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.

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