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Estate Planning with Living Trust

Estate Planning with Living Trust






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  • “ Now read me the part again where I disinherit everybody”

Estate Planning with Living Trust Estate Planning with Living Trust Presentation Transcript

  • Law Office of Thomas F. Sammons 847-359-9610 Estate Planning: Is a will or trust right for me?
      • 60% of population never signs any will or trust: Being “intestate” (or without a will) increases costs and problems.
      • Reasons estate planning doesn’t get done: People don’t like talking about death; People don’t like dealing with lawyers; easy to put it off.
      • Everyone over age 18 should have a will, trust and advance directives.
  • How most people view estate planning “ Now read me the part again where I disinherit everybody” New Yorker Cartoon Dec. 7, 1940”
  • Problems with intestacy
      • A probate is guaranteed
      • A “bond” must be purchased costing 1.5% of the assets per year
      • No executor or boss is named (fights over who has control)
      • Assets go to “heirs” even if you had no contact with them
  • Positives and Negatives of wills  
      • Easy to lose a will
      • Guarantees a probate
      • Often doesn’t control assets due to Joint Tenancy and Beneficiary Designations
      • Notice must be given to “heirs” even if they don’t inherit
    * Inexpensive   * No retitling of assets   * Will work for married couples with young children
  • What causes a Probate? Probate is necessary if:
      • There was real estate in deceased’s own name
      • Any combination of assets exceeding $100,000 (stocks, car, bonds, CD, checking accounts) will cause a probate
      • No beneficiary designations on IRAs or Life Insurance
  • Probate: What’s the big deal?
      • Probate is a court case designed to pay creditors of the deceased and distribute money to rightful heirs
      • Delay of 6 months until the estate can be closed
      • It’s a forum for “feuding” heirs
      • Filing fee in Cook Co is $350 and Publication Fee is $200.
      • No set fee –attorney’s fees and executor’s fee—both are entitled to a “reasonable” fee
      • Average attorney’s fee is about $2500 and executor’s fee is $3000
      • Some attorneys and executors overcharge
  • Wills are used sometimes
      • My practice: 90% living trusts and 10% wills
      • Young couples with young children-mostly do wills
      • Clients in pre-paid legal services
      • People leaving on vacation
  • Benefits of Living Trusts
      • Probate is avoided
      • Protects against guardianship
      • Privacy-no public disclosure
      • Can save on inheritance taxes
  • Negatives of Living Trusts
      • Trust must be “funded” or it won’t avoid probate
      • One-time cost of living trust is more than will
  • Uncertainty of Estate Tax
      • The amount that is free of estate tax has risen to $3.5 million in 2009
      • There is no tax in 2010
      • Then the estate tax comes back in 2011 and the “free” amount is only $1 million
      • Talk about uncertainty
    Estate Tax Exemption Amount Year $1.0 million 2002 $1.0 million 2003 $1.5 million 2004 $2.0 million 2006 $3.5 million 2009 Repealed for 1 Yr. 2010 Back to $1 million 2011
  • Types of Living Trusts
      • Three types of trusts depending on your marital status & total assets
      • 1. Single, Divorced, Widowed - Use a single trust no matter what level of assets
      • 2. Married Couple with Assets under $1 million – Use a Joint Trust, one trust for both spouses, except that second marriage couples with blended families rarely use these – they almost always need two trusts.(The $1 million amount is used because in 2011 the estate tax free amount reverts to that.)
      • 3. Married Couple with Assets over $1 million – Use two trusts, one for each spouse. Saves on estate taxes.
  • Types of Living Trusts: Single, Divorced, Widowed
      • Assets will avoid probate
      • Trust is beneficiary of IRAs and insurance
      • One unifying vehicle
      • No disability problems
      • No special tax returns-file 1040
      • Trust is invisible for tax purposes
    Lifetime Trust Client is sole trustee Successor trustee takes over at death or disability To heirs outright or continuing trusts can be set up House, CD’s, stocks, bonds, insurance all titled in trust IRAs and Cars not in trust
  • Types of Trust Married Couple (assets under $1 million)
      • Avoids Probate
      • Acts as unifying vehicle for all assets
      • Disability Protection
      • Easy to administer
    Joint Lifetime trust Marital Trust Both spouses are trustees Upon death or disability, Surviving spouse sole trustee Marital Trust - All income to spouse Principal for needs Can change beneficiaries among kids/grandkids only House, CDs, stocks, bonds, bank accounts titled in name of trust Distributed to heirs or held in “convenience” trust to protect from divorce creditors On second death, child acts as successor trustee
  • Types of Trusts- Married couple with assets over $1 million
      • Each spouse has his/her own trust
      • Avoids Probate
      • Pass $7.0 million to children free of estate taxes
      • House, CDs, stocks, bank accounts are titled in trust
    Lifetime trust Marital Trust Family Trust (funded first) Both spouses are co-trustees -Holds first $3.5 million -Income and Principal for spouse’s needs -Can change end beneficiaries to kids grandkids -All appreciation goes estate tax free to kids Holds slush over $3.5 million Spouse gets income and principal Surviving Spouse is sole trustee (usually) Distributed to Heirs or held in “convenience trust” to protect from divorce or creditors Upon first death Upon second death
  • Ways to distribute to heirs
      • Outright- Beware of converting to“marital property”
      • Trust paying for needs and distributing at ages- Most often used with young children
      • Flexible Protective Trust – Heir can leave in as long as he or she wants to protect from divorce/creditors
      • Continuing Trust for Lifetime -For those who can’t manage money
      • Substance Abuse Trust - To allow treatment of substance abuse
      • Special Needs Trust - For children or adults that are disabled and on SSI or who may be on SSI
  • Updating
      • No charge for review appointments
      • There is a charge for amendments/restatements
      • Web site at www.lawsam.com   Sign up for newsletter at http://www.illinoislawnews.net
  • What trust includes:
      • Pour over wills (naming guardians if needed)
      • Power of attorneys for property
      • Power of attorneys for health care (with HIPAA authorization
      • Living wills
      • Deed to property
      • Funding table and trust binder
      • Funding assistance
      • Flat fee billing/visa mastercard accepted