WHY YOU NEED A TRUST
by
Raphael A. Rosemblat on Oct. 13, 2015
Estate Trusts Estate Wills & Probate Other Power of Attorney
Summary: Top Ten Reasons for a Trust
AN OVERVIEW
Like most client’s I have not yet seen, you may number among the majority of individuals who do not have a will, trust or power of attorney. In fact, you may even pride yourself of having escaped the hazard of seeing a lawyer to create your own estate plan. But, in the back of your mind (or your loved one’s mind), you feel uneasy and ask yourself should I take action
TOP 10 REASONS TO ACT
FIRST: INCAPACITY. Did you know that a significant number of individuals, young and old, will become disabled during their lifetime. Without a properly drafted power of attorney and revocable trust, court intervention may be required to administer your assets or to make health care decisions for you.
SECOND: JOINT TENANCY. When you own assets in conjunction with one or more individuals like your residence or bank accounts, probate may be avoided in some instances, but at the cost of leaving the whole of the property to one individual, when you would prefer to leave the property at your death to both a spouse, children and other loved ones. Joint tenancy may also create additional taxes when your survivor sells the property following your death.
THIRD: TAXES. You remember your Aunt Thelma’s probate problem and shrewdly gifted away the bulk of your property to loved ones during your lifetime. Did you know that, by gifting property during your lifetime, your beneficiary may realize a taxable gain to the IRS in some instances greater than had the property been gifted by you only upon your death.
FOURTH: CHILDREN. Your children are not grown or if grown are not financially responsible. If minors, should you prematurely die, your assets may be managed by another individual, perhaps your spouse, but only after the court intervenes to establish a guardianship of your estate. Even if your children are grown, you may prefer to put restrictions on the distribution of your property to avoid fiscally imprudent spending habits by a child, or even to deter use or appropriation of funds by your spouse to the detriment of a child.
FIFTH: REMARRIAGE. Ringing in your ear is the lyrics to the Tina Turner song “What’s love got to do with it.” Yes you love your spouse dearly, but not at the cost of disinheriting your children from a previous marriage. Without a carefully drafted trust, pre or post nupitial agreement, or even a will, the longer you remain married to your spouse, the greater the chance your children will receive less and your spouse more.
SIXTH: TAXES REVISITED. If you are married and own assets net of liabilities in excess of the exempt amount under IRS tax code, you can maximize your tax savings upon the death of your spouse and ultimately upon your death. The failure to do so in these larger estates may result in an estate tax of 37% or more being assessed upon the death of your surviving spouse.
SEVENTH: YOUR EXECUTOR. Without a will or trust, a complex body of law established by the Legislature decides who will be your representative to manage and distribute your assets upon death. Typically, your spouse will have first priority, but your children may also seek appointment as well as your estate representative, increasing the probability of family disharmony. Your selection of a trustee in your trust is far preferable.
EIGTH: CHILDREN REVISITED. You may be operating under the mistaken assumption your spouse will inherit all your property, and only upon your spouse’s death will your children inherit any of your property. In fact, when you fail to write your own will or trust, the State of California provides its own rules for distribution and your children, including minors, share distribution with your spouse. This may create attendant financial hardship on your surviving spouse you never envisioned.
NINTH: YOUR PRIVACY. The process of probating your property through the court requires that formal notice that your assets are being administered be given to your relatives in many instances beyond your spouse and children. Inherent in probate court is the greater ease by disgruntled family members to challenge provisions made for loved ones. In contrast, a trust is inherently more private and confidential and designed to avoid administration through the court.
TENTH: COSTS. The costs of not creating an estate plan may be more than zero. For example, consider that whether you have a will or not, should you become disabled, your loved one may have to establish through the court a conservatorship for your assets and to authorize medical decisions with attendant biannual accountings, among the many complications. When you die, your loved one may have no choice but to commence probate proceedings. In an estate no greater than $200,000, attorney’s fees may average or exceed $5,000, increasing 2% for each increment of $100,000. A like amount is ordinarily awardable to your representative, with court costs an additional expense for such items as court bonds.
REPUBLICATION OF THIS MATERIAL WITHOUT EXPRESS PERMISSION OF AUTHOR IS STRICTLY PROHIBITED
