Willls and Trusts

“Trust envy” is an affliction plaguing many people in the U.S. today. It seems everyone wants one. It has its source perhaps in financial advisors trying to convince people that estate probate should be strictly avoided and that living trusts are the best form of probate avoidance. For a living trust to be effective, virtually all of a person’s assets must be re-titled in the name of a trustee, e.g. homes, cars, investments, etc. Assets acquired in the future must also be purchased and owned by the trust. A living trust is a “grantor trust” and is not recognized by the Internal Revenue Service as a legal entity and therefore accomplishes nothing toward income or death tax avoidance. For all the complication and expense of a living trust, even when carefully and copiously abided, it may still not accomplish its singular goal.

The logic behind living trusts is flawed since estate probate isn’t necessarily bad. In most states there are informal probate procedures that can be accomplished by a non-lawyer. Some states like California, Florida, New York and Texas have very liberal probate avoidance laws with some states allowing up to $140,000 of net assets in a decedent’s estate before probate is required. Many states allow real property to be passed after death with only an affidavit being signed by the beneficiary. A simple, informal probate proceeding may actually be advantageous since, like bankruptcy, potential creditors must present their claims during the probate period or their claims are extinguished.

The optimum scenario is for persons to reduce their probate estate to a level where an attorney is not needed and where a will deals with lesser-valued assets and non-financial issues such as the care of dependents. Assets of significant value can be passed outside the probate estate to intended beneficiaries using simple probate-avoiding techniques. This negates the need for probate, or at least implicates a state’s informal probate laws.

The concerns of most people about what becomes of their assets and who will care for their dependents in the event of their death or incapacity can be adequately accomplished by the following:

1)	Titling real property in joint tenancy with right of survivorship.

2)	Designating beneficiaries on investments and insurance policies.

3)	Utilizing transfer-on-death provisions on investment accounts.

4)	Granting durable power of attorney for health care and for finances.

5)	Executing a medical directive for catastrophic medical conditions.

6)	Drafting a simple will that names beneficiaries to receive specific and residuary assets not automatically passed to beneficiaries. If dependents are a concern, the will can name a guardian and can create a trust that becomes effective only if the adult dies and only then will the estate assets go to a trustee for the benefit of dependents.

For more information contact Nick Romer at 1-800-836-0012 or romerlaw@hotmail.com. For typically a few hundred dollars I can help you complete a will organizer, analyze your financial circumstances, recommend simple yet appropriate measures, and draft wills and other documents ready for signature.

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