LIVING WILLS FOR ESTATE PLANNING
The Living Trust Kit
A Special Report by:
J.J. Childers, Attorney at Law
Today's business and legal environment requires people to aggressively defend their assets. Essentially, you must be prepared to battle the three financial Goliaths of lawsuits, income taxes, and death taxes. In order to do this, you must design and implement a plan which addresses the three concerns of asset protection, estate planning, and tax reduction. One of the first steps in doing this is to establish a living trust.
This special report is designed to help you in your battle to take control over your financial situation. In this report, we will first take a brief look at why you need a living trust. From there we will focus our study on the more important area of implementation. Through this special report and the five-step plan of action contained herein, you will understand exactly what you need to do in order to properly protect yourself as well as your family. First, let's take a look at what we're dealing with.
The Problem: Probate
The primary reason to set up a living trust is to avoid probate. This begs the question, what is probate? Essentially, probate is the orderly administration of your affairs supervised by the court. It is a function of state law and varies from state to state. If you own real property in more than one state, it is probable that your estate will be subject to probate in numerous jurisdictions, each imposing their own probate fees.
To better understand probate, we must first understand what it means. The term "probate" comes from the Latin word meaning "to prove". A will must be presented to the probate court and proven to be a valid document. This is what the probate process is all about. In addition to "proving the will" the probate process also includes:
· Officially confirming the personal representative named in the will or appointing a representative, if necessary
· Notifying the court of a deceased person's death and informing all involved parties (all potential heirs whether named in the will or not) that probate has started
· Taking an inventory of all property and appraising its value
· Paying the deceased person's debts and taxes
· Preparing a final accounting to the court
· Distributing the remainder of the deceased's property to the heirs
· Closing the estate
All in all, this doesn't sound all that bad does it? The problem comes when you factor in all of the ancillary complications associated with handling the above-listed items. Among these disadvantages are the following:
Time Consuming: The probate process can take as little as a few months or as long as several years to complete. The average probate takes about 15 months. Eighteen months to 3 years is not uncommon at all. Costly: Attorney's fees to handle probate can run anywhere from as little as a few thousand dollars to literally hundreds of thousands of dollars and much more. In addition, the executor, inheritance tax referee, and other officers of the court must be compensated. All related probate fees must be paid before any of the decedent's assets are distributed to the family. The average cost of probate is 10% of the gross estate. Remember however, that this is the probate cost alone. This doesn't even factor in the estate taxes or debts of the estate.
Loss of Control: The probate court controls the entire process. A representative of the court will tell your beneficiaries who gets what and when.
Lack of Privacy: All probate transactions are a matter of public record. Anyone can find out the size, contents, and beneficiaries of your estate. This can be embarrassing and frustrating for your family, create disputes, and expose your family to unscrupulous solicitors.
As you can see, there are a number of reasons why you must avoid probate at all costs. Now that we've identified the problem, it's time for a solution.
The Solution: The Living Trust
One of the best solutions for handling the problem of probate is the implementation of a living trust. The primary reason to have a living trust is that it avoids the entire probate process altogether. While this is the living trust's primary purpose, it also has a number of other advantages as well. For example, you can save a tremendous amount in the form of estate taxes through the establishment of a living trust. The entire process is not a matter of public record thereby maintaining your family's privacy. Additionally, when properly structured, the living trust can save your family a great deal of unnecessary pain and suffering. The key, however, is to actually get it set up. In order to do that, I have outlined an important five-step process for exactly what you need to do to get started with putting your plan into action.
Let's take a look at the five-step plan of action for properly structuring your estate plan. The five steps can be broken down as follows:
1. Clarify Your Objectives
2. Take Inventory of Your Assets
3. Select Your Professional Planner
4. Have Documentation Drafted
5. Implement Your Plan
Now that we've identified the steps in the process, it's important for you to understand more fully what is involved with each step. For this reason, the information is divided into its respective sections on the pages that follow. Let's get going on protecting your family's assets.
Step One: Clarify Your Objectives
The first step in the process is to clarify your objectives. This means that you need to determine exactly how you want your affairs handled. This involves answering important questions such as, "Whom do you want to receive your assets after you die?" "When do you want that person or persons to receive those assets?" "Whom do you want to manage your financial affairs?" "What about your medical decisions in the event that your were to become incapacitated?" "How do you want your estate distributed upon your death?"
These are all very important questions which absolutely must be answered. The problem is that all too often people forget to make these decisions during their lives and the decisions are made for them after they've passed away. The way to avoid these conflicts is to plan for them NOW by clarifying your objectives.
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