LIVING TRUSTS

Mention estate planning and many people assume a Will is all they need. If more people knew the limitations of the Will, however, fewer of them would be relying on it as a primary estate planning device. Take a look at just a few of the areas where a Will falls short: Probate is the legal process through which the court makes sure that, when you die, your Will is legally valid, your debts are paid and your assets are distributed according to the provisions in your Will.

What's so bad about probate? If you've ever been through the process for a deceased family member or friend, you know the "perils of probate:"

Probate can be expensive. Court costs, legal fees and executor commissions tied to the probate process can take a hefty chunk out of your estate, anywhere from 3% to 7%, depending upon which state you live in and the complexity of your estate.

What's more, if you die owning assets in multiple states, your family could face multiple probate procedures, complete with their additional delays and expenses which must be paid from your estate before your assets can be fully distributed to your heirs.

Probate is a lengthy process. Generally, you can expect it to take between nine months to two years to probate your Will; even longer if anyone contests it (the probate process opens the door to will contests). During this period, your assets will probably be frozen so an accurate inventory can be taken and little or nothing can be distributed or sold without the court's and/or executor's approval.

Probate makes your personal affairs very public. All documents filed with the probate court are a matter of public record. Consequently, the details about your financial affairs, the names and addresses of your heirs as well as what they have been bequeathed, becomes public information available to anyone. This is a valuable resource for people who want to know who has recently come into money. What's more, the probate process invites those heirs not named in your Will to contest, and the court, not you or your family, decides what if anything they will get.

The probate process strips your family of control. In probate, the legal system has control over how your Will is interpreted, how much probate will cost, how long it will take and when your heirs will receive their inheritance. Your survivors lose control to a legal process for which they have to pay substantially.

A Revocable Living Trust, commonly referred to simply as a "Living Trust," is a private
legal document used to instruct survivors about what you want to happen to your assets
when you die or become incapacitated (not to be confused with a Living Will, which is anentirely separate device concerned with medical care). A Living Trust often looks and reads like a Will, but it differs from a Will in several critical ways:

The Living Trust avoids probate at your death , unlike the Will, which must be probated in the courts. The result? Substantial cost savings, speedier distribution of your assets and total privacy for your family.

A Living Trust prevents the courts from controlling your assets if you become incapacitated or incompetent.In the unfortunate event that you become unable to manage your affairs as a result of illness or injury, the instructions contained in your Will concerning your estate's management are useless; a Will becomes effective only upon death.

Management of your estate, therefore, may fall into the hands of the court system.
With a Living Trust, on the other hand, you have provided for someone you choose (usually a family member or trusted friend) to automatically assume management if you are ever unable. What's more, with effective planning, you will decide who makes health care decisions for you if you become unable rather than leaving it in the hands of the courts or hospital.

A Living Trust is simply another way to hold title to a property or asset . When you create a Living Trust, you transfer the ownership titles on your major assets from your own name to that of your Trust. For example, the title on your home might change from "John and Sally Wright" to "John and Sally Wright, Trustees, dated January 5, 1997."

Assets of all kinds can be placed in the Trust: real estate, bank accounts, securities, stocks, limited partnerships, cars, jewelry, furniture and other personal property. To understand how a living trust works, we have to poke our heads into a Law School property class for a moment. Anything you own - your car, for example - you own in two ways: you are the legal owner of the car, meaning you hold title to it, and you are the "beneficial" owner, meaning you are the person entitled to receive the benefits of owning the car - you get to drive it!

A Trust divides the two forms of ownership this way: when an asset is placed into a Trust, the Trustee (the representative of the trust) holds the legal title to the asset for the benefit of a "beneficiary." The Trustee is the legal owner, and the beneficiary is the beneficial owner.

With a Living Trust, you are both the Trustee and the beneficiary. You hold legal title to your property as Trustee, and you own all of the benefits of the property since you are the beneficiary. Your Trust holds legal title to your property, so if you become sick or upon your death, the backup Trustee whom you have designated (usually your spouse or child) automatically takes over, eliminating the need for the court to intervene in your affairs!

The process of placing your assets into your Living Trust is known as "funding" the Trust, and is a critical step in securing the benefits offered by the Trust. Because only those assets titled in a person's name are subject to probate by the courts, the properly funded Living Trust makes probate unnecessary when you die and allows your assets to go directly to your beneficiaries per your instructions. In the event you become physically or mentally unable to handle your financial affairs, your Living Trust protects you from court involvement by turning over control to the back-up (or "Successor") Trustee specified by you in the Trust. If you recover, you automatically resume control. While a Living Trust is just another way to hold title to a property or asset, it becomes the BEST way to keep control of your assets, avoid probate, maximize privacy of your financial affairs, and simplify the transfer of assets upon your death.

A LIVING TRUST :

Avoids probate of your estate Gives you control of who inherits what, when Ensures maximum privacy of your personal affairs Prevents court control in case of incompetency Costs less than Will preparation and probate Easy to modify as circumstances change Can combine married couples' estate tax exemptions to maximize tax savings A Living Trust is valid in all 50 states

Mark Tippins
Attorney at Law
145 E. Magnolia Avenue #201 • Auburn AL, 36830
Phone: (334) 821-3670 • Fax: (334) 821-3671
E-Mail: mtippins@bellsouth.net

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