduciary is one who occupies a position of trust and confidence and is subject to strict responsibilities, usually higher standards of performance than one who is dealing with his or her own property. Without the trustor's express written permission, the trustee cannot use trust property for the trustee's own personal use, benefit or self-interest. One must hold the trust property solely for the benefit of the beneficiaries of the trust.
A living trust can be an important part - in many cases, the most important part - of your estate plan.
Q. Can I be the Trustee of my revocable living trust? A. Yes, so long as you are legally competent, you can be the Trustee of your revocable living trust.
Q. What are some of the benefits of having a Living Trust?
• No probate and no probate fees at death
• Faster distribution of assets to beneficiaries
• Conservatorship action avoidance at incapacity
• Control over timing of distributions to beneficiaries (such as children)
• Private administration of your estate
• Convenient asset management
• Reduction or elimination of the Federal Estate Tax
• The ability to amend or revoke easily
• The ability to provide for future care of pets
• A trust will carry out your wishes when you are no longer able to in the way you want.
|
