Estate Planning

 

SOME SIMPLE FACTS ABOUT ESTATE PLANNING

 

TRUE OR FALSE?

 Only people who are wealthy or advanced in age need an estate plan?

 

FALSE! 

Everyone can benefit from an effectively designed estate plan; and making the proper arrangements for the distribution of your assets upon death is what estate planning is all about

 

Rosetta N. Reed, Bakersfield lawyer for wills and trusts explains: 

 

The fact is, all people have an estate plan, whether they realize it or not. If your wishes are not set forth in a legally accepted will or trust, your estate plan is created by default. California has laws that govern the distribution of a person’s estate if they die without a will (i.e. dies intestate) or a trust. So the question becomes not whether you have an estate plan or not, but whether you have an estate plan of your choosing or one that is imposed on you by law.

Most people rely on the most basic estate planning device to accomplish that goal of making provision for distribution of assets after death…the “last will and testament”.

And a will isn’t a “bad” thing. A person can achieve all of their goals of distribution through a will. And sometimes that’s the best way to go. But there is one huge drawback to the will…it must go through probate.But because probate is expensive and time consuming, a better way to plan for distribution of your estate upon death is through a revocable living trust.

 

PROBATE AVOIDANCE BY MEANS OF REVOCABLE LIVING TRUST

 

 

What is a living trust?
A living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die. But, unlike a will, a living trust avoids probate at death, can control all of your assets, and prevents the court from controlling your assets at incapacity.

 

Why would the court get involved at incapacity?
If you can’t conduct business due to mental or physical incapacity (Alzheimer’s, stroke, heart attack, etc.), only a court appointee (conservator) can sign for you—even if you have a will.(Remember that a will only goes into effect after you die.)Once the court gets involved, it usually stays involved until you recover or die. The court, not your family, controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming and difficult to end if you recover. And it does not replace probate at death—your family could have to go through the court system twice!

 

Does a Durable Power of Attorney prevent this?
A durable power of attorney lets you name someone to manage your financial affairs if you are unable to. However, many financial institutions won’t honor one unless it’s on their form. And, if accepted, it may work too well—it can simply give someone a “blank check” to do whatever he/she wants with your assets. It can be very effective when used with a living trust, but risky when used alone.

 

How does a living trust avoid probate and prevent court control of assets at incapacity?
When you set up a living trust, you transfer from your name to the name of your trust, which you control—such as from “Bob and Sue Smith, husband and wife” to Bob and Sue Smith, trustees under trust dated 1/1/20_.” Legally you no longer own anything (don’t panic: everything now belongs to your trust), so there is nothing for the courts to control when you die or become incapacitated. The concept is very simple, but this is what keeps you and your family out of the courts.

 

Do I lose control of the assets in my trust?
Absolutely not. You keep full control. As trustee of your trust, you can do anything you could do before—buy/sell assets, change or even cancel your trust (that’s why it’s called a revocable living trust). You even file the same tax returns. Nothing changes but the name on the titles.

 

Is it hard to transfer assets into my trust?
No, and your attorney, trust officer, financial adviser and insurance agent can help. You need to change titles on real estate (in and out-of-state) and other titled assets (stocks, CDs, bank accounts, other investments, insurance, etc.). Most living trusts also include personal items such as jewelry, clothes, art, furniture and other assets that do not have titles.Also, beneficiary designations on some assets (like insurance) can be changed to your trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die.

 

Doesn’t this take a lot of time?
It will take some time—but you can do it now, or you can pay the courts and attorneys to do it for you later. One of the benefits of a living trust is that all your assets are brought together under one plan. Don’t delay “funding” your trust; a trust can only protect assets that have been transferred to it.

Should I consider a corporate trustee?
You may decide to be the trustee of your trust. For example, a husband and wife who create a living trust are usually the initial co-trustees. However, some people select a corporate trustee (bank or trust company) to act as trustee or co-trustee now, especially if they don’t have the time, ability or desire to manage their trusts, or if one or both spouses are ill. Corporate trustees are experienced investment managers, they are objective and reliable, and their fees are usually very reasonable.

 

If something happens to me, who has control?
If you and your spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, your handpicked successor trustee will step in. If a corporate trustee is already your trustee or cotrustee, it will continue to manage your trust for you.

 

What does a successor trustee do?
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you automatically resume control. When you die, your successor trustee pays your debts and distributes your assets. All this is done quickly and privately, according to instructions in your trust, without court interference.

 

Who can be successor trustees?
Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should name more than one in case your first choice is unable to act. Remember that a trustee should be someone you trust!

 

Does my trust end when I die?
No. Actually, because a trust is basically a piece of paper, it can’t physically die. That’s why it doesn’t have to go through probate. Although a will is a piece of paper too, it is a document that directs how the assets of you, the owner of such assets, are distributed when you die. Death is the event that triggers probate. In a living trust situation, the trust itself is the owner of your assets (even though you retain complete control over them), and they remain in your trust until your beneficiaries (including minor children) reach the age(s) at which you want them to inherit, or to provide for a loved one with special needs.

 

How can a living trust save on estate taxes?
If the net value of your estate when you die is more than $5.49 million for a single person, $10.98 million for married couples, then federal estate taxes must be paid. If your estate falls within this category, there are methods to avoid federal estate tax altogether, at least on the first death, or at the very minimum, minimizing the amount of tax due, with proper estate planning.

 

Doesn’t a trust in a will do the same thing?
Not quite. A will can contain wording to create a testamentary trust to save estate taxes, care for minors, etc. But, because it’s a part of your will, this trust cannot go into effect until after you die and the will is probated. So it does not avoid probate and provides no protection at incapacity.

 

Is a living trust expensive?
Not when compared to the costs and loss of control that come with court interference at incapacity and death. How much you pay will depend on how complicated your plan is. Be sure to ask for an estimate in advance. Generally speaking, most law firms charge a flat-fee for preparing trust documents, rather than charge on an hourly basis.

 

How long does it take to get a living trust?
It should only take a few weeks to prepare the legal documents after you make the basic decisions and provide needed information to your attorney (i.e., such as deeds, existing wills, account information, etc.).

 

Should I have an attorney do my trust?
Yes, but you need the right one. An attorney with considerable knowledge in living trusts can provide valuable guidance and peace of mind that yours is prepared properly.

 

If I have a living trust, do I still need a will?
Yes, a pour-over will acts as a kind of “safety net,” in the event you forget to re-title an asset in the name of your trust. Upon your death, the will “catches” the forgotten asset and sends it into your trust. The asset may still have to go through probate first, but at least it can then be distributed as part of your living trust plan.

 

Is a “living will” the same as a living trust?
No. A living trust is for financial affairs. A living will is for medical affairs—it lets others know how you feel about life support in a terminal situation.

 

Who should have a living trust?
It doesn’t matter how old you are, how much you own, or if you’re married or single. If you own titled assets and want your loved ones (spouse, children, or parents) to avoid the problems of court interference at your death or incapacity, you should consider a living trust. You may also want to encourage other family members to have one so you won’t have to deal with the courts at their incapacity or death.

 

BENEFITS OF A LIVING TRUST

 

1. Avoids probate at death, including multiple probates if you own property in other states.
2. Prevents court control of assets at incapacity.
3. Brings all your assets together under one plan.
4. Provides maximum privacy.
5. Quicker distribution of assets to beneficiaries.
6. Assets can remain in trust until you want beneficiaries to inherit.
7. Can reduce or eliminate estate taxes.
8. Inexpensive, easy to set up and maintain,
9. Can be changed or canceled at any time.
10. Difficult to contest.
11. Prevents court control of minors’ inheritances.
12. Can protect dependents with special needs.
13. Prevents unintentional disinheriting and other problems of joint ownership.
14. Professional management with corporate trustee (if desired).
15. Peace of mind.

 

Law Office Of Rosetta N. Reed

4900 California Ave, Bakersfield,

Bakersfield, CA 93309

Phone. 661-377-1869

Email. Lawyer4wills@usa.com