Trust and Estate Planning
Question: What is a Living Trust and how can I benefit from it?
Answer: A Living Trust is for anyone who wants to maximize their net estate left to heirs, speed asset distribution after death, maintain privacy and avoid redrafting of a Will every time their intentions change. Anyone can benefit substantially by having an estate plan incorporating the use of a Revocable Living Trust.
A living trust can help anyone one of us who want to protect ourselves and our families from unnecessary probate court costs, attorney fees, guardianship expenses, bonds and in some cases, taxes. By creating a revocable living trust we can:
- Avoid involving the probate court in distributing our assets after our death; (thereby avoiding the costs, attorney fees and administrative expenses relevant to a probate case);
- Designate who will manage our affairs should we become disabled and prevent court involvement and expenses in appointing a guardian;
- Protect assets we wish to pass to our children from creditors, taxes, court costs and administrative expenses;
- Minimize estate and capital gains taxes.
Question: I only have a house and a bank account. Would I still be able to benefit from Living Trust?
Answer: Living trusts are not just for the wealthy. Many think their assets are too modest, or that they have plenty of time to plan for the distribution of their assets after their deaths. But even those with limited means and who are in their money-earning years can do themselves and their families a great favor by having a simple estate plan. First, they can avoid expensive and long Probate Process. Second, they can have a huge TAX Advantage by putting their assets into a Trust.
Question: What are the Benefits of a Revocable Living Trust?
Answer: First, you can pass a title to the property from one person to another without undergoing a probate court procedure. This happens simply because when a person places assets into a revocable living trust, legal title is changed into the name of the trust. Consequently, if you have added an asset to your trust, that asset is not considered a part of your personal estate, and legal title of that asset can be legally transferred to your intended beneficiary by your appointed Trustee after your death without court authorization.
Second, Trust help reduce or eliminate taxes. The use of a Trust accomplishes a reduction in estate taxes on estates that exceed $1,500,000.
Third, extremely important advantage of a Trust is its capacity to avoid having the court assume control of you and your assets in the event you become mentally or physically disabled before your death. This commonly happens when a person suffers from Alzheimer's disease, or a stroke and is no longer competent to manage property or to render decisions with respect to his or her health care. Without a living trust, a judge will appoint a guardian to manage the person's financial affairs and see to the personal care of the person.
Question: What is Probate Court?
Answer: In most instances, when a person is interested in creating a Living Trust, his first concern in doing so is to "avoid probate". Such person wants a loved one to legally distribute his assets after he has died, without court intervention. However, many people do not understand probate, only that it can be expensive, confusing, and can cost delays in the distribution of an estate. The Wall Street Journal estimated that the costs and expenses of probate average 4 to 6 percent of an entire estate, and that the average time to complete the process is from 12 to 18 months. Most probate cases take at least 12 months to complete. As for costs and expenses, probate fees vary from state to state.
Question: I read everything and I still don't understand what a Living Trust Is?
Answer: Lets compare a Trust to a wooden box:
Let's say you made or bought a wooden box, and now you place a stack of ten dollar bills in the box. The box is an inanimate object that holds property. Now, if you want, you can obviously remove the bills from the box, deposit them into a bank account, spend them or even give them away. And, if you were so inclined, you could even destroy the box. A revocable living trust works the same way.
With a revocable trust, you create the trust - you add property to the trust - you have the ability to remove property from the trust - you have the ability to leave property in the trust - and you have the right to destroy or terminate the trust. It is just difficult at first to understand what a Living Trust is or does, because, unlike a wooden box, the Trust is an intangible form of ownership as opposed to a tangible item. The only problem with this analogy is that a wooden box cannot legally own property. A trust can!
A living trust is ultimately a method of controlling and owning assets. Under the law, a Trust is a separate, intangible legal entity, just as a corporation or city is. A trust is an inanimate object, capable of owning, holding and possessing assets, just as though a piggy bank can hold coins, but incapable of thinking or performing any act on its own. Property can be added to, or taken away from the trust. Property within a trust (the trust estate) is not owned by the person who created or added property to the trust (the trustor), nor is the property owned by the person managing the trust (the trustee). Assets in the living trust are owned by the trust, and since a trust does not "die" when its creator or manager does, those assets are not subject to the probate of the decedent's estate, or the bureaucratic expenses previously discussed.
LEGAL DOCUMENTS INVOLVED IN A REVOCABLE LIVING TRUST ESTATE PLAN
Declaration of Trust - This is the main Trust document which sets forth the specific terms and provisions of how your Trust will operate, who is authorized to act on behalf of the Trust and how the property will be distributed.
Pour Over Will - Funds the trust at the time of your death with any property which you may have not formally transferred to the Trust. By using a Pour Over Will, even those things you forget to transfer into the Trust are distributed according to the plan set forth in the Revocable Living Trust. You may also specify that certain items should be transferred in another manner.
Medical Power of Attorney - An instrument which gives a person of your choosing the legal authority to make medical treatment decisions when you are not able to make the decisions yourself.
Durable Power of Attorney - A comprehensive durable power of attorney to give another person of your choosing legal authority to execute legal documents when you are not able to do so, avoiding expensive and time-consuming Conservatorship (Living Probate) proceedings.
Living Will - Instruments used to avoid artificial means of life support that may only serve to increase medical and hospital bills.
Transfer Instruments - Assignments, Grants & Quitclaims of Assets to Trust - documents showing your transfer of assets to the Trust.
Certificate of Trust - This instrument states the existence of the Trust and can be recorded in any county in any state where you own real estate or personal property. This instrument includes information regarding who is authorized to act on behalf of the Trust and who the successor trustees are.
Deed - A quitclaim or special warranty deed to transfer real estate into your Trust.
Law Offices of Inna Fershteyn can help you put together your own Trust and Estate Plan and transfer property that you have in any of the 50 states into such trust. Call us at (718) 333-2394 or email and we will be happy to assist you with all of your estate planning needs.