ESTATE PLANNING TIP CORNER

This month’s tip courtesy of Linda Retz, Esq.

WHAT A REVOCABLE LIVING TRUST DOES AND DOES NOT DO

Many clients choose to have a revocable living trust as
the cornerstone of their estate plans. The terms of such a trust
can be changed by the creator throughout his or her lifetime and
assets can be withdrawn by the creator at will. To realize the
benefits that such a trust has to offer, it is essential that the
creator’s assets without beneficiary designations (and that are
not held in certain forms of joint ownership on purpose) be
transferred to the trust as soon as it is signed. Once these
assets have been transferred to the trust, it is “funded.”

A funded revocable living trust will:

  • Avoid a probate administration after the creator’s
    death and the costs, “red tape” and delays
    associated with it.
  • Avoid the necessity for a conservatorship of the
    creator’s estate (for asset management) if he or
    she becomes incompetent and the costs and
    embarrassment associated with a conservatorship.
  • Provide a certain level of privacy vis-a-vis the
    public at large.

    A revocable living trust does not:

  • In and of itself, save estate taxes. Special
    planning to save estate taxes can be done either
    in a Will or revocable living trust.
  • Provide its creator with creditor protection
    during his or her lifetime.
  • Avoid the need for a conservatorship of the person
    of an incompetent person, to authorize someone
    else to make decisions about that person’s
    physical care.
  • Mean that nothing has to be done after the creator
    dies. After the creator’s death, certain legal
    notices have to be given, tax reporting has to be
    done and assets must be conveyed to the
    beneficiaries in keeping with the terms of the
    decedent’s estate planning documents. The failure
    to obtain the proper legal and accounting advice
    can lead to the dishonoring of the decedent’s
    estate plan, the payment of large tax
    deficiencies, interest and penalties, difficulties
    in selling and borrowing against property and, in
    a worst case scenario, lawsuits.

    In keeping with Internal Revenue Service rules and
    regulations, I inform you that any tax advice contained in this
    communication (including any attachments) was not intended or
    written to be used, and cannot be used, by any taxpayer for the
    purpose of (1) avoiding tax-related penalties under the U.S.
    Internal Revenue Code or (2) promoting, marketing or recommending
    to another party any tax-related matters addressed herein.

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Jon Haveman
Economic Forecast

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