Wills· Trust· Living Wills· Power of Attorney·
Living Trusts protect the estate assets from probate costs, virtually eliminate the time necessary to settle an estate and reduce or eliminate Federal Estate Taxes. In some circumstances they can be used for additional asset protection.
Probate is a court supervised distribution of property for a deceased person's estate. A probate is not normally required at the death of the first spouse in California. A probate is not required if the total estate is less than $100,000.00 and if the real estate included in the estate has a value less of than $20,000.00. Probate fees are established by law in California. They average about 6% for moderate sized estates. The Executor's and Attorney's fees would total $6,300.00 on a $100,000.00 estate. Real Estate is valued at its full value without subtracting liens and mortgages. There will be additional fees for court costs, appraisers and publications. There may be other fees for accountants, real estate brokers, stock brokers and attorneys. The probate proceeding requires a minimum time of approximately eight months and normally takes about twelve months. If there are special problems, such as selling real estate or a business, then the probate period may be several years.
The Living Trust bypasses the court proceedings unless there is a Will Contest. The Living Trust enables a person to transfer his or her property to his beneficiaries immediately upon his or her death. It usually takes no more than one hour of an attorney's time to instruct the final Trustee on the procedure to distribute the assets and terminate the Trust. There is a federal estate tax on estates greater than $2,000,000.00. An A-B Trust for a husband and wife can protect the estate from taxes on an estate up to $4,000,000.00. The tax rates for estates in excess of $2,000,000.00 are in excess of 40% of the surplus above $2,000,000.00. An estate with a value of $2,700,000.00 may pay an estate tax of more than $80,000.00. The legislation contains a provision which reduces the exemption to $1,000,000.00 in 2011. Your home plus investments insurance IRAs will make many estates taxable when that provision goes into effect.
IF YOUR ESTATE IS IN EXCESS OF $100,000 YOU SHOULD CONSIDER A REVOCABLE, LIVING TRUST, IT WILL SAVE PROBATE COSTS AND TIME. IF YOUR ESTATE IS IN EXCESS OF $2,000,000.00, YOU HAVE A DEFINITE NEED FOR A TRUST WHICH REDUCE OR ELIMINATE FEDERAL ESTATE TAXES FOR YOUR HEIRS. There are practically no legal disadvantages to a Living Trust at this time. Trusts are no longer required to file income taxes if the trust distributes all of its income. The Settlors remain in full control of their property and can change the Trust at any time. The only significant disadvantage other than cost is that it does take some effort to transfer the property into the Trust. We transfer the real estate and provide a set of instructions and assistance for the transfer of your assets to the Trust.
Wills specify the persons who are to receive the property of your estate. If the estate is less than $100,000.00, a Will, together with a durable general power of attorney, is often adequate for estate planning.
Revocable Living Trusts are a popular method of transferring property upon the death of a person. The trust is a contract between the Settlor, Trustee and Beneficiary. The Settlor, Trustee and Beneficiary make up the three classes of persons involved in each Trust. One person often belongs to more than one class. The first class of person is called a Settlor or Trustor. The Trust instrument is prepared under the Settlor's directions. The Settlor establishes the rules for investment, management and distribution by the Trustee. The second class of person is the Trustee. He or she is the legal owner of the property in the Trust. The Trustee manages Trust property, makes investments for the Trust and distributes the property under the rules established by the Settlor. The Trustee follows the instructions of the Trust document and must invest and distribute the property in the manner which is provided in the Trust instrument. The third class of person is the beneficiary or beneficiaries. They receive the distribution of the property of the Trust according to the terms of the Trust.
A typical Living Trust would consist of the Settlors transferring their property into the Trust for which they would also be the Trustees and the beneficiaries. A secondary benefit of the Trust is the provision for an alternate Trustee who can take over the affairs of the Settlor if the Settlor becomes disabled. That provision eliminates an expensive and time-consuming conservatorship proceeding.
Probate costs are in the range of four to 10% of the gross value of the estate. Even an estate which only contains a residence would involve probate costs of several thousand dollars. Nearly all of these costs are eliminated through a Living Trust. Since the Living Trust should only cost a few hundred dollars, the resulting savings are substantial.
All states now permit a person to make a Living Will. The Living Will is named Directive to Physicians in California. The living Will permits medical personnel to use ordinary care in the preservation of life, but prohibits the use of artificial life prolonging equipment, if the patient is terminally ill. The Living Will can save the estate many thousands of dollars in unnecessary medical bills and prolonged suffering for both the terminally ill patient and for the survivors during a terminal illness.
The general durable power of attorney and Durable Power of Attorney for Health Care are the two types of appointing an agent to act on behalf of the appointing person (the Principal). The General Durable Power of Attorney permits the agent to act on business affairs for the principal. The Power of Attorney for Health Care permits the agent to make health care decisions for the Principal if the Principal is not able to make decisions. The general durable power of attorney is an inexpensive way in which to provide powers to act not only in the case of disabilities, but also for absences of one party. The Durable Power of Attorney for health care also provides, if the party wishes, for the named attorney to consent to the removal of life support equipment. It is a necessary document to insure that the Living Will is properly implemented. The Durable Power of Attorney is also necessary to implement body part donations.
The power of attorney for health care is of great importance because of the new patient privacy laws. Our powers of attorney for health care include provisions for various persons and agencies involved in health care to provide information to the named agent. These include dentists, dental assistants, nurses, doctor's staff members and insurance agents. Always keep the power of attorney for health care with you when you travel.