The Living Trust Kit
A Special Report by:
J.J. Childers, Attorney at Law
Today’s business and legal environment requires people to aggressively defend their assets. Essentially, you must be prepared to battle the three financial Goliaths of lawsuits, income taxes, and death taxes. In order to do this, you must design and implement a plan which addresses the three concerns of asset protection, estate planning, and tax reduction. One of the first steps in doing this is to establish a living trust.
This special report is designed to help you in your battle to take control over your financial situation. In this report, we will first take a brief look at why you need a living trust. From there we will focus our study on the more important area of implementation. Through this special report and the five-step plan of action contained herein, you will understand exactly what you need to do in order to properly protect yourself as well as your family. First, let’s take a look at what we’re dealing with.
The Problem: Probate
The primary reason to set up a living trust is to avoid probate. This begs the question, what is probate? Essentially, probate is the orderly administration of your affairs supervised by the court. It is a function of state law and varies from state to state. If you own real property in more than one state, it is probable that your estate will be subject to probate in numerous jurisdictions, each imposing their own probate fees.
To better understand probate, we must first understand what it means. The term “probate” comes from the Latin word meaning “to prove”. A will must be presented to the probate court and proven to be a valid document. This is what the probate process is all about. In addition to “proving the will” the probate process also includes:
· Officially confirming the personal representative named in the will or appointing a representative, if necessary · Notifying the court of a deceased person’s death and informing all involved parties (all potential heirs whether named in the will or not) that probate has started · Taking an inventory of all property and appraising its value · Paying the deceased person’s debts and taxes · Preparing a final accounting to the court · Distributing the remainder of the deceased’s property to the heirs · Closing the estate
All in all, this doesn’t sound all that bad does it? The problem comes when you factor in all of the ancillary complications associated with handling the above-listed items. Among these disadvantages are the following:
Time Consuming: The probate process can take as little as a few months or as long as several years to complete. The average probate takes about 15 months. Eighteen months to 3 years is not uncommon at all. Costly: Attorney’s fees to handle probate can run anywhere from as little as a few thousand dollars to literally hundreds of thousands of dollars and much more. In addition, the executor, inheritance tax referee, and other officers of the court must be compensated. All related probate fees must be paid before any of the decedent’s assets are distributed to the family. The average cost of probate is 10% of the gross estate. Remember however, that this is the probate cost alone. This doesn’t even factor in the estate taxes or debts of the estate.
Loss of Control: The probate court controls the entire process. A representative of the court will tell your beneficiaries who gets what and when.
Lack of Privacy: All probate transactions are a matter of public record. Anyone can find out the size, contents, and beneficiaries of your estate. This can be embarrassing and frustrating for your family, create disputes, and expose your family to unscrupulous solicitors.
As you can see, there are a number of reasons why you must avoid probate at all costs. Now that we’ve identified the problem, it’s time for a solution.
The Solution: The Living Trust
One of the best solutions for handling the problem of probate is the implementation of a living trust. The primary reason to have a living trust is that it avoids the entire probate process altogether. While this is the living trust’s primary purpose, it also has a number of other advantages as well. For example, you can save a tremendous amount in the form of estate taxes through the establishment of a living trust. The entire process is not a matter of public record thereby maintaining your family’s privacy. Additionally, when properly structured, the living trust can save your family a great deal of unnecessary pain and suffering. The key, however, is to actually get it set up. In order to do that, I have outlined an important five-step process for exactly what you need to do to get started with putting your plan into action.
Let’s take a look at the five-step plan of action for properly structuring your estate plan. The five steps can be broken down as follows:
1. Clarify Your Objectives
2. Take Inventory of Your Assets
3. Select Your Professional Planner
4. Have Documentation Drafted
5. Implement Your Plan
Now that we’ve identified the steps in the process, it’s important for you to understand more fully what is involved with each step. For this reason, the information is divided into its respective sections on the pages that follow. Let’s get going on protecting your family’s assets.
Step One: Clarify Your Objectives
The first step in the process is to clarify your objectives. This means that you need to determine exactly how you want your affairs handled. This involves answering important questions such as, “Whom do you want to receive your assets after you die?” “When do you want that person or persons to receive those assets?” “Whom do you want to manage your financial affairs?” “What about your medical decisions in the event that your were to become incapacitated?” “How do you want your estate distributed upon your death?”
These are all very important questions which absolutely must be answered. The problem is that all too often people forget to make these decisions during their lives and the decisions are made for them after they’ve passed away. The way to avoid these conflicts is to plan for them NOW by clarifying your objectives. I have included an estate planning questionnaire in the material following Step #4 for your consideration. Take the time now to fill out this questionnaire to better situate yourself for planning your estate.
Step Two: Take Inventory of Your Assets
Once you have clarified your estate planning objectives, you need to take inventory of your assets and debts. It is important to find out exactly what you own and to try to place a dollar value on those assets. Most people simply fail to take this step and therefore fail to realize that their estate was at a point where they needed some serious planning. If your estate will have to pay estate taxes, you can start planning today to reduce and even eliminate those taxes in many instances. Below is a sampling of some of the items you must take into consideration.
For a more detailed plan, you should get a copy of MillionHeirs. You can order a copy by sending an email request to [email protected].
To value your estate from both a net worth and living trust planning standpoint, you must inventory your assets and calculate your liabilities first. Let’s first take a look at assets.
The first calculation is to identify and value your assets. You should list each item and describe it, indicating whether you own the property outright or the percentage of your ownership if not. After this, list the actual value of the portion you own. Begin with listing your liquid assets. This will include the following:
Money Market Accounts
Next, you need to list your other personal property which will be less liquid such as:
Once you have listed these items, move on to your real estate holding including your own home(s), condominiums, mobile homes, land, etc. After this, list any business personal property including partnership interests, copyrights, patents, trademarks, stock options, etc. When you have listed everything that you can think of, add the value of all of these items up and you will have the total amount of your assets. Now it’s time to take a look at your liabilities.
Upon coming to a reasonable determination of your assets, you must now consider your liabilities. Begin by listing all of your liabilities by name and by also noting the amount you owe. The list will include items such as:
Personal Loans (credit cards, bank)
Taxes Due (current or past)
Life Insurance Loans
Other Personal Debts
When you have identified all of your liabilities, add all of these numbers up to arrive at your total liabilities. Subtract your liabilities from your assets to arrive at your net worth. Once you have determined the value of your estate, it’s time to calculate the amount of taxes you may owe if any. The current amount to consider is $675,000. If your estate is over this amount you will owe taxes. Remember however, that whether you owe taxes or not, the paramount reason for establishing your living trust is to avoid probate. While it may not be a problem for you, it will certainly be a pain in the neck for your family for a long time after your death. Believe me, that’s not how you want to be remembered.
Step Three: Select Your Professional Planner
It is vitally important that you seek assistance with the implementation of your estate plan. This is not an area where you should try to scrimp. You need to consider that you will be sharing personal information with this person so you may not want to use anyone who might disclose this information to others. A disinterested party is often your best choice. Additionally, there are a number of questions that need to be answered throughout the process. One thing to look for is whether the professional you choose can answer your questions and whether or not they have material that will answer your questions available to you and included in your trust documentation. Profit Publishing Group, Inc. is a company which handles this type of legal work and is very experienced with setting up legal entities for people with a variety of needs. If you are interested in getting more information on establishing your own living trust, contact them at [email protected]. They will be glad to help you with all of your estate planning concerns.
Step Four: Have Documentation Drafted
Regardless of whom you choose to establish your living trust, there is certain information which you will need to provide. This information will greatly assist your professional in structuring a plan which has been custom-tailored to fit your needs rather than trying to squeeze you into a one-size-fits-all plan. Below is a list of questions for you to answer in order to make your estate planning process work as smoothly as possible. Take the time to answer these as soon as you get a chance. It may not seem like a big deal to put this off but I can assure you that it will be a big deal to your family if you fail to put things in order. With that thought in mind, start now by answering the following questions.
What is your full name?
What is your marital status and history?
What is your spouse’s full name?
Do you have any children?
What are the full names and ages of your children?
Do any of your children have special needs or disabilities? If so, describe.
What estate planning do you currently have in place?
Are you interested in avoiding the time and expense of probate?
Are you interested in federal estate tax planning?
Do you own a farm or a business?
Are you and your spouse U.S. citizens?
Have you entered into any agreements with your spouse (prenuptial, etc.)?
Do you own a long-term care insurance policy?
Do you hold everything jointly with your spouse, or is some property separate?
What is your approximate net worth?
What is the value of the death benefits on life insurance?
In order of preference, identify at least two persons who you would want to handle your financial affairs in the event you become incapacitated.
In order of preference, identify at least two persons who you would want to make medical decisions for you if you could not participate in making those decisions yourself.
In order of preference, identify at least two persons who you would want to distribute your assets and handle your estate after you pass away.
If you have minor children or an incompetent child, you will need to appoint a guardian. The guardian is responsible for the day-to-day care of the child. In order of preference, identify at least two persons who you would want to handle this responsibility for you.
Once you have answered the above questions, you will be much better situated to implement your estate plan. I suggest that you print these questions out and physically answer them. Even better, type your answers into your computer so that you can easily amend the information and have it readily accessible for your professional planner. The time it takes to do this can be some of the most important time you ever spend for taking care of your family.
Step Five: Implement Your Plan
All that’s left now is to actually implement your plan. This is the part where most people mess up when it comes to the living trust. Once you have had the documentation drafted, it’s time to transfer assets into the trust and operate it as a separate entity. While many people will do this initially, they fail to update things on a regular basis. This is something that you can certainly do yourself but the question is, will you? Over 50% of those who establish a plan fail to take the time to do the necessary follow-up themselves. This is not a problem if they leave that work up to their planner. However, people start off with good intentions yet never follow through on them. Don’t let this happen to you. Follow up with the professional planner you choose and make sure that your plan stays intact. It is a crucial step which absolutely must be adhered to.
Time to Take Action
Now that you’ve learned the steps necessary to implement your estate plan, it’s time to take action. Robert Allen and Multiple Streams of Income LLC have teamed up with Profit Publishing Group, Inc. to offer the best services available for accomplishing your key estate planning objectives. You need to get these things taken care of as soon as possible. Profit Publishing Group, Inc., through its Secret Millionaire series, can help you do it. For more information on how to get things properly handled visit their web site at www.secretmillionaire.com. The time is now to begin taking control over your situation before your situation takes control over you!
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