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"There is special providence in the fall of a sparrow. If it be now, 'tis not to come; if it be not to come, it will be now; if it be not now, yet it will come. The readiness is all." 
Shakespeare's ruminations on our eventual destiny apply equally to estate planning, which is all about readiness and the special providence that takes sparrows from the sky, and eagles from their perch.A few ruminations about estate planning are listed below with comments following: 1. Do you really want a revocable living trust? 2. Is a cookie cutter trust for you? 3. What makes your revocable living trust inoperable? 4. Do you hold any assets in joint tenancy? 5. Do you know what "step-up" in basis means? 6. Do your IRA's or other retirement accounts go in your trust? 7. Does a revocable living trust save you taxes? 8. Are you sure you want your children as co-trustees? 9. Has probate gotten a bad rap? |
COMMENTS: 1. Do you really want a revocable living trust? It's generally touted that you should have a trust to avoid probate, which is the court overseeing the administration and distribution of your estate at death. You don't have to worry about probate if your estate is under $100,000 at death, and even if it's more, you might want court supervision (probate) anyway. Assuming that your trust is an adequate substitute for probate without getting proper advice could be a mistake.  2. Is a cookie cutter trust for you? The old adage that you get what you pay for applies to trusts as well. Although the cookie cutter trust may be adequate within itself, you should understand the trust, how it works, and why it's right for you. You and your attorney should analyze your individual needs and discuss options available. 3. What makes your revocable living trust inoperable? The simple answer: Not funding it. After you sign your trust, with your signature officially notarized, and you are given the soft vinyl maroon three-ring binder containing it, with laminated divider tabs and beautifully formatted text, but no one bothers to transfer assets into it, you've just bought yourself a soft vinyl maroon three-ring binder, and little else. 4. Do you hold any assets in joint tenancy? Holding assets in joint tenancy form avoids probate because title in joint tenancy transfers by operation of law to the surviving joint tenants simultaneously with a joint tenant's death. You're probably holding title to your house in joint tenancy, as the agent or escrow advised. Or your stocks may be in joint tenancy form. Some concerns about joint tenancy are not being able to take full advantage of the "step-up in basis" (see below), creditors of the other joint tenants tieing up the property, and the property being distributed outside your will or trust. 5. Do you know what "step-up" in basis means? A step-up in basis generally refers to the purchase price of an asset being increased to its fair market value at the date of the owner's death, with the result of eliminating capital gains. The step-up doesn't apply in full measure to property held in joint tenancy, but it does to community property. 6. Do your IRA's or other retirement accounts go in your trust? Your IRA's and other retirement accounts are "beneficiary designation" accounts and are transferred to the beneficiary at your death outside of your will or trust (unless you've designated your estate or your trust as the beneficiary, which may not be what you should do). 7. Does a revocable living trust save you taxes? Maybe. If you're married and the total estate is more than $675,000 in the year 2000 or 2001 (this amount increases in steps to $1,000,000 by 2006), a properly drafted trust permits the first spouse to die to take advantage of a credit against the federal estate tax that would otherwise be lost if the surviving spouse takes the entire estate. 8. Are you sure you want your children as co-trustees? Having co-trustees requires unanimous agreement. Disagreement invites court intervention, which is exactly what you're trying to avoid by having a trust. 9. Has probate gotten a bad rap? Probate without question is complicated and technical, and can be frustrating. It has grown over centuries to foil the foibles of human nature grasping at the dying person's riches. And as probate law took on more bulk, it moved more slowly. Trust law, on the other hand, has laid dormant but is now sprouting, and although sleek and slim, is frail and fragile, and the law makers must each year rush to its aid to support it with new laws. All that bulk that probate has provides good protection for your estate, and when probate's done, eventually, the deceased's assets are probably in the hands of the persons intended to receive them. As new trust law is enacted each year, trusts may soon be difficult to distinguish from probates.  The above information is not legal advice; it is meant only to jump start your thinking-- to give you a few arrows in your quiver when discussing the topic with a professional. Aim for understanding. |
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