How You Can Save Thousands Of Dollars With A Living Trust!
By – R. Douglas Cobb, CRPC
Chartered Retirement Planning Counselor
Cobb Planning Group
Here is your guide on how to save thousands of dollars with a Living Trust.
It’s titled: “How To Save Thousands Of Dollars Using Living Trusts!
Discover The Little Known Secrets Your Accountant And Attorney don’t bother telling you About…”
Let me ask you a couple of quick questions:
Do you know what a living trust is?
Do you know what it does, and doesn’t do?
If you’re not sure, then keep reading, so you will finally know the truth about Living Trusts… and whether you should have one or not. You see, there are all kinds of myths about how Living Trusts work, and what they can do for people. Having the right information can literally mean thousands of dollars of savings to you and your estate!
Let me start off by telling you that Living Trusts, when set up properly, can be one of the best financial tools available!
The key here, is that they must be set up properly.
If you establish any trust arrangement, and it hasn’t been done properly, it may be worse than having no trust at all!
Fortunately, in most cases, the problems are easily fixed. In this report we’ll give you an outline of what to do and how to set your trust up with the help of the right financial and legal advice.
If you haven’t yet set up a Living Trust this report will provide you with the “how to” information you’ll need to use as a guideline to make sure you get things done properly… the way you want!
A Living Trusts allows you to avoid the legal court expenses that can literally swallow up thousands of dollars of your financial assets in your estate!
First of all, let’s define a “Living Trust”.
A Living Trust is a legal document that allows you to change the ownership of certain assets to the trust. For example, you change the ownership of a stock or bond, from you as an individual, to the trust as the new owner.
You’re basically switching the title from personal ownership, to ownership by a trust, with you serving as trustee, in most cases. (Your spouse can serve as co-trustee as well.)
Why would you want to do that?
We’ll discuss the why in just a minute.
First, it is important to understand what a Living Trust is, and how it differs from other types of trusts that you can establish.
A “Living Trust “, is set up to hold your assets while you are alive.
A Living Trust is different from a “Testamentary” trust, because it focuses on the control of your assets while you are alive. (A Testamentary Trust activates upon death.) A Living Trust is also totally revocable.
That means that you, as trustee, can decide to cancel the trust, or switch things around, any way you choose, without any problems.
Hmmmm.. why is that helpful?
You might be wondering why someone would transfer the ownership of their assets to a Living Trust. Why would someone go through all this trouble, if the trust can be changed any time?
In a sentence you want to have the flexibility to arrange your assets and estate as you desire to provide maximum protection from taxes and probate fees!
The IRS and probate attorneys may not be happy to hear that… but that is good enough reason the know about Living Trusts!
It also affords you much greater privacy regarding your family financial matters that you may not want advertised all over town
How is that you say?
See, when you own assets in your estate either individually or in joint tenancy with your spouse, and you pass away, all of those assets becomes part of your “probate” estate.
Oh boy – not good!
This means that the ultimate disposition of your assets is supervised by a judge. The system is intended to ensure that the wishes of the deceased have been carried out properly, and that no one has tried to circumvent those wishes.
In theory that sounds good.
Unfortunately in practice it doesn’t work very well… when you consider the time and expenses involved.
The probate process, being a public forum, has some very unpleasant side effects that go with this “noble effort” of protecting a family’s wishes for the distribution of their estate.
The executor of the estate has to file your will at the courthouse, where it becomes public information that everyone, and anyone, can see. Not good at all if you don’t want the world to know about you financial affairs.
The usual costs associated with probate can run anywhere from 3% to as high as 10% of the estate! A $1,000,000 estate = $30,000 – $100,000 paid to lawyers and court costs. Some people do not like wasting this much money.
Creditors are notified to make claims against the estate, estate tax returns have to be prepared and filed, any questions or problems with the disposition of the assets must be resolved, etc., etc.
This process of contacting creditors can take as little as nine months after the death, and is frequently much longer.
Quite candidly, this has a way of extending the grieving process… because the estate matters are continually coming up months after the loved one has passed away.
Many people don’t like making their family suffer through all these endless delays, especially if there is a business involved, or whatever.
So you can see that while probate has good intentions from the public’s point of view, it is not very desirable privately for most of us.
A Living Trust!
When you transfer your assets to the trust as the owner, here are the benefits that can be seen:
At death, the trust property will either be directly distributed to the family, or held in trust for them, based on however the parents wanted things to be handled. All these distributions are done without any court supervision!
If you should become mentally or physically unable to manage your affairs, a successor trustee of your choice can step in to take over the management responsibilities. The new trustee will not have to obtain probate court approval, or be subject to court supervision!
The trust arrangement can be amended or canceled anytime. This is not a permanent arrangement that can’t be switched later on!
In essence, what a Living Trust does, is provide for the orderly and prudent management of your assets in the event of a lifetime disability, and substitutes for a “will” at death.
The biggest benefit of a Living Trust is that there are no court proceedings, expenses or delays which are associated with probate and a Will!
For example, one of our clients passed away, and her entire estate of over $750,000 was distributed to all nine children and grandchildren in less than 30 days, with only $2,000 in legal fees!
That’s all good news.
Now you can see why so many people are interested in establishing a Living Trust to direct their wishes.
All the benefits of a Living Trust are very worthwhile.
HERE ARE 5 MISTAKES TO AVOID IN SETTING UP A LIVING TRUST!
Now let’s look at some specific mistakes that people make when setting up their estates, particularly when using a Living Trust. While these problems are the most common, they are by no means, the only ones that can come up and bite you. We just wanted to cover the most frequent problems we see on a regular basis.
1. Establishing a Living Trust, but forgetting or neglecting to put all assets into the trust. This is the most common mistake we see.
And, it is a huge one!
Setting up your Living Trust is just the first step.
If you forget, or just don’t get around to transferring some or all of your assets into the trust… all assets left out of the trust will end up going through the public probate process!
Yes, believe it or not, we’ve actually seen people spend money to set up a sophisticated trust arrangement, and then either pass away or become disabled before transferring assets into the trust.
So what they’ve done, is waste time and money, without a penny of financial benefit to their family.
A big mistake wouldn’t you agree?
So… if you decide to set up a Living Trust please make sure to have the “right people” get the assets out of your name, into the name of the trust! (We have a step-by-step procedure checklist for you to follow to make sure it is done properly)
2. Thinking a Living Trust will save you income and all estate taxes. I can’t tell you how many times people come into the office and want to discuss Living Trusts, thinking they will save either income or eliminate estate taxes.
Read carefully please.
A Living Trust cannot save you one nickel in income taxes. If you are single it cannot save you any estate taxes.
Many people are under a major misconception that a Living Trust can and will save you taxes. This simply isn’t so.
There are many, many ways to save income and estate taxes with other types of estate planning techniques.
If you are married and set up a proper “A/B” trust you can utilize each spouse’s personal exemption ($650,000 for 1999 increasing to $1,000,000 by 2006) which is usually lost when a married couple hold title as joint tenants.
So, for right now though…
Please understand, that Living Trusts are NOT to be used as a tax planning tool! They only allow you to keep what you are entitled to, nothing extra!
3. All Living Trusts Are The Same.
A lot of people think that a Living Trust is just a form that can be pulled off a bookshelf or printed out of a computer. The unsettling fact is, all Living Trusts are NOT created equal!
True, most Living Trusts are similar. You can buy one off the bookshelf that is three pages long or have a professional estate planning attorney with 20 years experience draft 40 to 50 pages of important provisions. Which one will you need?
The problem is. . .when will you know whether you needed a bookshelf cheapie or the attorney “Cadillac” Living Trust?
When you die it’s a little too late!
You see, you have to be careful about who you have prepare your Living Trust. First of all, it should be done by an estate planning attorney, because if it isn’t, you’re asking for trouble right away.
Second, whoever prepares your trust should be experienced in drawing up trusts and do this everyday for a living, not dabble in it on the side. Some attorneys only produce a dozen or so Living Trusts in an entire year; I certainly wouldn’t want to get heart surgery done by a surgeon who has only performed a couple of operations, or worse yet, by a general practitioner!
You work your whole life to build up your family savings, and if you’re not carefully you can lose 50-70% of your lifetime work efforts or “family business” to the IRS and attorneys in taxes and fees.
Think about this. . .most law schools don’t even teach attorneys about Living Trusts or how to draft them! The attorney that doesn’t have a lot of experience drawing Trusts, is learning how to do it — with you as the guinea pig!
Third, look at the credentials and experience of the Law Firm. How many years of experience do they have in Estate Planning?
It’s even more important that you ask if they have handled Living Trusts after their clients have died — when they’re really tested. How many deceased clients’ Trusts have they handled?
4. Having a Living Trust replaces a need for a will.
This is another very mistake that is made with Living Trusts!
You need a Will too. Specifically, you need a Will with “pour over” provisions set up in conjunction with your trust. What this will does, is two-fold.
First, it handles any assets whose titles haven’t been transferred to the trust. So, if you forgot to transfer the title on a stock or whatever, it would end up being distributed through the probate process.
Second, if there are minor children involved, a Will is where the guardians are appointed and then approved by the court. Without this will, the state would pick the guardians! That’s not good!
So please remember… your Living Trust is the primary estate planning tool, the Will is only a back-up.
5. Having your assets in “joint tenancy” eliminates the need for a Living Trust.
This final misconception is a biggie.
Let’s look at a real simple asset like a CD. (Although we don’t think people should own too many of these, but we won’t get into that now. When you are ready, we can show you some alternatives you just might like!
If you own a CD in both names, as joint tenants, with the rights of survivorship, (JTWROS) you may not think you need the trust. After all, the asset will be immediately retitled into the sole name of the surviving spouse, so why bother with a trust?
While it’s true that the asset will not go through probate when it’s set up in JTWROS. This may be the worst way to own any asset. Not because of probate, but because of estate taxes!
See, when you own assets in JTWROS, you will completely forfeit the marital deduction on that asset. This can cause enormous additional estate taxes.
For example, a clients of ours unfortunately lost his mother to cancer a few months ago.
Her son, had no previous involvement with his mom’s money.
|The combination of estate taxes and probate fees can erode your estate by as much as 50-70%. That is why it is so important for your to take a little bit of time to make sure that you preserve and protect what you worked a lifetime to accumulate!|
Well, it turned out that his parents had invested all their money in CD’s, (first big mistake) and all of it was JTWROS (second big mistake)
In structuring the ownership of their assets in JTWROS, they had lost the $650,000 marital deduction on the second spouses death, and their kids had to pay just over $250,000 in estate taxes that were totally unnecessary.
If they had made a few simple changes to their estate planning, none of those taxes would have been paid.
$250,000 — Is that sad, or what?
There is another benefit to avoiding JTWROS, and putting the assets into a trust.
If, for some reason, you become physically or mentally impaired, and can no longer manage your affairs, the trust will have provisions for who and how the assets will be managed.
No court appearances!
With an aging population, ever concerned about long term health care needs, it is vitally important that you structure your financial assets so that you can give yourself the greatest degree of flexibility and control in the future.
In the last example, if our client’s mother had become incapacitated before she got sick, she could have named her son in the trust to manage her affairs for her. He wouldn’t have had to hire lawyers to apply for conservatorship, and so on.
So many retired couples make this mistake!
The Better Alternative — The Living Trust!
If your CD’s are held in joint tenancy, then none of these protection and tax savings opportunities exist! (Just one more reason not to have too many CD’s in personal ownership!)
As you can see, a Living Trust, when used properly, is one of the best planning tools around.
Hopefully you now see the benefits of having a Living Trust – particularly if you are retired or plan on retiring soon.
Here is a summary of the advantages we talked about:
• A Living Trust is very affordable to set up and to manage!
• It can save you literally thousands of dollars in legal fees and court costs!
• It can provide for the simplest way to transfer the management of your financial assets in the event of a disability!
• It can dramatically speed up the distribution of your estate for family members and other beneficiaries.
• It can eliminate the publicity of probate!
• With proper planning, it may save thousands and thousands of dollars in estate taxes if you are married!
Yes, a Living Trust has no comparable tool when it comes to the benefits obtained, and the total financial flexibility and control it provides you with. It is a part of an overall estate plan that can give you greater control and security about your finances today… as well as in the future!
Jacqueline Kennedy Onassis is a perfect example of a woman and mother who did a masterful job of seeking out the proper help to see to it that her children and estate were handled in a manner that gave dignity to her life and accomplishments… as well as preserve the maximum amount of her estate for her family and charities that she supported during her lifetime.
How about you????
If you are a homeowner, have minor children, are retired, or planning on retiring soon it makes good sense to establish a Living Trust and apply other estate planning techniques to protect your financial assets from taxes, probate expenses and being eroded by an ever rising costs of living!
Frankly, if you allow the IRS and lawyers to have their way…
THEY will take as much as much Of Your financial assets as you let them!
We see it far too often.
So, what can YOU do to stop the IRS and attorneys from legally grabbing 50… 60… 70% of your family assets in taxes and fees?”
The first thing you should do is set aside an hour or two of time to find out what you need to do to protect your financial assets and estate.
You should seek assistance from a professional “estate planner” who can explain in simple terms what needs to be done.
This is the first step – before going to an attorney.
You shouldn’t pay someone $225 an hour just to listen!
You want someone who can show you in plain English how to protect your family assets, and make sure that you keep what you have spent a lifetime accumulating. Someone, who will carefully listen to your concerns, and make sure that the lawyers turn your desires into “legal ease.”
At The Cobb Planning Group, this is precisely what we do!
We provide FREE, NO OBLIGATION seminars and consultations that will show you, step-by-step, how to set up a “Living Trust” and protect your family assets from the kind of trouble we’ve discussed here.
I don’t mind saying that we do excellent work. Everything we discuss is presented in an easy-to-understand educational format. We can show you, as we have many others, how to:
• Legally avoid thousands of dollars in unnecessary taxes.
• Ensure that the IRS gets the least amount from your estate!
• Eliminate outrageous legal and other estate settlement fees!
• Make sure your family assets and heirlooms transfer without problems.
• Make sure that you and your family keep what is yours!
If what I’ve said does make some sense to you, I hope you will take us up on our invitation for a FREE seminar/consultation to discuss further how to protect your family assets and estate.
There is no cost, obligation, or “hidden catches” involved. This is simply a chance for you to meet us, and see if our services can benefit you.
IRS NOTE: No one likes to pay taxes! Why pay estate taxes if you don’t have to? Plan your estate so that your money stays with your family. The maximum estate tax rate is 55%. Without proper planning, your family could lose more than 1/2 of your estate to taxes, and legal fees. THAT’S DISGUSTING – ISN’T IT?! Find out how to make sure that the IRS is not included as a member of your family.
Click on the seminars button for a listing of our upcoming seminars.