If you have an estate of $100,000 or more, you may benefit from having a living trust. But be careful if you are approached by someone who is not a licensed attorney. Dishonest salespeople will sell you something without carefully analyzing your needs. Con artists promote their business by making false or misleading statements. These are the most common:
Lie #1: Living trusts save taxes. Your estate can be reduced by a 55% death tax.
Misleading. This depends on your state laws. For example, most Texans’ estates will face no death taxation at all. If your Texas estate is taxable, a will can accomplish exactly the same tax savings as a trust at a much cheaper cost. Also, federal law allows each person to transfer some assets "tax free": $2 million in 2008 and $3.5 million in 2009. The estate tax will be repealed in the year 2010, but reinstated in the year 2011. The value of property that can be transferred tax free will be $1 million at that time. If the value of your assets could exceed the applicable limitation (or if a husband’s and wife’s combined assets could exceed the amount), you should see an estate planning attorney to minimize your potential estate tax liability regardless of who receives your property. However, a living trust is not required to take advantage of other techniques to minimize estate tax liability.
Lie #2: Living trusts will help you qualify for public assistance benefits.
False. A living trust will not help you qualify for public assistance benefits, particularly nursing home Medicaid benefits.
Lie #3: Living trusts help you avoid contested wills.
Misleading. Because a "trust" and a "will" are separate legal concepts, a trust is not subject to a will contest. However, trusts just like wills are subject to attack on the basis of lack of capacity, undue influence, and fraud.
Lie #4: Living trusts help you avoid your creditors.
False. During your lifetime, assets in a living trust are subject to the claims of your creditors. After death, these assets are subject to the claim of your estate’s creditors.
Lie #5: Living trusts avoid the expense of a guardianship.
Misleading. A living trust is helpful to avoid the expense of a guardianship in case of your future incapacity. In some circumstances, a durable power of attorney is a simpler and less costly way to achieve the same goal. However, you should choose between a living trust and a power of attorney after you have considered the advantages and disadvantages of each.
Lie #6: Attorneys charge from 3% to 10% or more to probate your estate.
False. There are a variety of pricing options. You should contact three reputable attorneys and compare their prices. (Useful Definition: Probate is the legal process that usually involves filing a deceased person's will with the local probate court, taking inventory of the person's property, paying all legal debts, and eventually distributing the remaining assets and property. If the person died without a will (this is called intestacy), the estate still must be probated and property will be distributed according to state law.)
Lie #7: Probate takes years to complete.
Misleading and very unlikely. Assuming you have hired a reputable attorney, this depends on the complexity of your case.
Lie #8: Probate requires excessive time and money.
False. See above.
Lie #9: Everyone should have a living trust.
False. Good estate planning can't be reduced to one universal formula for everyone. Also, many states have simplified the probate process to the point where a living trust may be unnecessary. In some instances, your executor can validate your wishes for your estate simply by mailing a certified copy of your death certificate to the county probate court.
Lie #10: The living trust is the only way to avoid probate.
False. A living trust is not the only way to avoid probate. Through careful titling, you can arrange for much of your estate to go directly to your heirs, sidestepping probate. For example, retirement accounts and life insurance can be arranged to pass directly to beneficiaries you list on those accounts. Similarly, on your death, property owned jointly with right of survivorship will go straight to the other owners. Savings accounts and mutual funds in regular taxable accounts will pass directly to your heirs if you title the accounts as "pay on death" or "transfer on death." Moreover, most states have rules that allow small estates to be administered outside of probate or through an "expedited" probate process. These rules are different in each state. You can find out more from a reputable local attorney.
WHERE DO I GO FOR MORE HELP?
The following is a selected list of publications and organizations that can help you decide what works best for you:
AARP, "A Consumer's Guide to Living Trusts and Wills", stock #D14535. For more information, contact AARP at 1-800-424-3410; http://www.aarp.org/.
American Bar Association (ABA), "Guide to Wills and Estates" (ISBN 08129-2536-X). For more information, contact the ABA at 1-800-285-2221; http://www.abanet.org/.
Council of Better Business Bureaus, inc., 4200 Wilson Blvd., Suite 800, Arlington, VA 22203-1838; 703-276-0100; http://www.bbb.org/.
Complaints about particular companies or salespeople can be filed with state and local consumer protection agencies as well as the Federal Trade Commission (1-877-FTC-HELP; http://www.ftc.gov/).
SELECTED WEBSITES
AARP: http://www.aarp.org/
American Bar Association: http://www.abanet.org/
Better Business Bureau: http://www.bbb.org/
Federal Trade Commission: http://www.ftc.gov/
National Academy of Elder Law Attorneys: http://www.naela.org/
National Association of Consumer Advocates: http://www.naca.net/
National Consumer Law Center http://www.consumerlaw.org/initiatives/seniors_initiative/index.shtml
Nolo Press: http://www.nolo.com/
Lie #1: Living trusts save taxes. Your estate can be reduced by a 55% death tax.
Misleading. This depends on your state laws. For example, most Texans’ estates will face no death taxation at all. If your Texas estate is taxable, a will can accomplish exactly the same tax savings as a trust at a much cheaper cost. Also, federal law allows each person to transfer some assets "tax free": $2 million in 2008 and $3.5 million in 2009. The estate tax will be repealed in the year 2010, but reinstated in the year 2011. The value of property that can be transferred tax free will be $1 million at that time. If the value of your assets could exceed the applicable limitation (or if a husband’s and wife’s combined assets could exceed the amount), you should see an estate planning attorney to minimize your potential estate tax liability regardless of who receives your property. However, a living trust is not required to take advantage of other techniques to minimize estate tax liability.
Lie #2: Living trusts will help you qualify for public assistance benefits.
False. A living trust will not help you qualify for public assistance benefits, particularly nursing home Medicaid benefits.
Lie #3: Living trusts help you avoid contested wills.
Misleading. Because a "trust" and a "will" are separate legal concepts, a trust is not subject to a will contest. However, trusts just like wills are subject to attack on the basis of lack of capacity, undue influence, and fraud.
Lie #4: Living trusts help you avoid your creditors.
False. During your lifetime, assets in a living trust are subject to the claims of your creditors. After death, these assets are subject to the claim of your estate’s creditors.
Lie #5: Living trusts avoid the expense of a guardianship.
Misleading. A living trust is helpful to avoid the expense of a guardianship in case of your future incapacity. In some circumstances, a durable power of attorney is a simpler and less costly way to achieve the same goal. However, you should choose between a living trust and a power of attorney after you have considered the advantages and disadvantages of each.
Lie #6: Attorneys charge from 3% to 10% or more to probate your estate.
False. There are a variety of pricing options. You should contact three reputable attorneys and compare their prices. (Useful Definition: Probate is the legal process that usually involves filing a deceased person's will with the local probate court, taking inventory of the person's property, paying all legal debts, and eventually distributing the remaining assets and property. If the person died without a will (this is called intestacy), the estate still must be probated and property will be distributed according to state law.)
Lie #7: Probate takes years to complete.
Misleading and very unlikely. Assuming you have hired a reputable attorney, this depends on the complexity of your case.
Lie #8: Probate requires excessive time and money.
False. See above.
Lie #9: Everyone should have a living trust.
False. Good estate planning can't be reduced to one universal formula for everyone. Also, many states have simplified the probate process to the point where a living trust may be unnecessary. In some instances, your executor can validate your wishes for your estate simply by mailing a certified copy of your death certificate to the county probate court.
Lie #10: The living trust is the only way to avoid probate.
False. A living trust is not the only way to avoid probate. Through careful titling, you can arrange for much of your estate to go directly to your heirs, sidestepping probate. For example, retirement accounts and life insurance can be arranged to pass directly to beneficiaries you list on those accounts. Similarly, on your death, property owned jointly with right of survivorship will go straight to the other owners. Savings accounts and mutual funds in regular taxable accounts will pass directly to your heirs if you title the accounts as "pay on death" or "transfer on death." Moreover, most states have rules that allow small estates to be administered outside of probate or through an "expedited" probate process. These rules are different in each state. You can find out more from a reputable local attorney.
WHERE DO I GO FOR MORE HELP?
The following is a selected list of publications and organizations that can help you decide what works best for you:
AARP, "A Consumer's Guide to Living Trusts and Wills", stock #D14535. For more information, contact AARP at 1-800-424-3410; http://www.aarp.org/.
American Bar Association (ABA), "Guide to Wills and Estates" (ISBN 08129-2536-X). For more information, contact the ABA at 1-800-285-2221; http://www.abanet.org/.
Council of Better Business Bureaus, inc., 4200 Wilson Blvd., Suite 800, Arlington, VA 22203-1838; 703-276-0100; http://www.bbb.org/.
Complaints about particular companies or salespeople can be filed with state and local consumer protection agencies as well as the Federal Trade Commission (1-877-FTC-HELP; http://www.ftc.gov/).
SELECTED WEBSITES
AARP: http://www.aarp.org/
American Bar Association: http://www.abanet.org/
Better Business Bureau: http://www.bbb.org/
Federal Trade Commission: http://www.ftc.gov/
National Academy of Elder Law Attorneys: http://www.naela.org/
National Association of Consumer Advocates: http://www.naca.net/
National Consumer Law Center http://www.consumerlaw.org/initiatives/seniors_initiative/index.shtml
Nolo Press: http://www.nolo.com/
1 comment:
Establishing a living trust even though it may be expensive is a very important decision. It saves your descendants having to go through courts of law and overpaying for assets they could get for free right from your own very hands.In most cases the living trusts are under tax pressure but the main advantage is that the assets are protected from the hands of creditors if they are under a trust since the creditors can have no claim over the asset.
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