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A lot of people are very concerned with avoiding probate. Many people believe that as long as they have a valid Will, they can avoid Probate. This is exactly the opposite of what actually happens when you die with a Will. A Will is often called “a ticket to Probate.” If you really want to avoid the time, expense and public nature of the Probate process, a Will always falls short of the mark.
Many people look to Revocable Living Trusts to avoid probate. Probate is the process of removing a decedents name from property and assets that person owned when they were alive. So, it follows that if your name is not on any property or assets when you die- there is no need for probate. Revocable Living Trusts help people to do just that.
A Revocable Living Trust acts as a legal container that holds property for the benefit of the beneficiary of the Trust, who is usually a person, an institution or a charity. Trusts are legal agreements between three different parties: The Grantor (sometimes called a Trustmaker or Settlor) who establishes the Trust, the Trustee who administrates the Trust, and the beneficiary, who receives some sort of benefit (usually income) from the Trust.
Imagine a Revocable Living Trust as an “open box.” You can put assets into the box and you can take assets out of the box. The box is a alter ego for yourself. You can manage the assets in the box or appoint someone else to do that for you. You have total control- just as you would if you owned the assets outright (outside of the trust). Assets owned by the Trust (most likely managed by you for your benefit) will not have to be probated when you die- because you don’t own them- the Trust does.
Revocable Living Trusts are a great method of avoiding probate and the costs, lack of privacy and time associated with probating an estate. By using a Revocable Living Trust you can put your assets into your beneficiary’s hands in days instead of months, minimize the cost of transferring the assets, and do so privately.
If you would like to learn more about how Revocable Living Trusts work to avoid probate, and minimize estate taxes, Guertin and Guertin, LLC is offering a no cost workshop on April 7th at 6pm. Seating is very limited. Please call my office at 203-234-7400 to reserve your space.
In my day to day practice I’ve see one issue come up often: outdated documents. Some of the documents are just a little out of date, others are museum pieces. Even though these documents are drafted with skill and contemplate events far into the future, they often are in need of serious updating. Many plan once and then go into “estate planning hibernation.” In this Rip Van Winkle like state, they remain for twenty or thirty years as their world changes. A lot can change in twenty years, or even in a minute.
A Will that is out of date may not be any better than having no Will at all. A Will that was executed twenty years ago probably needs to be updated; people have been born, some have died, some grew up to be great people, others grew up to be not such great people. There have been divorces and remarriages. All of these things change the way you plan your estate.
Your estate plan should be reviewed every few years, and more often after the happening of certain events. Your plan should be reviewed upon birth, death and adoption of a child, a marriage or divorce, tax changes, the death of someone named in your current Will/Trust, changes in income/wealth, and any other major life change.
Consider giving yourself an annual estate planning checkup. You do not even need to meet with your lawyer for this exercise. Once a year take out your estate planning documents and your life insurance policies and other important documents and read through them. Give yourself an estate plan self-exam. Make sure that your plan conforms to your wishes, if it doesn’t, do what is necessary to make the changes you desire. Check your beneficiary designations on your life insurance policies- Are they correct? Make sure that the proper people are listed as beneficiaries. Often, ex-husbands and ex-wives are listed as beneficiaries of life insurance policies because they were never removed after a divorce.
There are many things people can do without an attorney to make sure they have the best possible plan in place. If you’re interested in learning more about non-legal solutions to common estate planning problems, my office is hosting a workshop on this topic on September 16. Please call 203-234-7400 or email us at info@guertinlaw.net to reserve your seat.
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Earlier this week the business section of The New York Times ran a great article about a recently deceased Texas billionaire, Dan L. Duncan. According to Forbes Magazine, Mr. Duncan’s net worth was about $9 Billion, making him the 74th richest person in the world. Not bad for a guy who started his business with $10,000 and two propane trucks.
Mr. Duncan died earlier this year creating a good news/bad news tax “situation” for his family. The New York Times did a wonderful job of highlighting the good news; however, they completely missed the boat on the devastating bad news.
The good news was really (really, really) good. Because Mr. Duncan died in the 2010 tax year, his $9,000,000,000 estate escaped a 45% estate tax. Mr. Duncan’s fortuitous death saved his family at least $4,050,000,000 (wow that’s a lot of zeros). Due to a lapse in the estate tax this year, Mr. Duncan’s estate received “uber-favorable” tax treatment (or no tax treatment at all). That’s the good news and that’s what The Times focused on, and who could blames them- they were probably blinded by all of those zero’s.
2010’s estate tax anomaly will surely be fixed soon. Many practitioners believe that next year the estate tax exemption will settle at $1,000,000, putting everyday families at the risk of having to fork over nearly half of the amount over a million to the federal government.
Mr. Duncan’s estate saved $4.5 billion, this year- that’s good. Mr. Duncan passed a large chunk of his estate to his wife via a Will, that’s bad. A Will…that’s right, no sophisticated estate/tax planning for this billionaire-his estate got lucky, but I’ve got a feeling there will come a time when the luck will run out.
So where is the dark lining in this silver cloud? The dark lining, in this case, is how Mr. Duncan passed these assets to his wife- a Will. Most likely, at this point, she owns the assets outright and free of trust. Now for the bad news: When Mrs. Duncan dies, there surely will be an estate tax and all those assets that she now owns will be taxed. Uncle Sam is patient- he can wait a few years, especially when the tax treatment of these assets will be more favorable to him. If Mr. Duncan had planned better and utilized even a simple revocable living trust, it is quite possible that these assets would NEVER be taxed by the estate tax.
The New York Times only highlighted the good news: Huge tax savings in 2010, not the bad news: A multi-billion dollar estate tax time bomb set to go off once Mrs. Duncan dies. Many would argue that there are billions of reasons for Mrs. Duncan to die this year. Be careful Mrs. D.
For me, the month of March starts out like a lamb and ends like a lion. My son’s birthday is almost mid way through March. This year I took the second week of March off-had myself a good old fashioned “stay-cation.” I did some work on the barn and made some props (pictured) for my kid’s birthday party. When the party was over, it was really over. Enter the lion portion of March. Every March I embark on a long strange trip through the tax code. I prepare (too many to count) federal and state gift tax returns for our clients who have made gifts over the past year. The numbers and paper fly around my office. You have to get in a special state of mind to do that many tax returns. I fully clean my office before I begin, removing most of the stuff that has accumulated since last tax season. Then, I pick one album and listen to it (yes the same album) for the entire process- which usually stretches right down to tax day (April 15) and sometimes (most of the time beyond). This year’s choice was Phish- Live at the Omni (Atlanta, GA) 10/31/1996. In addition to their normal show- the band covered the 1980’s progressive rock band-The Talking Heads’ album Remain in Light. Great album-I’m sure I listened to it 75 times throughout the process.
You may have noticed a lot of figures being posted recently. I had planned on putting a running log of my calculations up on the blog- but I won’t bore you with the details. The big news is that Guertin and Guertin, LLC helped many local families protect assets from lawsuits, creditor issues and long term illnesses. In fact, in 2009, we helped local families (your friends, neighbors and relatives) protect almost $20,000,000. Most of these folks are everyday people, who worked hard and saved a little bit of money. These same people were worried about what something like a long term illness would do to their family and their ability to live comfortably and pass something on to their children. Most of these people gifted assets to an Irrevocable Asset Protection Trust. If all goes as planned that $20,000,000- will pass probate free to the next generation. So that’s the short story on where I have been, what I have been up to, and what all those figures are about. I’m back! I’m ready to write. Stay tuned! If you have an idea for an article or just have a topic you’d like me to explore, drop me a line at marc@guertionlaw.net.
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