A majority (70%) of homeowners have no estate plan, except the state’s statutory default plan. Almost as bad, the majority of those who do have an estate plan have a Last Will and Testament. Both have to be probated. So, what’s the big deal?
Perhaps a true story will make the point best. A couple takes care of the husband’s elderly mother until one day she passes away. In those last months, the couple cares for her with love and great personal sacrifice, even great financial sacrifice. The mother left a sizable estate, and her written will divided her substantial estate equally among the four adult children. Seems simple enough, right? Every once in a while, and far too often, there is an adult black sheep in the family who is so dysfunctional, he or she will hire attorneys to get more than his or her fair share. So determined is such a person, he or she will intentionally seek to hurt and destroy the other siblings to get what he wants, which is more than the money. Usually such a person is full of hate deep down, unexplainable hate that motivates them to behave incorrigibly toward their siblings.
Greed is alive and well in the world today, and it finds fertile soil in a probate process that is subject to a defective judicial process, fostered by attorneys with their own agendas and judges who wouldn’t know what Solomon’s wisdom was if it bit them in the nose. It is in this fertile soil that the black sheep finds a support system to do his or her evil.
This probate lasted five (5) years, and the siblings’ inheritance was eaten by attorney’s fees and costs, and interestingly enough, by the black sheep’s theft of much of the estate prior to their mother’s death. That’s too long a story to tell here. There is no question that if the deceased mother had known what her adult child would do to her other children, and that that child would completely annul her Last Will and Testament, she would be rolling over in her grave. You can bet if she had know that her children’s inheritance would go to attorneys, she would have burned the money first, or more likely, she would have set up an indestructible estate plan.
There are intelligent ways to make sure this never happens to your estate, but you have to create an effective and intelligent plan while you are yet alive. Avoid probate at all costs! Attorneys are quite famous for stacking up massive attorney’s fees, and then they get paid first out of the estate funds. And while the average probate takes as much as 18 months, many take much longer. Use techniques that avoid probate, such as the revocable living trust, the irrevocable life insurance trust, payable on death instruments, the right of survivorship (in appropriate cases), insurance benefits (life insurance payoffs are tax free), and there are many more. Be sure that the title to your real estate is vested appropriately to accomplish your estate plan, and if you own a business, incorporate a business succession plan into your comprehensive plan. Create an indestructible estate plan, and do it today.
Avoiding Estate Probate with a Living Trust
We have all heard the horror stories of probate. In fact, most infamously, the estate of the late Elvis Presley was significantly reduced in value to probate taxation. Just because the King himself didn’t follow the proper estate planning procedures doesn’t mean you should too. For good reason, it’s a good idea to avoid estate probate whenever possible. The good news is that it’s not a difficult or complicated thing to avoid probate. When it comes to clearing out your estate, the probate process can be both time-consuming and costly.
Even if you have a will set up, your estate must still go through the probate process. There are a few ways to avoid this, most commonly setting up a living trust. A living trust can be a great way to pass along assets without the long delays that are so commonly associated with the probate process. There are a few more ways to avoid probate like life insurance, for example, but establishing a living trust covers your entire estate.
Establishing a living trust used to be a big ordeal. You have to find an attorney well versed in estate planning issues that could draft you up a suitable living trust based on your situation. For obvious reasons, things could get pretty expensive, pretty quickly. In the past, it was just easier to draw up a simple will.
But, it no longer has to be that way. He advances of the Internet have had a rather large impact on our lives. These advances have made it much easier to research living trust issues. In fact, you can do everything online now, from the research to setting up your custom living trust. And the beauty of all this is that you don’t have to pay an expensive attorney to just fill out forms on your behalf. If you’re like most of us that like to do things themselves, filling out simple forms is a great way to reduce the costs associated with setting up a living trust. Taking this approach has the potential to save you thousands of dollars, in fact. It’s not at all unusual to see online services offering living trust set-up for small fractions of what it used to cost.
Setting up a living trust is one of the best ways to transfer your estate to another entity, but how do they work? The individual that puts their property into the living trust is named the trustor. He trustee is the individual that manages the assets and property. And of course, the individual or entity that receives the benefits from a living trust is called the beneficiary. Most of the time, the trustor plays the role of both trustee and trustor.
A living trust has several advantages when compared to a will. A living trust allows anyone to be chosen as the trustee. Also, when it comes to a will, a will is a matter of public record, where a living trust is is not. The costs associated with going through probate, with a will, are considerably more expensive when compared to setting up a simple living trust. This is important for a number of reasons; it avoids the headaches that are often associated with estate probate, saving your beneficiaries the trouble. Also, for the sake of your beneficiaries, avoiding the costs of probate will leave them with more of your estate, much like you intended. It is always recommended that you seek a qualified estate planning attorney, well versed in estate probate and living trusts, if you have complications or questions that may not be the norm. Setting up a living trust is one of the most critical estate planning steps in avoiding estate probate. for your family.
However, probate is just one of the several benefits you can get from a living trust. Don’t delay, set one up today. One of the concerns that estate planning addresses is the problem of probate. This is your state’s legal process of settling a decedent’s affairs supervised by your local probate court in your county. It’s a public, time-consuming, and often costly process. You can avoid it if you wish, but it’s important to understand that the estate that’s probated is different from the estate you pay estate taxes on when you die.
Your Estate For Federal Tax Purposes: Your estate for federal tax purposes – that’ll be taxed at your death – is different from your probate estate. The federal estate is the total value of all you own, have a right to, or control when you die. This includes your home, life insurance you either own or control, your retirement plans such as your IRA, your car and all your investment holdings. It doesn’t matter whether any asset is subject to federal income tax or not. And it doesn’t matter whether or not the asset will automatically go to a designated beneficiary at your death – like an IRA. This also includes all assets you co-own with other people. The value of a co-owned asset that adds to your estate depends on who the co-owner is, what kind of co-ownership it is, and certain other factors about how you contributed to it. Lastly, any value someone owes you such as wages, debt, or bond interest, at the time of your death are also included in your estate. This estate can be quite sizeable and is subject to federal estate taxes and your state’s estate tax too. Of course each has its own tax exclusion or threshold level and tax rates.
Your Probate Estate: Your probate estate consists of only assets held in your own name alone and that won’t pass automatically to a named beneficiary when you die. You can see, the issue of the probate court is determining who should get your assets that only you own and have not automatic way of passing to another person.
So assets that typically bypass the probate estate (i.e. don’t get probated) include:
• IRAs and qualified retirement plan benefits with a named beneficiary
• Life insurance that pass to a named beneficiary, but not insurance left to the owner’s estate
• Annuities with a named beneficiary
• Property owned by joint tenants or tenants by the entirety with rights of survivorship, and
• Living trusts that hold title to assets and that pass to named beneficiaries
You can see that this estate for probate can be quite a bit smaller than your estate for federal estate tax purposes. And you can see that if you have some assets in your name only and don’t automatically go to some beneficiary other than you, you can easily arrange to eliminate them as probate assets by transferring them to a living trust. That simply means entitling your assets in the name you give to the living trust. The living trust is a revocable trust so you can dissolve if you want to at any later time. Because you still control the assets in your living trust, they remain part of your federal estate but no longer your probate estate. So if you don’t like the probate process, you can easily exclude it from a possibility. If you have a Will or are thinking of preparing one you must understand how a will works after you pass away. The probate process is neither cheap nor quick. It can take from several months and can go on for years after you have passed on.
There are several steps in the probate process. Your states Probate Court will control the process. Probate courts around the country all pretty much follow the same basic processes and steps, which typically include:
• Filing the deceased person’s will with the local court
• Notifying heirs, creditors, and the public that you are, indeed, dead
• Identifying and inventorying the deceased person’s property
• Having the property appraised
• Paying off all debts, including estate taxes, if any
• Having the will “proved” valid to the court
• Distributing your estate
The cost of probate may include appraisal costs, executor’s fees, court costs, the costs for a type of insurance policy known as a surety bond, legal fees, and accounting fees. When you add it all up, probate can cost from 3 percent to 7 percent of the total estate value. And if your estate includes property in more than one state, it may be subject to separate probate proceeding in all applicable states. It is said that the reason for having such a lengthy and costly process is to prevent fraud in transferring property and to protect inheritors by promptly resolving claims creditors have against a deceased person’s property. The reality is that most property is transferred within a close circle of family and friends and very few estates face potential fraud or creditor claims. Most people have no need for probate’s so-called benefits. Probate is often categorized as an expensive time-wasting process. As an alternative to probate there are many legal methods to avoid probate entirely. Because bequeathing property in a will usually results in probate, probate-avoidance strategies should be implemented. The most common probate-avoidance methods are:
• Revocable living trust
• Joint tenancy and tenancy by the entirety
• Payable-on-death designations
• Life insurance
• Gift Planning
Keep in mind that these probate-avoidance methods can and should be used together as part of an estate plan.
You should already have a pretty good idea of what your estate is worth so that you can make intelligent choices for your estate plan. Remember that what is right for one person may not be right for everyone. Obtain a plan specific to your situation and needs by visiting your attorney. Make sure that you take the necessary steps today so that in the future you make a difficult time easier for your loved ones.
Understanding the Role of Trustor in Estate Settlement
Trustor is the title provided to people who setup a trust. Individuals can transfer ownership of their property to a trust as a way to avoid probate and lessen estate tax. An individual known as the Trustee is appointed to control assets and settle the estate upon death. The title of Trustor is included with most types of trusts such as living, testamentary, land, and irrevocable life insurance. Each of these serves a different purpose, but all allow estate assets to be distributed to heirs without passing through probate.
Probate is perhaps one of the least understood legal processes. Many people do not realize that regardless of whether they prepare a Will or not their estate has to undergo probate. Leaving a Will makes the process simpler and takes less time. When a person dies, everything they own is held in probate until the legal process is completed. Only then can inheritance gifts be transferred to heirs. The only way to avoid probate is to transfer ownership of property to a trust.
Living trusts are one of the most commonly used estate planning strategies. Property that is transferred into revocable trusts is controlled by the Trustor until death. At that time, a successor takes over and distributes property to beneficiaries which are named in the decedent’s last Will. While living trusts can be setup without help from a lawyer, most people feel better about hiring a law firm or estate planner. Those who choose to take on the task without legal help ought to take time learning about the various options to ensure their property is protected. Testamentary trusts refer to a legal entity that is created in accordance with directives provided in the decedent’s Will. This type of trust is established to deal with estate assets acquired throughout the decedent’s life or as a result of their death.
For example, if there is some type of legal litigation that result in payment after their death, such as a wrongful-death lawsuit, a testamentary trust could be setup to manage the assets.
Land trusts are established to safeguard real property against legal actions initiated by others and to avoid probate. Real estate investors often use this estate planning strategy due to the protection and privacy they provide. Due to the fact that people usually cannot sue a trust, all property that is transferred into land trusts is shielded from judgments or liens. Furthermore, real estate trusts provide beneficiaries with tax advantages and make it easy to take possession of property bequeathed to them. Land trusts are a good option for people who plan ahead for incapacity. A co-Trustee can be appointed to oversee the trust in the event the Trustor is declared incompetent by a physician.
Irrevocable life insurance trusts (ILIT) are a special type of trust that is used to take out life insurance earnings from decedent estates. This type of trust must be arranged by an attorney to avoid tax consequences.
Due to the complexities of transferring assets to trusts it is recommended to work with qualified professionals. Otherwise, Trustors might unintentionally create avoidable problems that result in higher estate taxes.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506