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Living Trusts have become very popular
and are being heavily promoted to seniors. Should you Trust or not
Trust? That is the question. Read on to learn some simple guidelines
that will help you know whether a Living Trust may be right for you
and how to go about getting one if needed.
A Living Trust is considered a separate legal entity much like a
corporation. As a result, any assets ‘owned’ by the Trust at your
death avoid Probate and can pass to your heirs simply and easily. It
also provides for the management of your assets if you become
incapacitated.
Living Trusts can be complex documents that allow you to precisely
detail your wishes or they can be a straightforward means of
handling your estate. Even though the Trust is considered a separate
legal entity, you retain complete control over everything you own.
In fact, a Living Trust can allow you to control assets from the
grave.
A Living Trust will not protect your assets from lawsuits or
creditors. It won’t ‘hide’ your assets from Medicaid should you need
to go into a nursing home. It won’t automatically eliminate all
estate taxes, though it can help eliminate some and reduce others.
And a Living Trust only controls those assets that are ‘owned’ by
it, so unless you re-title your home in the name of the Trust, for
instance, the Trust will not protect it from having to go through
Probate.
Living Trusts are being heavily promoted through seminars. If you
attend one, you may come away feeling that everyone needs a Trust.
That’s not true. Although many people will benefit from one, they
are not for everyone.
Take ‘Lily’, an 82-year old widow from LeHigh Acres, Florida who
recently called me. She was being pressured to get a Trust after
attending one of these seminars. “If you don’t get one, you will
have to pay thousands of dollars in taxes when you die,” the
salesperson told her. That is completely untrue. In fact Lily didn’t
need a Trust at all.
Lily’s assets consisted of a few small bank accounts, an IRA at a
brokerage firm and a modestly priced condominium. She had already
named beneficiaries on her bank accounts and IRA, so these assets
would avoid Probate when they passed to her heirs. The only asset
that would be subject to Probate was her condo.
Lily has a good relationship with her kids, so she can title the
condo in their names. Sometimes there can be a gift-tax issue when
transferring ownership of an asset to a child. I almost never
recommend adding a child’s name to your home, but in this case it
makes sense and she shouldn’t incur any tax liability.
Another option for Lily was to set up a Living Trust on her own.
There are a number of off-the-shelf computer programs that provide
all sorts of legal documents, such as wills, powers of attorney,
contracts, and Living Trusts. Trusts created using this software may
not have all the special features of those costing $2,000, but most
people don’t need them anyway.
Anne and her husband in South Carolina set up a Living Trust this
way. They used an inexpensive software program to put together their
Trust. It’s critical that you have an attorney review it when you’re
finished. Their local attorney reviewed it, made sure everything was
as it should be and only charged them $100.
If you are able to do this, then there isn’t any reason not to have
a Living Trust. Even if it is to handle the transfer of your real
estate at death, the time you take now will make things much easier
for the loved ones you leave behind.
There are, however, several situations where it pays to go ahead and
have a professional draw up a Trust for you. These include your
estate being worth more than $1.5 million, having children that are
handicapped or disabled, or having children from a previous
marriage. Professional help should be sought if you want to have
incentives to financially motivate your heirs or if you want them to
receive their inheritance over time instead of all at once.
Still unsure if a Trust is right for you? Send me an email and I’ll
personally respond, free of charge. Go to www.guardingyourwealth.com
and click on ‘Ask Jeff’.
In addition to being a nationally syndicated columnist and Certified
Financial Planning Practitioner, Mr. Voudrie provides personal,
private money management services to clients nationwide. |
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