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WILLS AND LIVING TRUSTS………
CAN
YOU LIVE WITHOUT THEM?
Everywhere
we look there are “free” seminars on living trusts.
Many offer a free lunch or dinner.
And the information given out during these seminars is often
presented in a manner intended to scare the heck out of you! Do
you really need a living trust? How
about a will? Well, as
lawyers tend to say: “It depends”.
There are two main reasons for having a revocable (living) trust: 1.
To avoid probate 2. To avoid taxes (maybe).
Avoiding
Probate A
properly drafted revocable trust should avoid the need for your heirs to
“probate your estate”, because the trust continues to “live” even
after you die and, if properly funded, the property owned by the trust can
be distributed to your heirs without the need to obtain court approval. "Funding"
your trust basically means transferring title from yourself into the name
of the trust. Another way to
look at it is that your trust must be “fed” in order to continue to
“live” - properly funding your trust is an essential task.
If done right, your estate will avoid the time-consuming and costly
probate process.
Avoiding
Taxes Each
person can currently leave $650,000 (year 2000) to their heirs without
incurring an estate tax. A
married couple can pass on double this amount; however, a competent trust
plan is required in order to pay the least amount in taxes (or avoid them
altogether). Most
Americans don’t have estates large enough to worry about estate taxes.
Therefore, “free lunch” seminars that stress the tax advantages
of living trusts are probably just trying to sell you snake oil. Wills
are a different matter. Unlike
the revocable trust, a will practically guarantees that your estate will
need to be “probated” upon your death.
This means that your private instructions regarding the
distribution of your estate will now become public information. Often,
wills are prepared along with a revocable trust as part of one’s estate
plan—this is known as a “pour-over” will.
Essentially, any property that was not previously funded into the
trust will now pour-over into the trust and be distributed according to
the written terms of the trust. If
you don’t have a will or revocable trust, you still have an “estate
plan”. The State of
California will distribute your property via the laws of interstate
succession. Pursuant to a statutory scheme, your heirs will receive your
property according to their family relationship to you.
Bottom Line
For
middle-America, a simple living trust and pour-over will are worth the
investment for the following reasons: 1.
To avoid probate 2.
To distribute your estate to the persons you choose 3.
To provide authorization for others to carry out your written
instructions should you become incapacitated 4.
To keep your estate matters private and confidential 5.
To simply “Get your house in order”.
George F. Dickerman is a private elder law attorney. For information on other related subjects, call his offices at (951) 788-2156.
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