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assets can be withdrawn by the creator at will.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.