Reasons to Create a Living Trust
January 4, 2008 | 1 Comment
People have different reasons for doing a Living Trust.
Some of these reasons are:
- You want to avoid probate. Since the property is no longer in your name as an individual, but is now in your name as trustee, there is no reason to go through probate. This is a savings of 5%-10% of your gross estate. An additional benefit is that it will only take weeks instead of years to transfer your property to your heirs.
- The trust will remain private. Unlike a will, which has to be filed as a public record in the probate court, the trust remains a private document even after your death.
- With certain provision in the trust, you can completely avoid or reduce estate taxes. This can mean savings of literally thousands of dollars.
- You avoid the potential of a guardianship hearing because you have already named someone to take your place if you are unable to handle your affairs. In addition, you can set up your trust to allow your family Doctor to make the decision of whether you can handle your own affairs. The alternative is to allow a judge to do this in a public hearing.
- If your heirs are too young or immature to handle the money you will leave them when you die, you can use a trust to determine when they will receive the money and how much they will receive each time. For example, you can leave instructions that say, when my child reaches 30, he gets 1/3 of the property. When he reaches 35, he gets another 2/3. And when he reaches 40, he would receive the final 1/3, or the remaining balance of the estate.
- The trust is less open to attack than a will. This means that your wishes have a better chance of being carried out.
- In the context of a second marriage, the trust is an excellent way to protect both the surviving spouse and the children from your previous marriage.
- If you have property in another state the trust will eliminate the probate in the other state.
- Transferring property through a trust allows your property to receive a stepped up basis. This could greatly reduce the amount of capital gains tax your heirs will pay.
- Setting your finances in order will give you peace of mind.
- The trust will remain private. Unlike a will, which has to be filed as a public record in the probate court, the trust remains a private document even after your death.
How Does a Living Trust Work?
November 8, 2007 | Leave a Comment
A Living Trust is also known as an “inter vivos” trust. It is created during your life and has three key elements:
- Trustor – This is the person who sets up the trust;
- Trustee – The person appointed by the Trustor to actually manage the trust; and
- Beneficiary – The person(s) who receive the assets from the trust.
When you create a trust, as Trustor, you determine the terms of what goes into the trust, how its managed, and eventually distributed. That means you have complete control over your Living Trust. For example, only you can make any changes to the Trust (by amending it), or cancel it (by revoking it).
When you create your trust, you appoint a Trustee. So, as Trustee, you manage your estate in much the same way as you do now. You may: buy, sell, mortgage or give away assets that are held by the Trust; transfer ownership of property back into your name; add property to the Trust; or change your Beneficiaries or when they are to receive the inheritance.
Once you are deceased, your Successor Trustee(s) will take over management of the Trust on your behalf and make the final distributions, as you have directed.
Your Beneficiaries will inherit your estate - the property held in your trust passes to your Beneficiaries according to the terms of the trust. The probate court usually does not have to be involved, and the transfer of property is a straightforward process. AND happens just as you have directed.
What is Probate?
November 6, 2007 | Leave a Comment
When you die, the assets you own or have an interest in are “stuck,” unless you own them as tenant-in-common with someone else or you have a “pay-on-death” or “transfer-on-death” designation. Probate is a court supervised process of ensuring that to the various assets is passed to your beneficiary(ies) according to the “closeness” of your relative(s), according to the state laws where you died in. If you left no Will (an “intestate estate), a separate probate proceeding will need to take place in each state where there are assets.
Disadvantages of a Living Trust
November 5, 2007 | Leave a Comment
Disadvantages of Creating a Living Trust. Disadvantages to creating a Living Trust are few. The primary disadvantages are:
The cost of establishing a trust. A trust will cost more than a simple Will, though these costs are commonly less than the cost of going through probate.
The process of funding a trust can be tiresome and time-consuming. This is most commonly a burden if there are many bank accounts. Most assets are easily retitled to the trust with a little guidance from your attorney.
Finally, a Living Trust does not shelter your assets from creditors.
Advantages of Creating a Living Trust
November 4, 2007 | Leave a Comment
What are the advantages of creating a Living Trust? Depending on your family circumstances, the size and composition of your estate, and your goals, many advantages exist for creating a Living Trust. These advantages include the following: You want to avoid probate. Since the property is no longer in your name as an individual, but is now in your name as trustee, there is no reason to go through probate. This is a savings of 5%-10% of your gross estate. An additional benefit is that it will only take weeks instead of years to transfer your property to your heirs.
The trust will remain private. Unlike a will, which has to be filed as a public record in the probate court, the trust remains a private document even after your death.With certain provision in the trust, you can completely avoid or reduce estate taxes. This can mean savings of literally thousands of dollars.
You avoid the potential of a guardianship hearing because you have already named someone to take your place if you are unable to handle your affairs. In addition, you can set up your trust to allow your family Doctor to make the decision of whether you can handle your own affairs. The alternative is to allow a judge to do this in a public hearing.If your heirs are too young or immature to handle the money you will leave them when you die, you can use a trust to determine when they will receive the money and how much they will receive each time. For example, you can leave instructions that say, when my child reaches 30, he gets 1/3 of the property. When he reaches 35, he gets another 2/3. And when he reaches 40, he would receive the final 1/3, or the remaining balance of the estate.
The trust is less open to attack than a will. This means that your wishes have a better chance of being carried out.In the context of a second marriage, the trust is an excellent way to protect both the surviving spouse and the children from your previous marriage.
If you have property in another state the trust will eliminate the probate in the other state. Transferring property through a trust allows your property to receive a stepped up basis. This could greatly reduce the amount of capital gains tax your heirs will pay.Setting your finances in order will give you peace of mind.
Last Will & Testament
November 3, 2007 | Leave a Comment
A Last Will and Testament is your written statement of what will happen to your estate when you die. Your “estate” is comprised of all of the assets which you own in your name alone or as a tenant in common with one or more persons. Your Will only affects those assets which have no joint ownership with rights of survivorship and which have no endorsement (benefactor designation) which makes the asset payable on death to another. Common examples of assets that a Will will not act on, include: life insurance that has a beneficiary designation other than your estate; individual owned brokerage accounts or bank accounts, that have a transfer on death designation; tax-deferred retirement accounts (IRA’s, 401(k)’s. . .) that have a beneficiary designation; and real estate where title is held either by tenants by the entirety or as joint tenants with rights of survivorship. No matter what the will says, these kinds of assets are not subject to the Will’s terms. When you die, your Will is submitted to the Probate Court, for processing, typically where you last resided. This begins the probate process. Probate is also required if you die without a Will and the asset is still in your individual name. This circumstance is called intestate and it simply means that the state has written a default Will for you.
Durable Power of Attorney
November 2, 2007 | Leave a Comment
A Durable General Power of Attorney appoints an agent (attorney-in-fact) to make decisions for you when you no longer are able to do so. Regardless of whether you execute a will or a trust, there are always circumstances where a power of attorney is needed. While a trust “owns” your assets, you have other financial aspects to your life, such as pensions and medical insurance that may need to be addressed while you are incapacitated.
Advance Medical Directive
November 1, 2007 | Leave a Comment
An Advance Medical Directive is a document that combines a living will (a statement of your desires in end-of-life situations) and a medical power of attorney (your appointment of an agent). By stating under what circumstances you want life support withdrawn by your loved ones and the related anguish of making such a decision. By appointing an agent, you ensure that those decisions will be honored. Your agent can also make related medical decisions that need to be made when you can no longer make those decisions.
Welcome to Dan Dorsch’s Blog!
October 11, 2007 | Leave a Comment
October 11, 2007 … 1:16am! First post and on a day with an extremely powerful day number. The number 11 is the symbol of clenched fist, the symbol of strength. Bob Marley, Rasta prophet, died on May 11, 1981. His most famous stance is standing with a raised & closed fist, singing: “Get Up, Stand Up, Stand Up for Your Rights!”
Bob Marley left a huge estate, but he didn’t believe in estate planning, so his loved ones and business partners spent years in court. They may still be trying to figure it out.
This site is devoted to helping you avoid that type of situation … by having solid contracts and a plan for the future. So, come back soon, and look around.
I want to take this opportunity to thank Dan for asking me to help with this project. It’s been fun, and I know it’s going to be productive!
Lynn Roberts, writing on Dan Dorsch’s blog, over & out, 242 am.