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See the perfect way to inherit: THE DYNASTY TRUST
A Trust may be used for married couples, or single people. This brochure discusses the benefits for a single person. Click here if you would like our Brochure for Married Couple, Married Couple Without Children, or Unmarried Couples.
The best Will reads, "Being of sound mind, I spent it all." For most people, life is not this perfect and more complex planning is needed.
If you think that you need a Will, a Living Trust is probably appropriate.
Probate fees are about 5% of the estate; $8,000 for an estate of $150,000; $42,000 for an estate with a gross value of $1,000,000.
Probate is full of delays. The Judge's permission is needed for many actions. Notice must be given (frequently it must be published in a newspaper) and a hearing must be held to decide to sell assets or pay money to the family. A Probate usually takes 1 year but can easily take twice as long.
A Trust does not die and Probate is avoided entirely.
With a Trust, decisions can be made immediately. Investment decisions or payments to heirs can be made even before the funeral.
A TRUST WILL NOT COMPLICATE YOUR LIFE. While you are alive, the Trust will not change the way you do anything. No special tax returns are required; no reports to any government agency. No control is lost. In fact, once the Trust is set up, you can forget it; everything should work automatically.
Furthermore, a Trust is private. (Once a Will is admitted to Probate, its terms become a matter of public record. The Will and assets held by the deceased are public knowledge.) A Trust is a private document and its contents and provisions are fully confidential.
He is also the sole BENEFICIARY of the Trust during his life. He has full control. He is entitled to do anything he wants to do with Trust assets. No one else has any power.
The Trust may be amended easily at any time during the lifetime of the founder. As family circumstances change, the Trust should be amended to reflect changes.
A TRUST MAY BE APPROPRIATE FOR:
A Living Trust is extremely difficult to challenge, which makes it a perfect tool for many single people.
Unlike a Living Trust, a Will is very easy to contest. During Probate of the estate of a person with a Will (or who died without a Will) a Court proceeding already exists. The terms of the Will are known to all. Undue influence or lack of capacity are very easy to allege, even without a lawyer, causing a major, expensive controversy and delay with very little effort.
It is very difficult to challenge a Living Trust. First, there is no pre-existing Court proceeding. Rather, a lawsuit must be started from scratch.
Second, the disgruntled heir does NOT have a copy of the Trust. In fact, he does not even know what it says. This makes it nearly impossible to hire a lawyer on a contingency. Most lawyers would want a significant retainer (more than $5,000) before taking on such a case.
These two factors normally eliminate contests over Living Trusts.
A major advantage of a Trust is the speed and flexibility it provides. Since Court approval is not required, property can be transferred immediately after death, providing for family needs without the delay and expensive procedural requirements of Probate.
One concern clients have is distributions to minors. At what age is a beneficiary mature enough? The client may specify any age (or ages) or a formula to determine when the beneficiary is old enough to receive outright ownership of the assets without any supervision.
Age 18 is the legal minimum. But most 18 year olds are not wise enough to own substantial wealth. You may decide to distribute a portion at each of several different ages, allowing a trusted person to retain management and control of the balance of the assets.
Some clients give the Trustee total control, using such language as, "When my Trustee deems my child to be of sufficient maturity, he shall distribute, free of Trust."
Some clients put other or additional prerequisites on bequests, such as college graduation, drug free testing, non-participation in certain religious groups, or any other matters which meet the particular needs of the client.
With a little imagination, whatever is right for each client's situation can be constructed.
Two horror stories illustrate the concern:
A 17 year old girl (with $2,000 in the bank) wants to take her boyfriend (the dishwasher) to college to share an apartment. She meets parental opposition. She says, "When I turn 18, it's my money, and I can do it if I want to!"
A 34 year old woman says, "I cannot pay the $2,000 debt, because I already spent the $100,000 per year I get from grandmother's trust fund. [She spent it on `a couple of trips to Hawaii' and has nothing to show for it except a suntan.] But I'll pay it in 6 months when I turn 35 because then I get the millions grandmother left me in Trust."
Deciding on the distribution or `strings' is very difficult sometimes, but total flexibility is achieved with a Living Trust.
The Trust allows anything to be accomplished, privately, with a minimum of difficulty.
Handicapped children present special needs in planning. The Trust is the ideal way to provide for a handicapped child in such a way to retain eligibility for most public assistance.
With a Trust, Probate Court is avoided entirely.
However, there are two advantages of Probate. First, Probate's restrictive rules may eliminate your manager's ability to steal from your heirs. However, this is very expensive protection [5% of the GROSS estate].
Typically, there is only one other disadvantage to a Living Trust: its cost of formation. (There are no other costs of its operation during the lifetime of the founder - no tax returns, no management fees, no legal fees, no filing fees.)
Forming a Living Trust is not expensive, especially in view of the savings of Probate.
If these dispositions meet your needs, do you still need a Will? YES! Probate Court proceedings are much more efficient and less costly if a Will exists.
A 1992 law allows such forms to be valid forever in California, rather than merely 7 years as under prior law.
A POA may be limited to a particular transaction (e.g., sign documents to sell my house while I am out of town), or broad to allow the person you select to act on your behalf for all matters.
It may be effective immediately; or "spring" into effect only on the occurrence of a future event (such as upon your future incapacity). It may be canceled, enlarged or restricted (in scope or in time).
A Will is used to control assets after death; a POA may be used to control assets during life, in periods of absence or illness. A POA rounds out estate planning, ensuring that someone is authorized to act on your behalf in the event that you are not able to do so.
Click here for more details on POAs.
Probate provides a creditor's claim cut-off not formerly available under a Living Trust.
People with Living Trusts were faced with a potential unlimited duration of claims. This only applied to people with unknown creditors.
An unknown creditor is someone you owe, but don't know it yet. An example is an Obstetrician whose malpractice on delivering a baby doesn't show up for many years.
While Probate of his estate would cause a cut-off of all claims, including those which were unknown or even unknowable, under old law, if the Doctor had avoided Probate by using a Living Trust, the creditors' cut-off would not apply, so that a later discovered victim could pursue the Doctor's heirs years after his death.
Effective January 1, 1991, any claim against a decedent must be filed within one year of his death, or it is forever lost.
Now, even the remote risk of a claimant appearing long after death of a person who avoided Probate by use of a Living Trust is eliminated, although the one year period applies, rather than a 4 month cut-off.
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