MORE ABOUT TRUSTS

How do some families manage to pass on their wealth to future generations without the expense and hassle others face? One of the tools that they often use is a Revocable or Living Trust. As opposed to an Irrevocable Trust, a Living Trust allows you to make any changes that you want for as long as you live. You have complete control of everything you own, exactly the same as you would without a Trust.

The big advantages of a trust include avoiding probate. This alone makes a trust worthwhile. According to Webster, probate means the proving of a will. This is a court process that involves making your will public, often includes lawyer bills and can take years. Even with a small estate, probate can be expensive and unpleasant. With a Trust, there are no delays in distributing your estate.

Wills can be contested, while Trusts cannot. Have you ever heard of a family who split apart arguing over who will get Dad's car or Mom's cherry wood desk? Or maybe worse is the battle over burial vs. cremation. Telling your family what you want isn't the same as putting it in writing in an enforceable legal document. With a Trust, you can be sure that your wishes are carried out exactly the way you want them to be.

A Trust is easy to get. We discuss to whom you want to leave your assets, and who you want to manage things if you become disabled. Then we have a document drawn that explains exactly what you want. A good Trust is a book that spells out exactly what you want in legal terms. It is includes much more than a will. Beside deciding "who gets what," a Trust includes your choice for a Medical Power of Attorney and Durable Power of Attorney, usually your spouse or an older child. Successor Trustees are listed. Don't be fooled by ads that offer inexpensive Trusts. Too many people pay for Trusts that they never receive, or Trusts that aren't thorough enough to be usable.

A well-written Trust includes a Living will, which explains how much life support you want when you are near the end of your life. The person who has Medical Power of Attorney helps to see that your plans are followed exactly.

The person with Durable Power of Attorney can make financial decisions for you if you are no longer able to make them for yourself. This means that if you are incapacitated, there is someone who can help whom you have chosen, not someone appointed by a court after a messy Conservatorship case. This person can handle things without any government interference.

You will probably choose to be your own Trustee. A married couple are usually Co-Trustees. Successor Trustees have no power until the original Trustees are gone. Again you have someone in charge whom you have chosen, rather than a court appointee. The Trust should specify alternatives for these important positions, in case your original choice is unable to serve. Usually with a married couple, the surviving spouse remains Trustee and is the beneficiary. When the second spouse dies, the Successor Trustee administers the Trust to see that everything is done as you said.

For larger estates there is another important point. You or your spouse pay no death tax when the first of you passes. However when the second spouse dies, the children or other heirs are liable for tax if the estate is over a specified amount. This was $600,000 for many years. New legislation is raising this limit over a period of years to $1,000,000. Anything over the amount of this Unified Credit is subject to tax.

A good Trust is written to divide the estate into two Trusts at the death of the first spouse. A survivor's Trust and a Descendant's Trust are created automatically. Each Trust has it's own Unified Tax Credit. Therefore at the death of the second spouse, the heirs would receive twice as much free of inheritance tax.

For example, if the estate was worth $1,200,000, and the Unified Credit was still $600,000, the tax savings would be $235,000. This much more would go to your children instead of going to the government.

Even with a much smaller estate, the protection is major. For example if you live in a community property state, such as Arizona, the surviving spouse may be liable to capital gains taxes by selling your assets after your death. Additionally with a Trust, everything happens privately, and is not a matter of public record.

Perhaps the most important benefit of having a good Trust is the peace of mind you have. Unpleasant as some of these matters are to think about, having them decided and protected by a Trust will help you get a good night's sleep,

To find out what kind of trust would be best for you, call Nancy at 928-777-8736, or Ron at 928-717-8256 or E-mail us at answers@weareinsurance.com.

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