Estate Planning, Wills, and Trusts
Protect your loved ones from the outrageous costs of Probate and attorney fees.
Protecting your loved ones future is the greatest gift that you can give them, but if your estate is not protected though proper estate planning they may have to pay substantial amount of taxes and probate costs. Having an estate plan may not be able to eliminate all costs, but can substantially reduce the cost they may need to bare. There are websites out there that state you may not need a trust. This may be true in some cases, but a trust is the only way to avoid probate for certain assets. I can explain why you may want a trust and if you can get by without one. There is one thing that you cannot do without, and that is a will. If you don’t make a will before your death, state law will determine who gets your property (who may or may not be the people you wanted) and a judge may decide who will raise your children.
No matter what size your estate is you and your loved ones can benefit from an estate plan. If your estate is small, you can simply focus on who will receive your assets after your death, and who should manage your estate, pay your last debts and handle the distribution of your assets. If your estate is large, your attorney will also discuss various ways of preserving your assets for your beneficiaries and of reducing or postponing the amount of estate tax which otherwise might be payable after your death. If you fail to plan ahead, a judge will simply appoint someone to handle your assets and personal care. Additionally, your assets will be distributed to your heirs according to a set of rules known as intestate succession, and not necessarily the people you wanted.
What is included in my Estate?
Your estate is all the stuff that you own. This could include assets held in your name alone or jointly with others, assets such as bank accounts, real estate, stocks and bonds, and furniture, cars and jewelry. Your assets may also include life insurance proceeds, retirement accounts and payments that are due to you (such as a tax refund, outstanding loan or inheritance). The value of your estate is equal to the “fair market value” of all of your various types of property—after you have deducted your debts (your car loan, for example, and any mortgage on your home.) The value of your estate is important in determining whether your estate will be subject to estate taxes after your death and whether your beneficiaries could later be subject to capital gains taxes. Ensuring that there will be sufficient resources to pay such taxes is another important part of the estate planning process
Wills
A Will is needed even if you are Young.
The will is the first and most important estate planning document. A Will allows you to insure that your property goes to the people you choose. Additionally, a Will allow you to insure that your children are care for by the people you believe will care for your children the best.
No one can predict when their time will come. It is an unfortunate fact of life that accidents happen even to young people. I speak from personal experience when I say that the last thing you want to deal with during this time is the court and the process of Intestate Succession (dying without a Will). A Will helps make this process easier. The best and easiest way to avoid probate however, is to have a living trust.
Don’t Forget, even if you have a Will it may need to be updated. Things in our lives change. The person you wanted to look after your children when you first drafted your will may not be the person you want to look over your children now. Events that may cause you to re-examine your Will are: Marriage, having a child, major change in your financial situation, development of a chronic illness, or divorce.
Trust
Almost Everyone should have a Trust
Only a Trust will allow you to avoid Probate and save your loved ones the hassle of Probate Court. A Will allows you to dictate who gets your property and who will care for your children, but your Will have to go through probate. A trust allows you to pass your house, vehicles, bank accounts, pension plans, stocks and other titled assets without having to go through Probate.
A Trust will control how the Trust operates during your life and what will happen to your assets after you pass. When creating a Trust care must be taken because this is the only thing that your beneficiary will be able to rely on to distribute your asset, and arrange for the care of your loved ones.
A Revocable Trust will allow you to enjoy your assets while at the same time allow you to protecting them. A Revocable Trust gives you total control and access over your assets, including the ability to remove the assets from the Trust.
Revocable Trust and Tax Returns
With a Revocable Trust no separate tax return needs to be filed, as long as you are the trustee. You will continue to file your normal tax return.
Avoid Publicizing Your Estate
If you estate needs to go through probate, the items that need to be Probated will be a matter of public record. This allows tele-marketers and other solicitors the opportunity to see what assets were being passed and to whom they were going. Only by having a Trust and executing it properly will you be able to save your loved ones this headache.
No Income Tax Savings
A Trust can do many things and has many advantages, but it cannot accomplish everything. A Living Trust cannot avoid income tax (although estate taxes and Probate fees may be reduced or eliminated). During your life, you have full use and powers over the Trust. For tax purposes, since you still retain control you are considered to be the owners of the Trust, therefore, you are taxed on all income from Trust property on your regular tax return. No annual tax return is needed for the Trust.
Probate
What is probate?
Probate is a court-supervised process for transferring a deceased person’s assets to the beneficiaries listed in his or her Will.
Typically, the executor named in your Will would start the process after your death by filing a petition in court and seeking to be appointed by the Court. Your executor would then take charge of your assets, pay your debts and, after receiving court approval, distribute the rest of your estate to your beneficiaries. If you were to die intestate (that is, without a will), a relative or other interested person could start the process. In such an instance, the court would appoint an administrator to handle your estate. Personal representative is another term used to describe the administrator or executor appointed to handle an estate.
Simpler procedures are available for transferring property to a spouse or for handling estates in which the total assets amount to less than $100,000. The probate process has advantages and disadvantages.
Probate helps to distribute your assets after you have passed. There are well defined rules that are followed, and the Court is very good at resolving estates, however there are some major disadvantages to Probate. One disadvantage, is that probates are public. Your estate plan and the value of your assets will become a public record. Also, because lawyer’s fees and executor’s commissions are based on a statutory fee schedule, a probate will cost more than the management and distribution of a comparable estate under a living trust.
Time can be a factor as well. distributing assets with a trust will take substantially less time then having to go through probate. I can discuss such advantages and disadvantages with you.
Why do I want to avoid Probate?
Probate fees (Executors’ fees and lawyers’ fees) are avoided with a Trust. Probate fees are based on the gross value of a person’s assets (before reduction for mortgages or other debts).
Probate fees are about 5% of the estate; $8,000 for an estate of $150,000; $46,000 for an estate with a gross value of $1,000,000. With that said what this amount does not show you is that the attorney gets an additional 4% for probating the case and this also does not cover the taxes or expenses that the estate may owe. If you have a house that needs to be appraised, the appraiser will receive 1% of the appraised value. So, the cost can be substantial.
Avoiding probate is also not a matter of saving money, but also a matter of saving time. Probate can be a long and frustrating process. To probate a Will can take up to a year to probate no matter how well your Will is drafted. If your estate is over $100,000.00 it can take even longer. For this reason along it is smart to have a trust. A trust will allow certain asset to skip probate, and allow you to avoid probate altogether.