Living Trust Seminar

In this seminar we're going to discuss subjects most of us would rather avoid: death disability and taxes. Many people do not give a single thought to the certainty of their own death, yet it will happen to each and every one of us. Estate planning forces us to face the financial and emotional consequences of death and take action to minimize the effects on our families. But if people were asked to summarize their estate planning wishes, most would simply say that:

• They want their estate to be distributed to the people they chose according to their wishes;
• They want to avoid excessive attorney's fees, court costs and unnecessary delays in passing on their property; and
• They want to avoid, or at least, minimize the payment of state and federal death taxes.

Is creating A Will a good idea?
Many people plan their estates by creating a document called a Last Will and Testament. A will is essentially a legal document that lays out how you want your assets distributed at death. As we've already learned, a will doesn't control the distribution of all your assets. Joint tenancy property and life insurance proceeds both pass outside your will. Wills don't take effect until you die so they are no help with lifetime planning. Upon your death, your will becomes a public document when it's filed with the probate court and is available to anyone who want to read it. Once your will enters the probate process, your estate is not longer controlled by your family. It's in the hands of the court and the probate attorneys. Because a will guarantees that your estate will go through probate, it's very poor estate planning document for most families.Why do so many estate planning professionals recommend a revocable Living Trust?
A revocable Living Trust is a complete will substitute. It can control all of your assets both during your life and after your death. Here's how it works: When you set up your living trust, you transfer the title of all your major assets (stocks, bonds, real estate, etc.) from your name to the name of the trust. You then name yourself as the trustee and beneficiary. That gives you and you alone, total and complete control of all your assets. You can buy, sell, trade, doe whatever you want---just like you do now.Here's the difference, and the real benefit of it. When you die, there will be no assets left in your name, and, therefore, no probate for your family to endure. Whomever you name as your successor trustee will immediately gain control of your assets to distribute them according to your exact instructions.What happens if you do nothing?
Believe it or not, a majority of Americans choose to do nothing. Experts report that 70% of all Americans have no written estate plan. And, of those who have planned, most have created a simple will or rely on joint tenancy ownership of their assets to distribute their estate. Unfortunately, for the majority who have no plan in place, state law will dictate how their estate is to be distributed at death. As you might imagine, the government's plan of distribution has no particular concern for the best interests of your family.There is no argument that doing nothing can result in probate costs, attorney's fees and, of course, higher death taxes. But most people don't realize that there can be major problems as a result of creating a simple will or holding title to your assets in joint tenancy.This Living Trust seminar will walk you through a discussion of each of the estate planning evils and explain what happens if you plan with joint tenancy, a simple will or a living trust.What is Joint Tenancy and why do so many people use it?
Joint tenancy ownership is where two or more people hold title to an asset together. But unlike other forms of joint ownership, upon the death of one of the owners the entire interest passes automatically to the surviving joint tenants. Actually, the full name for joint tenancy is Joint Tenancy With Right of Survivorship (JTWROS). Right of survivorship means that whoever dies last owns the whole property.Because a joint tenant's interest passes to the surviving joint tenants immediately at death, it's not controlled by the owner's will. For example, let's say two good friends, Bob and John, owned a piece of property as joint tenants. Bob dies and his will says that upon his death all of his estate should go to his wife, Mary. What happens to his interest in the real property he owns with John? Because the title passes automatically at death to the surviving joint tenants, John will own the entire property and Mary will get nothing. This is only one of the unforeseen problems that joint tenancy ownership can create.What is a Living Probate?
When you mention the word "probate", most people think it's only something that happens when you die. Unfortunately, probate can also happen while you're alive. It's often referred to as a living probate but it's technically called a conservatorship or guardianship proceeding. If you become mentally disabled before you die, the probate court will appoint someone to take control of all your assets and personal affairs. These courts appoint agents must file strict annual accountings with the court. The entire procedure is expensive, time consuming and humiliating.Does Joint Tenancy avoid a Living Probate?
No. Each joint tenant is required to sign documents on all major transactions involving joint property. If one of the owners is mentally disabled and incapable of handling financial matters, everything will have to wait until the probate court takes control. The court, in effect, becomes a joint owner and will continue to have a voice in managing the property until the disabled owner recovers or dies.Does a Will avoid a Living Probate?
No. A will only takes effect at the time of your death. It has not control over events during your life.Does a Living Trust avoid a Living Probate?
Yes. One of the most important benefits of a living trust is that it is designed to protect you while you're alive. Part of every well-drafted living trust is a section setting forth your instructions in the event you should become legally incapacitated. You can plan in advance to look after sickness, disability and even old age. The trustees you pick are bound by law to follow your instruction during these difficult times. With a living trust, there will be no need for expensive "help" from the probate court, probate lawyers or conservators.What is Death Probate?
When you think about it, probate is not difficult to understand. At your death, your assets need to be distributed to your heirs, your debts need to be paid and any loose ends need to be looked after. You obviously, can't sign the deeds, write the checks or hand your business affairs. The probate court takes over those duties.The probate process is a long complicated and bureaucratic nightmare for most families. Here are the five basic steps to settling an estate:Step one: Filing Petition and Gathering MaterialA formal written petition to the court along with a filing fee must be submitted to the court to start the probate process. One of the probate court's first jobs is to approve or appoint someone to hand the affairs of the estate. This person is called the executor, administrator or personal representative depending upon the rules of the state and whether the decedent died with or without a will.To keep things simple, we'll call this agent of the estate a "personal a representative". Generally, the first thing the personal representative does is hire an experienced probate attorney. Although having an attorney is not always a legal requirement, it has become a practical necessity because probate paperwork and filing procedures can be very complex.Step Two: Publishing Notice to Creditors The second major job of the probate court is to order that the decedent's creditors be notified so that they can present their claims to the court for payment. This requires the time consuming task of cataloguing all of the decedent's liabilities. The creditors are notified either by notices in the local newspaper or directly by mail. The law sets a time that the probate proceeding must be left open to allow creditors the chance to present their claims. In most states, the creditor period is several months long.Step Three: Inventory and Appraise AssetsDuring probate all the assets in the estate are usually frozen so that an accurate inventory and appraisal can be made. This means that during this period none of the assets can be distributed or sold without written permission from the court. The court will often require formal written appraisals for many items, such as real estate, antiques, collectibles, automobiles, furniture and other valuable assets. Appraisal fees can be expensive and, like all expenses, are paid for out of the estate. Step Four: Payment of Debts, Claims and TaxesOnce all the debts and claims have been submitted and approved, they're presented to the court for approval to pay them from the assets of the estate. Some estates may also have heath tax liability and they must stay open until those taxes are paid.During the entire probate process, disgruntled heirs or those who disagree with the provisions in the will can bring a lawsuit in the probate court. These suits are called will contests. They can hold up the distribution of the estate and are often used to intimidate heirs into settling cases that have no merit.Step Five: Final Distribution and Closing of Estate Finally, after the court is satisfied that all legal requirements have been met, it will order all debts, claims, taxes, attorney's fees and the personal representative's compensation and any other miscellaneous expenses to be paid. If there's not enough cash in the estate to pay these substantial claims, the judge can order that assets be sold at public auctions or estate sales. These transactions are often conducted in a depressed market or under the banner of "distressed sales".Only after all the bills are paid, will the probate court distribute the estate to the beneficiaries named in the will, or if there is no will, to the designated heirs at law. The court then closes the file.How much does Probate cost?
Despite what probate lawyers say, probate is very expensive. One critic of the system says that the average cost is over seven percent of the gross value of the estate. A full sixty-percent of the costs goes to lawyers and forty percent to personal representatives and others. One legal scholar, who urges a reform in the probate system remarked that, "the cost of probate expands to consume the money available". Small estates are particularly vulnerable because even reasonable fees can eat up a large percentage of an estate's assets. There just isn't that much to go around. Remember that, every dollar that goes to pay probate costs is a dollar that could benefit your family.How are Probate fees calculated?
The way probate fees are calculated is exceedingly unfair to your family. State law sets the probate fees that, attorneys and personal representatives can charge. Many states allow attorneys to charge any fee that the court considers reasonable, without any limitations. Other states limit the fees to a fixed percentage of the estate. Under either method, the fees can range for $% to 10% of your family's gross estate. Massachusetts and New Hampshire are reasonable compensation states.Remember that, probate fees are often levied at each spouse's death. Depending on how title was held on the date of death, a married couple could pay some form of probate fees on the death of each spouse.Not only are these fees excessive, but the manner in which they arrive at the size of your estate bears little resemblance to its actual value. In states that use the percentage of the estate method, probate fees are calculated on your estate's gross value without deductions for liens or encumbrances. This means that if you have property worth $100,000 but owe $90,000 to a bank or some other financial institution, your probate fees will be based on the full $100,000 not the $10,000 equity interest you actually own. As you can see this valuation method unfairly increase the size of your estate and results in the payment of larger fees.How long does Probate take?
The slow progress of your estate through probate can be very frustrating for the family. Although this complex process usually takes at least one and a half years to complete, many estates take years. Most people assume that their estates are simple and will glide through the system. Regardless of how simple an estate appears, it's very difficult to close a full probate in less than a year. That's because of all the steps that must be completed to the satisfaction of the court.Are the details of the estate kept private in Probate court?
No. All probate proceedings are open to the public. Anyone who has an interest can pull your probate file and examine every detail of your financial life. The file will disclose an inventory and appraisal of every asset you owned at death. It reveals the name of all your creditors and amount owed to each. It lays out the names of all your beneficiaries and the amount and conditions of their inheritances. This information is often compiled and sold to those who use the information to sell products and services to vulnerable surviving family members. It can be particularly damaging if you owned a business. Your competitors will have a treasure trove of confidential business information at their fingertips in the probate file.What happens to the real estate located in another state?
A probate must be instituted not only in the state where you lived, but in every state where you owned real estate. This is called an ancillary probate. Each state has probate jurisdiction of the real property located within its borders. That means that your family will have to file a new probate in each state and hire local counsel to represent the estate. Of course, this will add to the expenses that must be paid before your family receives its share.Are there any other problems with a Death Probate?
Yes. Perhaps the most important disadvantage of death probate is that your family loses control of the estate. During probate, it may not be able to sell assets without court approval even if it needs the money. Opportunities can be lost because the cumbersome probate system moves so slowly.Your family may pay an emotional price in probate, as well. Because the process takes so long, it can be a constant reminder of the loss of a loved one. It can also foster arguments among family members who would normally seek support from one another. It's common to see family members taking out their frustration about the system on one another, especially if one of the family members has been named the personal representative of the estate.Does Joint Tenancy avoid a Death Probate?
Well, the answer is yes and no. In the case of a husband and wife who own their assets in joint tenancy, there's no death probate when the first spouse dies because title passes automatically to the surviving joint tenant. However, when the surviving spouse dies, there will be a complete probate on the entire estate.The fact that joint tenancy ownership avoids death probate at the first spouse's death is a small reward for the many other disadvantages of joint tenancy ownership. It can lead to huge unexpected liability when parents and children own assets together. In community property states it creates capital gains tax problems. For these reasons, estate-planning experts agree that joint tenancy may be the poorest estate-planning tool.Does a Will avoid a Death Probate?
No. In fact, a will guarantees probate. The word probate actually comes from the Latin and it means "to prove the will". All property that is controlled by your will must go through the probate court. Once your estate enters the probate process, it's trapped in the system until the judge releases it.Does a Living Trust avoid a Death Probate?
Yes. All assets transferred to a living trust completely avoid the probate process, both during your life and at your death. Living trusts are not new. They've been successfully used in one form or another since the Middle Ages. Both then and now, the living trusts have required that the owner of assets transfer title from his or her name to the name of trust. This means really changing the title to your property. For real property, it means you will sign a new deed. For other assets, you sign special transfer documents changing ownership to the name of your trust. Once the process is complete, all your assets will be owned by the trust.Almost nothing will be owned by you personally. Your living trust has title to the assets, but don't worry, you or you and your spouse if you're married, have complete control of the trust while you're alive. But when you die, there are not assets in your name so there's not need to go through probate. The trust already has your written instructions directing your hand picked agent, the successor trustee, about how you want your estate distributed.With a living trust, there's not need for "help" from the probate court or probate lawyers. Your trust will completely eliminate these unnecessary costs. Moreover, your estate can be distributed instantly at your death. There are no judges to consult or bureaucrats to please. Your trustee merely follows your instructions in distributing your estate according to your wishes. In most circumstances the Living Trust, when used, avoids probate, however, there are exceptions.Many states have abolished the inheritance tax but the federal estate tax is still around and it's one of the largest taxes a family will ever have to pay. It's a tax on your right to transfer property to others at your death. Currently, the federal estate tax rates start at 37% and quickly rise to 55% of every dollar in your estate over the amount of the exemption.

• Taxable Estate
• 1998 Federal
  Estate Tax
• 2006 Federal
  Estate Tax
• $625,000
• $ -0-
• $ -0-
• $700,000
• $27,750
• $ -0-
• $750,000
• $46,250
• $ -0-
• $850,000
• $85,250
• $ -0-
• $1,250,000
• $246,250
• $102,500
• $1,350,000
• $289,250
• $145,500
• $1,500,000
• $353,750
• $210,000
• $1,750,000
• $466,250
• $322,500
• $2,000,000
• $578,750
• $435,500
• $2,250,000
• $701,250
• $557,500
• $2,500,000
• $823,750
• $680,000
• $3,000,000
• $1,088,750
• $945,000
• 55% on the excess over $3,000,000

Do all estates pay Federal Estate Taxes?
No. The federal government has given every person in the United States an exemption for estate tax purposes. Presently, the exemption is $600,000 with a planned gradual increase to $700,000 in 2002 and to $1,000,000 in 2006. That means if your estate at the time of your death is less than the exemption, there will be no federal estate taxes due. In deciding whether your estate is greater than or less than the exemption, the government includes everything you own even the face value of your life insurance policies.Is there an Estate Tax Deduction for married people?
Yes. In addition to the phase-in personal exemption that everyone gets, the federal government has exempted all transfers of wealth between a husband and wife. This is called the Unlimited Marital Deduction and it means that regardless of the size of your estate there will be not federal estate taxes levied when the first spouse dies and leaves the estate to the surviving spouse.Keep in mind, however, that this is merely a postponement of tax. There will be a tax on the estate of the surviving spouse when it passes to the children or other beneficiaries. Since in all probability the estate will continue to appreciate in value, taxes may be paid at a higher rate.WARNING: Recent changes in the tax law has eliminated the unlimited marital deduction for surviving spouses who are not U. S. citizens. Without special palling, all non-citizen spouses are restricted to the tax-free transfer of the personal exemption amount from their deceased spouses.What if you have a small estate, do you need to worry about estate planning?
Yes. While an estate under the exempt amount is free form federal estate taxes, you will probably not avoid a living probate if you become disabled or a death probate when you die. Remember that, probate and federal estate taxes have nothing to do with each other. Estate taxes are paid to the federal government for the right to transfer property at your death. Probate fees and costs are paid to the probate court, attorneys and the personal representatives of your estate for supervising the administration of your estate and distributing assets to your beneficiaries.How can I create a Living Trust?
The first step is to make an appointment for a free, no obligation meeting with one of our estate planning professionals. You should be prepared to discuss the following issues:

• How your assets are to be distributed after your death, and
• The names of the people you want to manage your assets if you become mentally disabled, and after your death.

If you become disabled or are unable to manage your estate, your living trust avoids the need for a court mandated conservatorship. The successor trustee you've named will step in and manage your affairs without government interference and expense.With a living trust your assets will go directly to your beneficiaries after your death. There will be no probate attorney's fees or court costs. There will be no delay in distributing your assets, and all your estate planning goals will be completely private. In most circumstances, a Living Trust avoids death probate; however, there are exceptions.With a living trust, a married couple can pass twice the exempt amount absolutely estate tax free to their heirs. That means in 1998 with proper tax planning a married couple can make a tax-free transfer of $1,250,000. That same couple in 2006 can transfer $2,000,000 estate tax free. A single person can pass $625,000 estate tax free in 1998, gradually ramping up to $1,000,000 in 2006. A living will can also pass twice the exemption amount.It can provide for the care, support and education of your children by turning over assets to them at an age chosen by you. Even insurance proceeds can be paid to the trust so your successor trustee can manage them for the benefit of your family.Both the surviving spouse and the children from a previous marriage can receive fair treatment and protection under the terms of your living trust.Most living trust contain a "No Contest Clause" which prevents greedy beneficiaries and their lawyers from successfully attacking your estate plan.When your living trust is completed, you and your family will relax knowing that your estate will be managed and distributed by someone you have selected and trust.

• Complete Estate
  Planning Portfolio

• Revocable Living Trust:
• Avoids Living Probate, Death Probate and reduces or eliminates federal estate taxes.
• Trust Property:
• Summary of assets owned by Living Trust
• Pour Over Will:
• Transfers any assets outside the Trust into the Trust
• Community Property Agreement:
• For married couples. Changes Joint Tenancy assets to community property to avoid capital gains taxes
• Affidavit of Living Trust:
• Summary copy of selected portions of your Living Trust.
• Instructions:
• Guidelines for transferring assets to your Living Trust.
• Life Insurance Summary:
• Information on all life insurance Policies.
• Location List & Family Information:
• Where all important documents are located. People to notify in case of death or incapacity.
• Estate Planning Letter:
• Distribution of small items of personal property, burial and funeral instructions.
• Living Will:
• Authorizes termination of life support systems if there is a terminal illness.
• Anatomical Gift Declaration:
• Authorizes organ donations.
• General Durable Power of Attorney:
• Authorizes someone to manage your property if you become incapacitated.
• Durable Power of Attorney For Health:
• Authorizes someone to make Health Care decisions if you become incapacitated.

• Estate Planning Alternatives

• Planning Alternatives:

• Intestate Succession (No Will)

• Joint Tenancy
• Life Insurance
• Simple Will
• Testamentary Trust
• Unfunded Living Trust
• Funded living Trust
• Avoids probate at death of first spouse
• No
• Yes
• Sometimes
• No
• No
• No
• Yes
• Avoids probate at death of second spouse
• No
• No
• No
• No
• No
• No
• Yes
• Provides maximum tax savings
• No
• No
• No
• No
• Sometimes
• Sometimes
• Yes
• Avoides Living Probate
• No
• No
• No
• No
• No
• No
• Yes
• Provides family privacy
• No
• No
• Sometimes
• No
• No
• No
• Yes
• Establishes trust for beneficiaries
• No
• No
• No
• No
• Sometimes
• Sometimes
• Yes
• Permits testing during life
• No
• No
• No
• No
• No
• No
• Yes
• Prevents attachment of beneficiary's assets
• No
• No
• No
• No
• Sometimes
• Sometimes
• Yes

• Estate Shrinkage of Famous People Who Failed to Plan

• Name
• Gross Estate
• Total Settlement
• Net Estate
• Percent Shrinkage
• W. C. Fields
• $884,680
• $329,793
• $554,887
• 37%
• Nelson Eddy
• $472,715
• $109,990
• $362,725
• 23%
• Franklin D. Roosevelt
• $1,940,999
• $574,867
• $362,725
• 23%
• Humphrey Bogart
• $910,146
• $274,234
• $635,912
• 30%
• Clark Gable
• $2,806,526
• $1,101,038
• $1,705,488
• 30%
• Dean Witter
• $7,451,055
• $1,830,717
• $5,620,338
• 25%
• Henry J. Kaiser, Sr.
• $5,597,772
• $2,488,364
• $3,109,408
• 44%
• Al Jolson
• $4,385,143
• $1,349,066
• $3,036,077
• 31%
• Gary cooper
• $4,948,985
• $1,520,454
• $3,454,531
• 31%
• Myford Irvine
• $13,445,552
• $6,012,685
• $7,432,867
• 45%
• Walt Disney
• $23,004,851
• $6,811,943
• $16,192,908
• 30%
• William E. Boeing
• $22,386,158
• $10,589,748
• $11,796,410
• 47%
• William Frawley
• $92,446
• $45,814
• $46,632
• 49%
• Hedda Hopper
• $472,661
• $165,982
• $306,679
• 35%
• Marilyn Monroe
• $819,176
• $448,750
• $370,426
• 55%
• Erle Stanley Gardner
• $1,795,092
• $636,705
• $1,158,387
• 35%
• Cecil B. DeMille
• $4,043,607
• $1,396,064
• $2,647,543
• 35%
• Elvis Presley
• $10,165,434
• $7,374,635
• $2,790,799
• 73%
• J.P. Morgan
• $17,121,482
• $11,893,691
• $5,227,791
• 69%
• John D. Rockefeller, Sr.
• $26,905,182
• $17,124,988
• $9,780,194
• 64%
• Alwin C. Ernst, CPA
• $12,642,431
• $7,124,112
• $5,518,319
• 56%
• Frederick Vanderbilt
• $76,838,530
• $42,846,112
• $33,992,418
• 56%
• Howard Gould
• $67,535,386
• $52,549,682
• $14,985,704
• 78%