Why Estate Planning Is Important?
People ask themselves why do they need estate planning or what exactly does it do for them? Many people are under the false impression that estate planning is only for the rich. This is not true. lt is not about how much wealth you have accumulated. It is about what and who is important to you. What if a person only has a home and a life insurance policy? To some, this isn’t a Jot. Does someone like this need an estate plan? This person may want to be assured that they can live in the comfort of their own home. They may have a child with a drug or alcohol problem. Wouldn’t that person feel better leaving the money in such a way that the child’s rehabilitation can be provided for? Estate planning can provide you with a sense comfort and well-being about you and your family’s future.
So what is the difference between a Will and a Trust? A Wilt tells the Court where you want your things to go when you die. It only becomes effective upon death, so it does not handle things in the event of your disability. When you have a Will, it guarantees that you will go through a probate. A probate is a Court supervised transfer of assets. The down side of probate is that it is expensive and takes a long time. It is also a public proceeding where all the information about your estate becomes public knowledge.
When you have a Trust, assets are transferred into the Trust upon the creation of the Trust. Because your assets are transferred ahead of time, there is no need for the transfer of assets by the probate court. A Trust becomes effective immediately and can handle things that occur during your lifetime, such as handling what happens in the event that you become mentally incapacitated. It will keep you out of a conservatorship situation during your lifetime in the event of incapacity. In the event of death, the assets are already inside the Trust name, so there is no need for a probate. Your Successor Trustee can step in and start immediately handling the assets in the estate.
If you don’t have a Trust and end up in probate, that can be very costly. For example, in the State of California, if you have a $500,000 estate, the cost of probating that estate is as follows:
$13,000.00 in attorney’s fees; another $13,000.00 in Executor’s fees;$2,000.00-$4,000.00 in Court costs
– Approximate total cost is $28,000-$30,000 to probate a $500,000.00 estate. Compare this to the cost of $2,500 – $3,000 to prepare a living trust. The family is much better off, and you can provide much more protection when you have a Trust.
When you create a living trust, there are various different protections you can give to your beneficiaries depending on how you set the trust up. There are different ways to do distributions.
- Outright When you pass away, the Trustee distributes everything in the trust outright to the beneficiary. There is no protection in this because everything goes into the beneficiary’s name and it becomes the beneficiary’s asset. Therefore, if the beneficiary is married and commingles the assets with a spouse, the spouse can gain an interest in the assets. lf the beneficiary gets sued, the assets can end up in the hands of the beneficiary’s creditors because it is now the beneficiary’s assets.
- Staggered distributions. You can distribute a certain percentage out to a beneficiary at certain They don’t receive all of the assets at once. This prevents them from blowing it all at once and is meant to make the money last longer.
- Convenience This allows a beneficiary to demand his or her share from the Trustee at any time the beneficiary wishes. This gives the beneficiary total control over the inheritance. This does not protect the inheritance from the beneficiary’s creditors.
- Lifetime Trust. This keeps the inheritance in the trust for the lifetime of the beneficiary. Income can be distributed for the beneficiary’s health, education, maintenance and This type of distribution protects the assets from the beneficiary’s creditors.
A trust can be written with remarriage protections written into it. I often times tell clients that this is an area where there is an inadvertent disinheritance of your own children. One spouse dies. A few years later, the surviving spouse finds someone new and decides to remarry. They then put everything in joint tenancy together. If the new spouse dies first, there is an automatic right of survivorship and everything passes to the new spouse. If they have their own kids, your kids end up being left out in the cold. Everything passes to the new spouse’s children. This is a common scenario that can be avoided through proper planning and proper language inside your living trust.
There are many different ways to set up a trust. You can plan with incentives. Some beneficiaries have developed an unacceptable behavior or lifestyle. There are ways to create a trust to motivate beneficiaries to be productive members of society, to teach heirs financial responsibility or to push a family member to get help for a dependency problem. Clients can be helped to build incentives into their trusts to reward beneficiaries for achieving certain goals or discourage beneficiaries from unacceptable behavior. You can have a Trustee match a beneficiary’s income shown on their w-2 form. If education is important to a client, then they can pay a beneficiary’s educational expenses and even offer a bonus for reaching certain educational targets. For parents who have children who have drug or alcohol problems, their greatest concern is that their wealth will eventually go to support a self-destructive lifestyle.
With proper drafting a trust can actually help an addicted child recover. A trust can be created to instruct the Trustee to withhold distributions to a child while he is exhibiting addictive behavior. The Trustee can require the child enroll in school, to attend counseling programs, to submit to drug screening tests. The trust can pay for counseling and treatment to help the beneficiary overcome the destructive behavior.
For couples with minor children, a trust is a must. If a couple has minor children, neither a Court nor a financial institution is going to pay out to a minor. Therefore, if there is no planning done or planning done with a Will, the Court will require that a guardianship be set up through the Court. The money will then pay out to the Guardian. However, the Court must protect the money from the Guardian, so everything will be ordered to be set up in blocked accounts and cannot be removed without Court Order. When the child reaches the age 18, the Court goes to the other extreme and releases everything to the child and no longer oversees anything. The cost of the guardianship can be avoided if the assets are put into a living trust and managed by a Trustee. When the child reaches the age of 18, you are not required to distribute out to the child. Through the terms of the trust, you can determine when and how that child will receive their inheritance.
What about people who have children who have disabilities and who are receiving government benefits because of those disabilities? Special needs trusts can be set up to protect
the assets and to prevent a child from getting cut off from their government benefits. The assets inside the trust are meant to supplement the child’s benefits, not take the place of these benefits.
As one can see, the living trust is really the way to go if you have more than $150,000.00 in assets in the State of California. It keeps you out of a probate or conservatorship. It can protect the assets for your loved ones. This can all be done at a much lower cost than the lengthy probate process. Most everyone needs to have a trust. If you own a home in the State of California, a living trust is the way to go. If you have minor children, a living trust is the way to go. If you end up in long term care, the living trust is the way to go.
Proper estate planning combines financial, tax, business, retirement and insurance planning. These diverse subjects must be addressed in an integrated fashion to create the best plan for you and your family. When looking for an estate planning attorney, you should work with an attorney who emphasizes estate planning in his or her practice. You want to make sure that the attorney is working to make sure the assets are transferred into your trust name. You want to work with an attorney who will take the time with you to lay out the options available to you when doing your planning and avoid the person who is putting you into a one size fits all plan. You want to work with an attorney who will keep the plan updated. You also want to work with an attorney who will want to develop a long term relationship with your family.
The Law Office of Suzanne Graves
Suzanne Graves
(909) 987-6177
email : sgraves@suzannegraves.com
1317 W. Foothill Blvd., Suite 245, Upland, CA 91786
http://www.suzannegraves.com/index.html
You have worked hard for your assets. That is why you need to make sure your assets are protected the way you want. Each family or business is different, which is why you want to make sure that you are protected by setting up the estate plan that is right for you. The Law Offices of Suzanne Graves has professionals who specialize in family legacy and estate services. They can help you with the complicated process of what legal service is best for your unique legal situation and customize your asset planning so that you can feel safe knowing your assets and family are protected.
Homes For Sale in Upland!
[wnt_grid keyid=”1″ maptype=”disabled” minprice=”300000″ maxprice=”1900000″ city=”Upland” exactcity=”1″ ownertype=”all” paginated=”true” sortoptions=”true” maxresults=”10″ /]Search for More Homes in Local Areas
[wnt_search title=”QuickSearch” view=”basic” /]To learn more about The Hanover Group at Keller Williams Realty
Call (909) 942-6165 or (844) HANOVER
Email : info@thehanovergrp.com
Visit:
