REVOCABLE LIVING TRUST
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WHAT IS A LIVING TRUST?
If you have ever acted as a Personal Representative or Executor under a Will and have had to prepare filings for a probate process, you already know how cumbersome, time- consuming and costly the probate process can be.
A Living Trust, like a Will, is a written document that allows you to direct how your property will pass after your death. Unlike a Will, the Living Trust also directs how you want your property managed if you are disabled. A Living Trust is a revocable trust you set up during your lifetime with the primary purpose of avoiding probate. Living Trusts offer the following:
Immediate transfer of assets to loved ones upon death. No waiting 8 to 12 months for assets to pass to loved ones as in a probate proceeding.
Flexibility in dealing with your own assets.
No legal fees or other probate costs upon death. No probate; no fees.
Privacy - probate is a public proceeding -- all assets and liabilities of the
deceased are listed for public review.With or without a will, if you hold property in your sole name, you can only transfer the property to your loved ones by going through the probate process. That process takes 8 - 12 months to complete and may cost a significant amount of money in legal and other fees. In Maryland for example, the statutory maximum amount of legal fees that can be charged is $1,800 on the first $20,000 and 3.6% of anything above that. So for an estate worth $500,000, the statutory maximum fee to go through the probate process would be $1,800 PLUS $17,280.
When you set up a Living Trust, you transfer all of your assets to your own Trust and therefore, there are never any assets held in your sole name. You are the trustee of your Living Trust. When you die, your revocable Living Trust ends, but still plays a role in settling your affairs. You appoint a successor trustee in the Trust to take custody of the assets in the Trust after you die - the successor moves immediately to take control of the assets upon your death and to distribute those assets to your loved ones without court involvement.
Because your Living Trust is revocable, there is no tax effect to placing your assets into the name of your Trust. For example, when you re-title your house into the name of your Trust, there are no state transfer fees or taxes imposed. Your ability to buy or sell any of your property is not impacted at all by your Living Trust - in effect, for tax or other purposes, the Living Trust does not affect your ability to run your life at all.
Living Trusts are more expensive to set up than a Will because all of your assets must be re-titled into the name of your Trust; however, the legal cost of setting up a Living Trust is significantly lower than the cost of a probate proceeding.
Based on the above, is there any reason not to set up a Living Trust?
HOW DO I SET UP A LIVING TRUST?
ENGAGEMENT:
If you decide to choose me to draft your Living Trust, I will provide you with other estate planning documents as part of an overall package. This includes a “pour-over” Will, a Power-of-Attorney and a Living Will. I work only on a fixed-fee basis and the fee is set forth in an engagement letter I send to you for signature. One-half of the fixed fee is due when you return the letter; one-half upon completing and signing the final documents. The fixed fee ensures you will not receive any legal bills beyond the fixed
fee. It also enables me to work with clients at their speed, not mine. Since I am not forced to account for my time in 15-minute increments, I can spend as much time as I need and the time you want on providing you with the highest quality legal documents.
DISCUSSION:
There is no use setting up a Living Trust unless you place your major assets into the Trust. Therefore, the approach used is to discuss and discover what assets you have so they can be re-titled into the name of your Trust. Those assets may involve real property, investment accounts, bank accounts, pension plans, insurance policies, and personal property. We discuss each asset, figure out how to re-title those assets you want in your Trust and/or list the Trust as the beneficiary of those assets.
Often, my clients receive “homework” to do. Usually this involves finding deeds to property to provide to me, making copies of investment account statements and obtaining change of beneficiary forms for various insurance, pension, and other accounts. Discussion also involves determining who you want to appoint as a successor trustee, where you want your assets to go upon your death and how you want the assets to be transferred. Basically, we must learn everything about your life, your desires and your assets before we map out a plan for creating your Living Trust. Not only is this not difficult, it is often a lot of fun for my clients!
DRAFTING:
Based on our discussions, I prepare your draft Living Trust, Will, Power of Attorney, Living Will, Deeds, Letter and/or forms relating to your investment accounts, letters relating to any stock transfers and other materials you will need to transfer title of your assets to your Trust.
REVIEW:
Once the initial draft of the Living Trust and other documents is completed, discussions are held with you to review and comment on the draft documents. It is imperative to me that all clients fully understand all the language in the Living Trust and other documents I prepare for them - I work to ensure you understand what you are signing.
FINALIZING THE DOCUMENTS:
Once you have reviewed all of your documents, I put them into final form and we meet again to sign everything. Upon your signature, your documents are in final form and effective. Deeds and other documents of transfer are also signed - these documents are filed with the appropriate authorities. Once the transfers of title are confirmed, I send you the evidence of such confirmation and the funding of your Trust is complete.
REVIEWING YOUR TRUST AND OTHER DOCUMENTS PERIODICALLY:
We want your Living Trust and other documents to serve you for your lifetime; however, life has a way of intruding on the best of plans with surprise events. And, laws change. We periodically meet with you to ensure your documents are kept up to date.
Having handled numerous probate administrations, my opinion is that the Living Trust is a more effective and appropriate vehicle to transfer your assets to your loved ones.
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