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A Note About Estate Planning
When people hear the term
"Estate Planning", they usually associate it with their mortality.
Therefore, it is generally an uncomfortable subject to talk about let alone do
the necessary planning.
The goal of Estate Planning is to give your assets to who
you want, the way you want and when you want, while also saving every tax
dollar, attorney fee and court cost possible. An Estate is everything you own -
residence(s), car(s), personal property, boat(s), cash, bank accounts, stocks,
business, pension plan(s), IRAs, CDs, life insurance policies, etc.
Surprisingly, a Will is not an
effective Estate Plan. A Will, by law, must proceed through Probate Court which
costs approximately 3% - 10% of the gross value of the estate. If you think
about it, you probably have more assets than you realize. For example, if your
home is worth $150,000, you have $100,000 for your retirement (pension plan and
savings) and personal property valued at $25,000 (which is a low figure
considering most families have 2 cars today), your gross estate would be valued
at $275,000. Based on the probate cost of only 3%, this would be $8500 and 10%
would be $27,500. Why would anyone not want to give this money to their heirs?
Fortunately, probate can be
entirely and legally avoided by having a Living
Trust. This is a written document that enables you, or you and your
spouse, to appoint yourselves as trustees to manage your property for the
benefit of yourselves because you are the beneficiaries of your Trust. This
document is revocable, cancelable and amendable during your lifetime. Upon your
death, the Trust will provide for the transfer of your assets to your heirs the
same as a Will but without Attorney fees, court costs, etc.
Furthermore, if one of your
goals is to protect yourself and your family should you become incapacitated and
can no longer handle your affairs, a Will is of no help. The only time a Will
comes into play is at death. One of the important advantages of having a Living
Trust is that your family will not have to obtain a court appointed, highly paid
Guardian to manage affairs should you become incompetent. Your spouse/Trustee
will already have the authority to do it.
Joint Tenancy is not an
effective estate planning option either. True, joint tenancy allows the property
to pass automatically, without probate, to your spouse upon your death. However,
upon the death of the second spouse, the property will be distributed to your
heirs through probate. The consequence of joint tenancy is that your heirs will
pay the maximum in taxes and costs rather than the minimum. Furthermore, if a
joint property owner/spouse becomes incapacitated and cannot sign a deed, etc.,
the other spouse must go to court to have a Guardian appointed in order to sell
the joint property. Once again, the solution to this situation is a Living Trust
created while both spouses are alive.
In conclusion, a revocable
Living Trust meets all the criteria for effective Estate Planning. It allows you
to control your assets and affairs during your lifetime, if incapacitated and
after your death. It minimizes taxes, Attorney fees and costs, thereby
preserving your wealth for your loved ones. Do not think that Trusts are just
for the wealthy. As the example regarding probate costs illustrated, Trusts are
valuable estate planning devices for anybody that wants their heirs to receive
the full value of their estate. Most importantly, a Trust is not expensive.
If you do not have a Will, make
arrangements to have a Living Trust prepared immediately. If you currently have
a Will, replace it with a Trust, NOW. If you do not have either, contact us, we
specialize in cost saving Living Trusts. You and your family deserve this kind
of planning and protection. Do not procrastinate!
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