Living trusts enable you to control the distribution of your estate.  Furthermore, certain trusts may enable you to reduce or avoid many of the taxes and fees that may be imposed upon your death.

In short, a trust is a legal arrangement under which one person, the trustee, controls property given by another person, the trustor, for the benefit of a third person, the beneficiary.  The fun part is that when you establish a revocable living trust, you are allowed to be the trustor, the trustee, and the beneficiary of that trust.  Simply you get to play all the parts in the play.

When you set up a living trust, you transfer ownership of all the assets you’d like to place in the trust from yourself to the trust. Think of it as if you took all your possessions and put them into a box. Legally, you no longer own any of the assets in your trust. Instead, your trust now owns your assets. But, as the trustee, you maintain complete control. You can buy or sell assets as you see fit. You can even give assets away. Effectively, you can have all the same control over your assets as you did before you put them into trust.  So you may ask: “what’s the point of setting up a trust?”  Well keep reading.

Upon your death, assuming that you have transferred all your assets to the revocable trust, there isn’t anything to probate because the assets are held in the trust. Therefore, properly established and funded living trusts completely avoid probate.  So, you get to skip a lot of the fees and costs associated with probate.  Also, by establishing a living trust you also get to avoid the 12 to 16 months that probate requires.  This is a huge benefit.  Effectively, if you use a living trust, your estate will be available to your heirs upon your death, without any of the delays or expensive court proceedings that accompany the probate process.

There are some trust strategies that serve very specific estate needs. One of the most widely used is a living trust with an A-B provision. An A-B trust enables you to pass on up to double the “exemption amount” to your heirs free of estate taxes.  The exemption amount is the amount of money that Uncle Sam allows you to pass on without him taxing it.

When an A-B trust is implemented, two subsequent trusts are created upon the death of the first spouse. The assets will be allocated between the survivor’s trust, or “A” trust, and the decedent’s trust, or “B” trust.  Sometimes these are referred to as the Marital Trust and Family Trust.  Don’t worry about naming protocols.  Let’s just stick with A and B for now.

This will create two taxable entities, each of which will be entitled to use a personal exemption.

The surviving spouse retains full control of his or her trust. He or she can also receive income from the deceased spouse’s trust and can even withdraw principal from it when necessary for health, education or maintenance.

On the death of the second spouse, the assets of both trusts pass directly to the heirs, completely avoiding probate. If each of these trusts contains less than the exemption amount, these assets will pass to the heirs free of federal estate taxes.

Sound like a good deal.  Well for most people it makes a lot of sense to establish a trust. I’ll be covering some of the other benefits of these types of trusts in later posting, including asset protection benefits.  But, if you need more information right now, you can always go to www.yourtotalestateplan.com.

What are you planning to give your teenager when he or she turns 18 and legally becomes an adult? A new watch? A car? A deposit for an apartment? A trip to Europe?

Those are all fine gifts, if you can afford to spend for them. But here’s one you may not have thought of … and it won’t cost you a bundle. Take your son or daughter to your attorney’s office and have them prepare a trio of documents: a simple trust or will, a durable power of attorney, and an advanced healthcare directive. Actually, it’s a gift for both of you, because once your child reaches legal age of adulthood, you will no longer be able to automatically make medical and legal decisions for him or her without the appropriate legal documents authorizing you to do so.

If your son becomes ill or injured and cannot handle his own financial affairs, you will not be able to step in for him and conduct business (sign checks, sell assets, etc.) unless he has a trust or a durable power of attorney and has named you as his successor or agent. If he hasn’t, you’ll have to go through the courts … and that will take time, cost money, and restrict you in ways you cannot imagine. (Some financial institutions also require their own forms; make sure you and your child check with each bank, etc.).

If your daughter cannot make her own medical decisions, it will be much easier for you to make them if she has already named you as her agent. And what if she should be so ill or injured that she is placed on life support before you get to the hospital? Unless she has made her wishes known through a legal document, you may not be able to abide by her wishes and have the life support equipment removed without court approval.

Finally, if your adult child should die without a will, the court will distribute his or her assets according to the laws of the state in which they lived … regardless of what you (or they) would have wanted.

Make sure your new adult understands that all of these documents will need to be changed as their life changes including: accumulating more assets, getting married, buying property, having children, etc.

Helping your child get started with this adult responsibility at the moment when he or she becomes an adult is just one more responsibility we have as parents. It fits right in there with how to balance a checkbook, how to handle a credit card, and how to buy insurance.

Chances are that it will be a long time before any of these documents will be needed. But you’ll be sending your child out of the nest with a full layer of protection … just in case.

Much too often I speak to people and they tell me that estate planning is something for the wealthy.  After much contemplation, introspection and coffee, I came to a conclusion that now seems so obvious that I can’t believe I missed it.  People believe that estate planning is a concern for only the wealthy, because only the wealthy have estates.  Well that’s just plain silly.  An “estate plan” is nothing more than another term for “stuff plan.”  So, if we all started to call it stuff planning we’d all know it was for all of us!  We all have stuff, some good stuff and some bad stuff.  My stuff is important to me because it’s mine.  Your stuff might be better than mine because I don’t have it, but that’s a whole other posting.

In short, estate/stuff planning is simply a set of instructions that you are writing regarding your stuff and what you want to do with your stuff.  Normally, you want your stuff going to your family, sometimes friends and sometimes charities.  But, don’t you want to be the one that decides what happens to your stuff?  That’s an estate plan – your plan for what happens to your stuff.

Now there are a number of requirements that must be met in order to have a valid estate plan.  Your estate plan has to be written down, you must sign it and people have to see you sign it.  That’s the simple part.  Now the plans get more complex depending on how much stuff you have, how long you want to control your stuff (even after you’re gone) and where you want your stuff to go in the end.  Case in point, I love my son, but I think he should wait a few years before he gets my car – or at least until he can walk and is out of diapers.  So in the mean time, I’d need someone to look after my stuff for my son.  See how it gets a bit more complicated.

In order to make your estate plan, you’ll need to put down your wishes into a document called a will or a trust.  To make sure it actually does what you want, you’ll need to have an experienced attorney write up your plan.

Here’s something fun.  The first question you ask the lawyer who’s about to write your will or trust should be “How much of your practice is estate planning?”  If they tell you anything less than 100%, turn around and walk out of their office.  Lots of attorneys claim that they can take care of your estate plan, but if it’s my stuff, I want the guy who works on taking care of stuff all the time.

Finally, if you don’t come up with a plan regarding your stuff, don’t worry.  There’s a plan out there for all your stuff.  It’s the government’s plan and they hope you like it.  Then again, it doesn’t matter if you like it.  This plan will happen if you don’t make one of your own.  The problem with the government’s plan is that someone might be left out of the plan that you would have made and that person now misses out on getting some of your stuff.  Here are some examples:

Example 1: If more than one of your relatives want the same part of your stuff, that can get messy and expensive…and a lot of your stuff will be used to pay the courts and attorneys to sort it all out.  (Fun for the lawyer, but that’s about it).

Example 2: If you’re not married and you want your significant other to get some of your stuff when you die, you’d better get your plan in place, or it just won’t happen.  Under some states’ plans, your stuff will go to your blood relatives.  Period.

Example 3: If you’re married and you’ve got kids, don’t be too sure that your spouse is going to get all your stuff.  Your kids will probably get their share of your assets, which means your spouse may not get enough of your stuff to live on.

In short, if you have stuff and it matters to you, be responsible enough to decide what you want to do with your stuff.

One last thought: if your stuff includes kids, you’ve really got to have a plan in place.  If you don’t do you really think that the government is going to make the same decisions regarding your kids you would have if you were still making the decisions?

Most people have some idea what estate planning is about, but much of what they “know” is actually false. Prior to working with clients, we want them to recognize that the “truth” about estate planning is probably different from their preconceived notions. Take a look at the following information and see if it changes your way of thinking about estate planning. Our “Truth About Estate Planning” presentations go into the details behind these issues so please feel free to check in for these events. (Please sign-up for email updates to receive event specific details)

Estate planning is a Process, not an event. Every estate plan goes through three steps:

(1) Your plan is developed and written;

(2) Time will pass until your plan is needed, during which changes in your assets and the law often cause my plan to fall out of date; and

(3) Administration of your plan at your death or incapacity.

Creating Your Total Estate Plan™ allows you to stay in control throughout the estate planning process. At a minimum you need to have a solid working relationship with a counseling oriented attorney.  This relationship lets you learn what is possible and then develop your plan to do whatever you want. Your attorney’s formal updating program will assure that you keep it current, and that you and your family stay in touch with it. Also remember that getting a settlement fee disclosure and commitments now keeps your family from losing control at your death.

There is no Magic Bullet that will free you from ever working with an attorney again.  Unfortunately many people have the viewpoint of never wanting to work with an attorney. The fact is you need to have a comfortable relationship with an attorney who you know will continue to work with you on an ongoing basis. “Call if you need to update” will fail in the long run as a way of keeping your plan up-to-date. Just leaving your family to “call the attorney” after your death would put the attorney in control of your plan and the costs at that point, so you need an attorney who will fully disclose and limit those costs.  This is one of the reasons why everything we do at Chhokar Law Group, P.C. is done on a flat fee basis explained fully to the client before ever signing anything.

Estate Planning requires teamwork. You can trust and follow the advice you will get from your different professionals if you get them to confer and agree on the advice they are giving you.  Your attorney should have solid professional networks with financial advisors to be able to meet your needs as well as have the ability to coordinate with your personal financial advisors so everyone is on the same page.

Your estate plan won’t work without proper asset titling. Proper asset titling is crucial to the success of your estate plan, whether your plan is designed as a will or a trust. The will or trust is your set of instructions to your family. You need to review all asset titles and make sure the assets will follow your instructions.  This is one of the driving forces behind Your Total Estate Plan™ - we make absolutely sure every one of your assets is titled appropriately and your trust is funded properly.

Estate Planning is about your personal goals more than avoiding probate and taxes. Personal goals can include things like: how you want to live your life; how you want your spouse and children cared for; how your children should be raised even if you die early; what priorities you have for your heirs’ education; protecting your spouse (and your assets for your children) from a new spouse after your death; keeping control of your assets and your care within the family in the event of your incapacity; protecting your estate from nursing home costs; protecting assets from divorces or creditors of the children even after they inherit; and promoting your family’s intangible and spiritual values.

You understand how attorneys charge. Attorney fees for estate planning are always some percentage of the estate, no matter how they are calculated. Our allocation of the fees allows you to explore all planning options by reducing your costs and eliminating hourly fees that often far exceed the initial estimate given to the client at the outset by the attorney.  A good estate planning attorney will make known to the client in advance exactly how much you are going to be charged and exactly what services are provided with that fee.

You can have peace of mind, knowing that your Estate Plan will work!

You can do it through the proactive and systematic process utilized by Chhokar Law Group, P.C. that is specifically designed to develop customized plans for each client in order to satisfy the particular needs of our clients.

For additional information we invite you to check out our website, www.yourtotalestateplan.com. Also, we invite you to set up a consultation with us; bring your family members and your professional advisors.