Category - Probate

How Can A Living Trust Benefit Me?

The main benefit to a Living Trust is to avoid probate. To understand the Living Trust you must understand all the roles that each person involved in the trust will play. There are essentially four different parties to the trust:

1. Grantor. The Grantor is the individual who sets up the trust to protect their assets. They may also be referred to as the Settlor, Trustor, or Creator.

2. Trustee. This is the individual(s) established by the Grantor to manage the estate. This is usually the same as the Grantor so they may continue to control his estate in the manner he is accustomed. Some choose to name a Trustee other than themselves to manage the trust if his circumstances prevent him from being able to do so.

3. Successor Trustee. This is the individual(s) established to take over the original Trustee’s responsibilities if they are unable to do so for any reason, usually death or disability.

4. Beneficiaries. These are the individuals or companies that are to receive the benefits of the trust once the Grantor has passed away. Beneficiaries are mostly spouses and children, but can also be friends, other family members, charities, etc.

Once these roles have been established the trust is executed and must be funded. Funding the trust is a very important step in creating the trust. The trust must hold the assets that will be distributed at the time of death. In order to fund the trust the assets must be re-titled into the name of the trust. This is a very easy process and can be done quite quickly. This is crucial to having your estate avoid the timely and costly process of probate.

Upon the death of the Grantor the Trustee or Successor Trustee will act in the same manner as a representative would in distributing a Will. They will carry out the terms, conditions and instructions stated in the Revocable Living Trust. This usually will entail payment of taxes, bills, and distributing the assets.

Be sure to speak to an Estate Planner at Legal Awareness for Seniors to properly set up your trust and avoid probate.

A Will Isn’t The Only Way

Over your lifetime you’ve been used hard work, discipline, vision, and long-range planning to build an estate to pass on to your children and grandchildren. But have you taken steps to protect that wealth from being whittled away by legal fees and other costs associated with probate after you die? Probate – the time-consuming, and often expensive, process of proving in court the validity of a will – can be side-stepped by drafting a living trust. In establishing a trust, the bulk of your assets are transferred into the trust; you no longer personally hold the title. You still control all the assets and derive all income and other benefits from those assets. But when you die, your property doesn’t go through probate because the property isn’t in your name.

There are many advantages to avoiding probate, experts say, including savings in time and money. Even in a simple estate probate usually takes from 10 months to two years. Only after the estate has been appraised, taxes paid, and contested claims settled is the property distributed to the beneficiaries. And during all this time, a lawyer’s meter is running. Fees are generally a percentage of the value of the estate. A typical fee is five to ten percent on an estate.

If yours is a large estate, a living trust also may provide tax advantages over probate. Although Arizona has no estate tax, there is a federal tax on estates in excess of $600,000. A married couple could split their property into two trusts and protect up to $1.2 million from estate taxes. Yet the surviving spouse has the right to all the income from the principal of the trust.

A living trust also provides more privacy than a will. Probate is a public process. While a will details your wishes only up on your death, a living trust can help manage your affairs should you become disabled. A living trust can turn over your assets, and your instructions on how they are to be managed, to a successor trustee should you become unable to manage your own affairs.

In order to provide for disability, experts recommend that the trust be funded while you are still living. Many who draft a living trust fail to transfer assets to the trust. You’ve got the box, but it’s empty. Almost everything should be in a trust except the automobiles.

I suggest to my clients that they review their trust annually just to make sure it keeps up with their current needs. The trust should be reviewed by a professional every three to five years to make sure it is current with tax laws. And any additions to your family, such as children or grandchildren, or additions to your wealth will necessitate amending the trust. The main thing is to make sure it meets your desires. It ought to do what you want it to do.

Although a trust does many of the chores generally associate with a will, it doesn’t replace the need for a will. You must have that back-up document just in case there are changes in your life that aren’t included in the trust. Although a trust should be your main estate planning document.

Beware of Joint Tenancy Deeds

Many people have this idea that they can eliminate probate simply by owning their assets with joint tenancy. Well, that works sometimes, but you have to be careful to make sure that the asset is held in ‘joint tenancy with right of survivorship‘. Those are the magic words that have to be on the document, on the deed, on the bank account. Without the words ‘with right of survivorship‘ the property does not automatically go to the other joint tenant without probate.

Too many times people have come to me and said, “I have this deed. Real estate is being held by me and by my deceased wife as joint tenancy, but the title company won’t let me keep it in my name or sell it without going through probate. They say it needs to have some additional language.” I have to agree with them. The magic clause ‘with right of survivorship’ is missing. That means it will require probate.

Joint tenancy simply postpones probate. Even if that magic phrase is on the deed — it’s held as joint tenants with right of survivorship — this simply means it postpones the probate until the second death. Sure, it will avoid the probate on the first death. With right of survivorship means the property automatically belongs to the survivor. But at the death of the second person, this property is still subject to probate. So it does not avoid it altogether.

Never hold property in joint tenancy with anyone other than your spouse. I recommend that you never hold any kind of property in joint tenancy with anyone other than your spouse. Now I hate to use that word “never.” It seems that there is always an exception. But I haven’t found the exception to this one, yet, because joint tenancy also means joint liability. Now with your spouse, that’s not so bad. You usually have joint liability anyway, but with anyone other than a spouse, do you want to be held accountable for their liabilities?

Your Will and the Public

A will is a unique legal document that has absolutely no effect until you’re dead. And so to carry out the terms of your will it has to be presented to the court and the court supervises the distribution of your estate under the terms of your will.

Now, it’s a court process. That means it’s open to the public. Anybody has access to the court records. And so you can have people looking at your court records that you would never have invited to in the first place. It could be just a nosy neighbor or a newspaper reporter, which is what happened to Natalie Wood’s estate. The Wall Street Journal sent a reporter after her death to look at her probate records. Now they found that she had an estate worth about six million dollars, and that included 29 fur coats and various other things. Her estate became public because there was an article printed in the Wall Street Journal. So her estate was more public than most of ours will be, but that’s what happens in the probate of an estate. It is public record.

Now, you will be interested to know that in the newspaper the last several years there have been ads promoting looking at probate records as a way of finding real estate that might be up for sale at a lesser cost. So people can buy it at “fire sale” type rates. That’s all public record and now it’s being promoted as a way for other people to make money off your estate when you’re looking to sell your parents’ goods so you can just have a cash inheritance. Probate records are not private.

We’re going to take a glimpse at some of the estates of some of these famous people, just so you can get an idea. It’s kind of fun to see what happened.

Marilyn Monroe

When she died in 1962, she was actually deeply in debt, but over the next 18 years her estate gained some royalties and other payments, and so it accumulated about a million and a half more dollars. The estate was settled and, at the end, the net estate – the amount that was finally able to be distributed to her heirs — amounted to about $370,000. So out of that one and half million dollars that her estate accumulated, most of it was eaten up in taxes, court costs and lawyers’ fees.

Robert F. Kennedy

The Kennedy Family is full of tragedies. Of course, we know about the assassination of President John F. Kennedy, but do you remember his younger brother, Robert Kennedy, was also assassinated while he was running for president? Robert F. Kennedy was a lawyer and he had been the U.S. Attorney General. So, you’d think he would know about planning his estate. But when we look at the settlement of his estate it appears he had a gross estate of about 1.6 million dollars — a pretty good sum in those days. And that the costs in settling his estate amounted to just over a million dollars. So the total shrinkage in his estate was 63%. Now this is from someone who should have known about planning for his estate. He was a senator, a U.S. attorney, a learned gentleman with a wealthy background, and yet the shrinkage of his estate was huge.

Elvis Presley

It’s always fun to talk about the rock star, Elvis Presley. While he was alive, he accumulated an estate over 10 million dollars in value. Of course, he didn’t expect to die when he did. But he left an estate full of debts and costs of settlement, and didn’t really plan for passing his estate onto his heirs. Now they’ve made a lot of his estate, but I think if Elvis were to come back now, he would say “Don’t be cruel.” They took a lot of his money in settling his estate. The total costs of his estate were over 7 million dollars. Imagine if he had planned a little bit and left more to his family what Graceland would amount to now, and his other assets. They’re huge, as it is, but they were cut way down at his death. The shrinkage was about 73%.

It is wise to prepare an Estate Plan including a Trust in order to keep your estate private and allowing it to transfer without fees to your heirs. Let Legal Awareness for Seniors help set up the right estate plan for you.

Do I Need A Trust If I Have A Small Estate?

1-11-17-small-estateWhen you pass your assets will need to go through a small estate proceeding and if your assets are over the state’s limit (usually close to $150,000 but varies per state) they will be required to go through probate. The probate process on average takes a year (some have been known to last over 20 years or more if contested).  Not only is probate a lengthy process it is also costly. It can cost around 5% of the entire estate for all the legal fees. Probate is also a public process; anyone can see what the estate is worth and all the details around it.

Creating a Trust is important, especially if you own property, have children, and/or have assets of over $100,000. Some of the reasons why it is beneficial to have a Trust are:

  • With a Trust all the assets will be divided up according to your wishes instead of according to a probate judge.
  • You will not need to go to court at all to have your assets distributed (if you fund your trust properly).
  • The Trust can be distributed right away instead of waiting the years it may take to go through the probate process.
  • Trusts are kept private so nobody will be able to see what assets you have or who they will be given to.
  • You save the court and attorney fees it would have taken to go through the probate process.
  • Documents included with the trust will protect you before and after your death with Medical and Durable Powers of Attorney, Last Will and Testament, and ancillary documents to help transfer assets into the trust.

If you would like to learn more about the benefits of having a trust, please feel free to reach out to us.

What is Probate and How Will It Affect My Estate?

Probate effect estateProbate is defined as the act or process of proving a will by a court to have competent jurisdiction.

There are a few exceptions to avoiding the probate process through the courts. One of those is if the deceased person held no property at the time of their death, including any personal property.

Another is if the deceased held a minimum amount of assets. This requirement can vary from state to state. Most states require that the deceased not hold more than $10,000 in assets at the time of death. At that time the assets can be transferred through an affidavit instead of going through probate.

Once probate has started the personal representative must inform all the heirs and beneficiaries in writing and this must be filed with the probate court. After the beneficiaries are notified a written notice must be given to all the creditors by publishing them in a newspaper and a notice to creditors must be filed with the probate court.

After everyone has been notified you must wait the state appointed time, generally 4-6 months. During this time the personal representative must create an inventory of the deceased assets and their values. The representative must also resolve any disputes against the estate before a plan to distribute the estate can be made. Once the plan is made it must be filed with the court and shared with the beneficiaries. If it is all agreed upon the estate can be distributed and a closing statement is filed.

Some cases close within the year, but there are many cases that can take up to 2 years or longer. Anyone can fight the distribution plan in court which holds things up. There was one I know of that took up to 75 years to close! Not only can they be timely, but they are open to the public. Anyone can review the probate file for any deceased person.

Once the probate is closed the attorney fees must first be paid, then the creditors and finally the beneficiaries receive the remaining assets of the deceased.


Will Your Estate Go Through Probate?

Will Your Estate Go Through ProbateTo avoid probate in Arizona the maximum amount of assets you can have is equal to $75,000. This can vary from person to person on how their total value of assets combined. You may have real estate worth $50,000, an IRA worth $20,000, a bank account with $2,000 and a vehicle worth $10,000. With these combined assets your estate is over the allotted amount and will go through probate unless you set up a Living Trust. With a Living Trust your assets are smoothly passed over to your listed beneficiaries without the drawn out court probation process. Take a moment to look at all of your assets to see if your estate will go through probate. If so, you may want to think about protecting your assets through a Trust. Remember, with probate the minimum cost incurred would be 8-10% of your estate.