2nd Quarter 2015
Add Up The Pluses And
Minuses Of A Living Trust
Don’t Play Up Super
Bowl Outcome In
Stock Decisions
revocable living trust can be a
valuable tool in your estateplanning kit, but it is not
without its potential drawbacks. For
starters, a living trust generally should
be viewed as a
supplement to a will
rather than a
replacement. You
likely will need a
valid will to tie up
all the loose ends of
your estate.
Furthermore, how
well a living trust
will work often
depends on state laws.
The basic premise is relatively
simple: You establish a living trust,
transfer assets to it, and name a trustee
to handle its administration. If you
designate yourself as the initial
beneficiary, you’re entitled to receive
income from the trust for the rest of
your life. But you also need to
designate secondary beneficiaries—
typically, your spouse, your children, or
your spouse and your children—who
will be entitled to receive the assets in
the trust when it terminates.
Unlike with other kinds of trusts,
you retain some measure of control of a
living trust while you’re alive. You may
be able to sell trust assets and keep the
cash, amend the terms of the trust (for
example, by changing secondary
beneficiaries), or revoke it entirely if
you wish. The trust only becomes
irrevocable when you die.
With that basic framework in mind,
consider the pluses and minuses of a
revocable living trust.
Pluses of a Living Trust
he New England Patriots just
won the Super Bowl. What does
it mean for the stock market?
Unless you believe in a myth, it means
absolutely nothing.
The frequently cited Super Bowl
indicator is interesting, but hardly
scientific. According to lore, when an
NFL team from the AFC Conference,
like the Patriots, wins the Super Bowl,
it will result in a stock market decline
for the upcoming year. Conversely,
when a franchise from the NFC
Conference, such as the Seahawks,
prevails in the championship game,
the market will prosper during
the year.
Since the Patriots won on February
1, it predicts a down year for the stock
market in 2015.
From a historical perspective,
the Super Bowl indicator has been
accurate about 80% of the time, based
on S&P 500 figures. But that’s hardly
foolproof. For instance, the New York
Giants from the NFC beat the same
Patriots in the Super Bowl in 2008.
According to the theory, the stock
market should have reacted favorably.
Yet we all know what happened next:
The market hit the skids and began one
of the biggest downturns since the
Great Depression, when the NFL
was in its infancy.
Sure, it’s fun to consider theories
like the Super Bowl indicator, but it’s
no substitute for sound research and
analysis. Rely on the fundamentals to
increase the chances for success.
A
A Living Trust
(Continued from page 1)
you’ll need to examine your current
assets to determine what to transfer to
the trust. Sorting through your files
can provide a snapshot of your
financial picture that should have
other benefits, too.
Minuses of a Living Trust
It costs money. You’ll need to
use an experienced professional to set
up a living trust, and in addition to
that initial cost, you’ll also pay annual
fees if you use the professional as
your trustee. (But you can be the sole
trustee during your lifetime.) Generally,
it costs more to create a living trust
than to establish a will, but the living
trust may be less expensive over the
long run.
●
It can be time-consuming. You’re
not done when you put your John
Hancock on the living trust documents.
You’ll still need to contact
financial institutions and
transfer agents to change
ownership of accounts;
issue new stock certificates;
revise business interests;
sign and record real estate
deeds; and re-title cars and
other property.
It isn’t a panacea.
Don’t expect a living trust
to address all of your estateplanning issues. Having an
up-to-date will often is still central to
an estate plan. Also, if you devise a
“pour-over will” to catch the assets that
don’t go into the trust when you die,
that will still has to be probated. For
●
●
some people, these issues cancel out
the benefits of using a living trust in the
first place.
It can be contested
just as a will can. In fact,
state laws generally allow
a longer time to challenge
a living trust than they do
for a will. And creditors
still can make claims
against the assets included
in a living trust.
Finally, whatever you
may have heard, there are
no estate tax benefits for
transferring assets to a
living trust.
In the end, the decision whether to
a use a living trust is a purely personal
one. Obtain all the information and
guidance you need. ●
●
©2015 API
It avoids probate. This is the main
reason for using a living trust.
Normally, if someone dies with a will
in place, surviving family members will
need to go through the probate process.
Probate can be
lengthy or short
depending on the
circumstances and
state law. However,
probate doesn’t
apply to the assets
you’ve transferred
to a living trust, so
your beneficiaries
have immediate
access to cash. (Assets transferred by
joint rights of survivorship also are
exempt from probate.)
It avoids guardianships and
conservatorships: This benefit often is
overlooked, but a fully funded living
trust can sidestep restrictive rules
relating to guardianships and
conservatorships. If the trust is
structured properly, beneficiaries
will have access to assets without
interference from a judge if you
are incapacitated. Otherwise, a
guardianship or conservatorship
can last much longer than probate.
It provides privacy. As opposed
to probate, which is open to the public,
the provisions of a living trust are
protected from prying eyes. A will has
to be filed with the appropriate court
but a living trust does not. This can
be a major advantage if you treasure
your privacy.
It helps you plan ahead. When
you contemplate using a living trust,
●
●
●
●
(Continued on page 4)
T
Bull Or Bear Market? Plan Both Ways
fter another good year on Wall
Street in 2014, some stock
market prognosticators are
predicting a reversal of fortunes for
2015, while others expect another good
year for investors. But no one knows
what actually will happen next, and the
best thing you can do is to plan for all
possibilities. You also can learn from
stock market history, while recognizing
that past performance is not a guarantee
of future results.
The stock market is known
as a leading economic
indicator—that is, it tends to
rise or fall in advance of
economic gains or losses.
That’s what happened when
the most recent bear market
bottomed out in March
2009. Finally, several
months later, the U.S.
economy, too, moved into
positive territory, although
the recovery has been
painfully slow by historical
standards. But during most
bull markets, the economy is
strong and unemployment
low. Consumers feel
relatively confident, and
their outlays help fuel
economic growth. And because
times are good, people usually are
more than willing to take the risk
A
of owning stocks.
Conversely, worries about the
economy may make investors sell their
stocks, and that drop in demand can
lead to a bear market. Usually, prices
will begin rising again after a fall of
40% or so. But in a particularly bad
bear market, such as during the Great
Depression, that percentage can be
significantly higher. As the economy
sputters and unemployment rises,
investors shy away from taking risks
in the market.
The best strategy to use in a bull
market is to try to gauge sector and
broad market trends and invest wisely.
Just don’t be tempted into thinking
you can time the market better than
anyone else.
It’s a little trickier during a bear
market, but there are some options. For
instance, you might consider “selling
short”— borrowing stock you don't
own, selling it, and waiting for the
price to drop. Then if you’re able to
buy back the stock at a lower price,
you’ll profit. U.S. Treasury Bonds also
may be a sound investment when stock
prices fall, in part because of demand
by U.S. and foreign investors
looking for a safer place to
put their money. You also
may decide to invest in
defensive stocks, such as
those of utilities, which
usually don’t fluctuate much
in times of uncertainty.
But the main thing to
learn from stock market
history is that you have a
better chance of succeeding
by maintaining a long-term
approach. Over time, the
stock market bounces back
from bear markets, and it’s
advisable to not buy or sell
stock just because the market
is bullish or bearish. Being
informed and methodical will serve
you better than selling stocks in a panic
or trying to jump on a bandwagon. ●
Can You Avoid Estate And Gift Tax?
re you hoping to pass investment
assets to your heirs without any tax
damage? Under the current rules,
you have plenty of leeway to avoid estate
and gift taxes on the federal level, although
state taxes may be another story. However,
keep in mind that your investment returns
may outpace the inflation adjustments to the
personal gift and estate tax exemption—and
this could mean that your wealth will grow
enough to be subject to taxes when you die.
There are two main estate and gift tax
breaks: the annual gift tax exclusion and the
unified estate and gift tax credit.
1. Annual gift tax exclusion. You can
give each recipient, such as a younger
family member, assets valued up to $14,000
A
a year without paying any gift tax (or even
having to file a gift tax return). The
exclusion is doubled to $28,000 for joint
gifts made by a married couple. So, if you
and your spouse each give the maximum
$14,000 to five other family members, you
can reduce your taxable estate by $140,000.
And you can do this year after year.
The annual gift tax exclusion is
indexed for inflation but rises only when the
cost of living increases enough to result in a
$1,000 bump to the exempt amount. With
inflation very low in recent years, increases
have slowed to a crawl. The last adjustment
was made in 2013, from $13,000 to the
current $14,000.
2. Unified estate and gift tax credit.
This generous credit can wipe out either
estate taxes, gift taxes, or a combination
of the two.
After a decade of gradual increases,
Congress permanently locked in the
exemption amount at an inflation-adjusted
$5 million. For 2015, the exemption is
$5.43 million (up from $5.34 million in
2014). That means a couple easily can
shelter more than $10 million in assets
from estate tax, although any lifetime gifts
exceeding the annual gift tax exclusion
will reduce the amount available to help
an estate avoid estate taxes.
But you can’t simply take this tax
shelter for granted. Remember that your
assets may appreciate in value at a rate
Live Long And Prosper: Roll Out A Stretch IRA
he individual retirement account
(IRA) is a time-tested way to
save for retirement. Typically,
you make contributions to an IRA during
your working career, or you roll over
funds to an IRA from a 401(k) or
another employer plan, or both. You
might end up with a sizable stash
from which you’ll be able to withdraw
during retirement.
But you may not have to tap that
part of your nest egg much if you can
rely upon retirement income from other
sources, though you will have to take
required minimum distributions
(RMDs). If it looks as if much of the
account will survive you, you might
consider the potential benefits of a
“stretch IRA.” That can help an IRA be
there for your chosen beneficiaries long
after you’re gone.
Under the rules for IRAs, you can
take as much as you want out of your
account whenever you want, although
there’s normally a 10% tax penalty on
distributions you take before you reach
the age of 59½. At the same time,
though, you can leave money in the IRA
indefinitely, except for taking the RMDs
that must begin when you hit age 70½.
Those are taxed as ordinary income,
which means the tax rate on that money
may be as high as 39.6%. And there can
be other tax consequences, too.
The idea behind the RMD rules is
to force you to use, and pay tax on, the
funds that have been accumulating in
the account without being touched by
taxes. The amount of your annual RMD
normally will be based on your account
balance on December 31 of the prior
year, with that amount divided by your
life expectancy according to an IRS
table. For example, a 75-year-old with
$500,000 in IRA assets would use a
factor of 22.9 from the universal life
expectancy table to get an RMD of
$21,834 for the current tax year.
This system is designed to exhaust
the account if you live long enough. But
there’s an alternative that could reduce
the size of the RMDs. If you designate
your spouse as the IRA’s sole
beneficiary, and if your spouse is more
than 10 years younger than you, RMDs
can be based on your joint life
expectancy. Assuming our 75-year old
owner with $500,00 in IRA assets has a
60-year-old spouse, their joint life
expectancy would be 26.5, resulting in
an RMD for the year of $18,868.
The basic concept behind the
stretch IRA is to postpone withdrawals
as long as possible and to minimize
RMDs both before and after your
death. The following steps could help
you get there:
Make sure you have properly
established beneficiaries, both primary
and secondary, for all of your IRAs.
greater than the
annual inflation
adjustments for the
estate tax
exemption. (Of
course, assets also
might decline in
value.) This is
especially true if
the recent trend in
low inflation
persists. For
example, suppose
a couple has $7
million in assets and earns an annual average
return of 7%. If the inflation rate remains at
2%, it will only take nine years for the
couple to face federal estate tax exposure.
For those in the danger zone, tax-
sheltered trusts and other techniques could
help safeguard assets from estate tax. In
addition, making annual tax-exempt gifts for
several years can help reduce the eventual
size of the estate. ●
T
●
Double-check your paperwork.
Limit your RMDs to the amount
you’re required to withdraw.
Withdrawing the bare minimum allows
you to preserve a larger nest egg.
When you die, your beneficiaries
who inherit what’s left of your account
can arrange payouts based on their life
expectancies. If they’re younger than
you were, the RMDs will be smaller.
If you have multiple
beneficiaries, each one should
establish a separate account for his or
her inherited IRA assets. RMDs have
to begin in the year following the year
of death. Without separate accounts,
RMDs will be based on the life
expectancy of the oldest beneficiary.
Dividing your account will reduce the
RMDs for younger beneficiaries.
Name successor beneficiaries.
This ensures that RMDs will be
withdrawn over your beneficiaries’
entire life expectancies, even if they
don’t live that long. Otherwise, a
beneficiary’s estate might have to pay
out the entire amount.
Timing can be crucial in
establishing a stretch IRA. To qualify
for the benefits, your beneficiaries
must establish accounts in your name
by December 31 of the year after the
year of your death. That leaves some
time for making decisions about
inherited IRA funds, but it’s important
not to dilly-dally.
It’s also essential for your heirs to
follow the rules on RMDs. The tax
penalty for failing to take one, whether
you’re the original IRA owner or a
beneficiary of an inherited account,
is equal to 50% of the required amount
(less any amount that actually was
withdrawn). Returning to our example
of a 75-year-old IRA owner with
$500,000 of assets, failing to take
the RMD this year could result in a
penalty as high as $10,917 (half of
$21,834). And that’s on top of regular
income tax.
Note that lifetime RMDs aren’t
mandatory for Roth IRA owners. And
while beneficiaries who inherit a Roth
must take RMDs based on their life
expectancies, those distributions
generally aren’t taxable. ●
●
●
●
●
Bull Or Bear Market? Plan Both Ways
fter another good year on Wall
Street in 2014, some stock
market prognosticators are
predicting a reversal of fortunes for
2015, while others expect another good
year for investors. But no one knows
what actually will happen next, and the
best thing you can do is to plan for all
possibilities. You also can learn from
stock market history, while recognizing
that past performance is not a guarantee
of future results.
The stock market is known
as a leading economic
indicator—that is, it tends to
rise or fall in advance of
economic gains or losses.
That’s what happened when
the most recent bear market
bottomed out in March
2009. Finally, several
months later, the U.S.
economy, too, moved into
positive territory, although
the recovery has been
painfully slow by historical
standards. But during most
bull markets, the economy is
strong and unemployment
low. Consumers feel
relatively confident, and
their outlays help fuel
economic growth. And because
times are good, people usually are
more than willing to take the risk
A
of owning stocks.
Conversely, worries about the
economy may make investors sell their
stocks, and that drop in demand can
lead to a bear market. Usually, prices
will begin rising again after a fall of
40% or so. But in a particularly bad
bear market, such as during the Great
Depression, that percentage can be
significantly higher. As the economy
sputters and unemployment rises,
investors shy away from taking risks
in the market.
The best strategy to use in a bull
market is to try to gauge sector and
broad market trends and invest wisely.
Just don’t be tempted into thinking
you can time the market better than
anyone else.
It’s a little trickier during a bear
market, but there are some options. For
instance, you might consider “selling
short”— borrowing stock you don't
own, selling it, and waiting for the
price to drop. Then if you’re able to
buy back the stock at a lower price,
you’ll profit. U.S. Treasury Bonds also
may be a sound investment when stock
prices fall, in part because of demand
by U.S. and foreign investors
looking for a safer place to
put their money. You also
may decide to invest in
defensive stocks, such as
those of utilities, which
usually don’t fluctuate much
in times of uncertainty.
But the main thing to
learn from stock market
history is that you have a
better chance of succeeding
by maintaining a long-term
approach. Over time, the
stock market bounces back
from bear markets, and it’s
advisable to not buy or sell
stock just because the market
is bullish or bearish. Being
informed and methodical will serve
you better than selling stocks in a panic
or trying to jump on a bandwagon. ●
Can You Avoid Estate And Gift Tax?
re you hoping to pass investment
assets to your heirs without any tax
damage? Under the current rules,
you have plenty of leeway to avoid estate
and gift taxes on the federal level, although
state taxes may be another story. However,
keep in mind that your investment returns
may outpace the inflation adjustments to the
personal gift and estate tax exemption—and
this could mean that your wealth will grow
enough to be subject to taxes when you die.
There are two main estate and gift tax
breaks: the annual gift tax exclusion and the
unified estate and gift tax credit.
1. Annual gift tax exclusion. You can
give each recipient, such as a younger
family member, assets valued up to $14,000
A
a year without paying any gift tax (or even
having to file a gift tax return). The
exclusion is doubled to $28,000 for joint
gifts made by a married couple. So, if you
and your spouse each give the maximum
$14,000 to five other family members, you
can reduce your taxable estate by $140,000.
And you can do this year after year.
The annual gift tax exclusion is
indexed for inflation but rises only when the
cost of living increases enough to result in a
$1,000 bump to the exempt amount. With
inflation very low in recent years, increases
have slowed to a crawl. The last adjustment
was made in 2013, from $13,000 to the
current $14,000.
2. Unified estate and gift tax credit.
This generous credit can wipe out either
estate taxes, gift taxes, or a combination
of the two.
After a decade of gradual increases,
Congress permanently locked in the
exemption amount at an inflation-adjusted
$5 million. For 2015, the exemption is
$5.43 million (up from $5.34 million in
2014). That means a couple easily can
shelter more than $10 million in assets
from estate tax, although any lifetime gifts
exceeding the annual gift tax exclusion
will reduce the amount available to help
an estate avoid estate taxes.
But you can’t simply take this tax
shelter for granted. Remember that your
assets may appreciate in value at a rate
Live Long And Prosper: Roll Out A Stretch IRA
he individual retirement account
(IRA) is a time-tested way to
save for retirement. Typically,
you make contributions to an IRA during
your working career, or you roll over
funds to an IRA from a 401(k) or
another employer plan, or both. You
might end up with a sizable stash
from which you’ll be able to withdraw
during retirement.
But you may not have to tap that
part of your nest egg much if you can
rely upon retirement income from other
sources, though you will have to take
required minimum distributions
(RMDs). If it looks as if much of the
account will survive you, you might
consider the potential benefits of a
“stretch IRA.” That can help an IRA be
there for your chosen beneficiaries long
after you’re gone.
Under the rules for IRAs, you can
take as much as you want out of your
account whenever you want, although
there’s normally a 10% tax penalty on
distributions you take before you reach
the age of 59½. At the same time,
though, you can leave money in the IRA
indefinitely, except for taking the RMDs
that must begin when you hit age 70½.
Those are taxed as ordinary income,
which means the tax rate on that money
may be as high as 39.6%. And there can
be other tax consequences, too.
The idea behind the RMD rules is
to force you to use, and pay tax on, the
funds that have been accumulating in
the account without being touched by
taxes. The amount of your annual RMD
normally will be based on your account
balance on December 31 of the prior
year, with that amount divided by your
life expectancy according to an IRS
table. For example, a 75-year-old with
$500,000 in IRA assets would use a
factor of 22.9 from the universal life
expectancy table to get an RMD of
$21,834 for the current tax year.
This system is designed to exhaust
the account if you live long enough. But
there’s an alternative that could reduce
the size of the RMDs. If you designate
your spouse as the IRA’s sole
beneficiary, and if your spouse is more
than 10 years younger than you, RMDs
can be based on your joint life
expectancy. Assuming our 75-year old
owner with $500,00 in IRA assets has a
60-year-old spouse, their joint life
expectancy would be 26.5, resulting in
an RMD for the year of $18,868.
The basic concept behind the
stretch IRA is to postpone withdrawals
as long as possible and to minimize
RMDs both before and after your
death. The following steps could help
you get there:
Make sure you have properly
established beneficiaries, both primary
and secondary, for all of your IRAs.
greater than the
annual inflation
adjustments for the
estate tax
exemption. (Of
course, assets also
might decline in
value.) This is
especially true if
the recent trend in
low inflation
persists. For
example, suppose
a couple has $7
million in assets and earns an annual average
return of 7%. If the inflation rate remains at
2%, it will only take nine years for the
couple to face federal estate tax exposure.
For those in the danger zone, tax-
sheltered trusts and other techniques could
help safeguard assets from estate tax. In
addition, making annual tax-exempt gifts for
several years can help reduce the eventual
size of the estate. ●
T
●
Double-check your paperwork.
Limit your RMDs to the amount
you’re required to withdraw.
Withdrawing the bare minimum allows
you to preserve a larger nest egg.
When you die, your beneficiaries
who inherit what’s left of your account
can arrange payouts based on their life
expectancies. If they’re younger than
you were, the RMDs will be smaller.
If you have multiple
beneficiaries, each one should
establish a separate account for his or
her inherited IRA assets. RMDs have
to begin in the year following the year
of death. Without separate accounts,
RMDs will be based on the life
expectancy of the oldest beneficiary.
Dividing your account will reduce the
RMDs for younger beneficiaries.
Name successor beneficiaries.
This ensures that RMDs will be
withdrawn over your beneficiaries’
entire life expectancies, even if they
don’t live that long. Otherwise, a
beneficiary’s estate might have to pay
out the entire amount.
Timing can be crucial in
establishing a stretch IRA. To qualify
for the benefits, your beneficiaries
must establish accounts in your name
by December 31 of the year after the
year of your death. That leaves some
time for making decisions about
inherited IRA funds, but it’s important
not to dilly-dally.
It’s also essential for your heirs to
follow the rules on RMDs. The tax
penalty for failing to take one, whether
you’re the original IRA owner or a
beneficiary of an inherited account,
is equal to 50% of the required amount
(less any amount that actually was
withdrawn). Returning to our example
of a 75-year-old IRA owner with
$500,000 of assets, failing to take
the RMD this year could result in a
penalty as high as $10,917 (half of
$21,834). And that’s on top of regular
income tax.
Note that lifetime RMDs aren’t
mandatory for Roth IRA owners. And
while beneficiaries who inherit a Roth
must take RMDs based on their life
expectancies, those distributions
generally aren’t taxable. ●
●
●
●
●
2nd Quarter 2015
Add Up The Pluses And
Minuses Of A Living Trust
Don’t Play Up Super
Bowl Outcome In
Stock Decisions
revocable living trust can be a
valuable tool in your estateplanning kit, but it is not
without its potential drawbacks. For
starters, a living trust generally should
be viewed as a
supplement to a will
rather than a
replacement. You
likely will need a
valid will to tie up
all the loose ends of
your estate.
Furthermore, how
well a living trust
will work often
depends on state laws.
The basic premise is relatively
simple: You establish a living trust,
transfer assets to it, and name a trustee
to handle its administration. If you
designate yourself as the initial
beneficiary, you’re entitled to receive
income from the trust for the rest of
your life. But you also need to
designate secondary beneficiaries—
typically, your spouse, your children, or
your spouse and your children—who
will be entitled to receive the assets in
the trust when it terminates.
Unlike with other kinds of trusts,
you retain some measure of control of a
living trust while you’re alive. You may
be able to sell trust assets and keep the
cash, amend the terms of the trust (for
example, by changing secondary
beneficiaries), or revoke it entirely if
you wish. The trust only becomes
irrevocable when you die.
With that basic framework in mind,
consider the pluses and minuses of a
revocable living trust.
Pluses of a Living Trust
he New England Patriots just
won the Super Bowl. What does
it mean for the stock market?
Unless you believe in a myth, it means
absolutely nothing.
The frequently cited Super Bowl
indicator is interesting, but hardly
scientific. According to lore, when an
NFL team from the AFC Conference,
like the Patriots, wins the Super Bowl,
it will result in a stock market decline
for the upcoming year. Conversely,
when a franchise from the NFC
Conference, such as the Seahawks,
prevails in the championship game,
the market will prosper during
the year.
Since the Patriots won on February
1, it predicts a down year for the stock
market in 2015.
From a historical perspective,
the Super Bowl indicator has been
accurate about 80% of the time, based
on S&P 500 figures. But that’s hardly
foolproof. For instance, the New York
Giants from the NFC beat the same
Patriots in the Super Bowl in 2008.
According to the theory, the stock
market should have reacted favorably.
Yet we all know what happened next:
The market hit the skids and began one
of the biggest downturns since the
Great Depression, when the NFL
was in its infancy.
Sure, it’s fun to consider theories
like the Super Bowl indicator, but it’s
no substitute for sound research and
analysis. Rely on the fundamentals to
increase the chances for success.
A
A Living Trust
(Continued from page 1)
you’ll need to examine your current
assets to determine what to transfer to
the trust. Sorting through your files
can provide a snapshot of your
financial picture that should have
other benefits, too.
Minuses of a Living Trust
It costs money. You’ll need to
use an experienced professional to set
up a living trust, and in addition to
that initial cost, you’ll also pay annual
fees if you use the professional as
your trustee. (But you can be the sole
trustee during your lifetime.) Generally,
it costs more to create a living trust
than to establish a will, but the living
trust may be less expensive over the
long run.
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It can be time-consuming. You’re
not done when you put your John
Hancock on the living trust documents.
You’ll still need to contact
financial institutions and
transfer agents to change
ownership of accounts;
issue new stock certificates;
revise business interests;
sign and record real estate
deeds; and re-title cars and
other property.
It isn’t a panacea.
Don’t expect a living trust
to address all of your estateplanning issues. Having an
up-to-date will often is still central to
an estate plan. Also, if you devise a
“pour-over will” to catch the assets that
don’t go into the trust when you die,
that will still has to be probated. For
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some people, these issues cancel out
the benefits of using a living trust in the
first place.
It can be contested
just as a will can. In fact,
state laws generally allow
a longer time to challenge
a living trust than they do
for a will. And creditors
still can make claims
against the assets included
in a living trust.
Finally, whatever you
may have heard, there are
no estate tax benefits for
transferring assets to a
living trust.
In the end, the decision whether to
a use a living trust is a purely personal
one. Obtain all the information and
guidance you need. ●
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©2015 API
It avoids probate. This is the main
reason for using a living trust.
Normally, if someone dies with a will
in place, surviving family members will
need to go through the probate process.
Probate can be
lengthy or short
depending on the
circumstances and
state law. However,
probate doesn’t
apply to the assets
you’ve transferred
to a living trust, so
your beneficiaries
have immediate
access to cash. (Assets transferred by
joint rights of survivorship also are
exempt from probate.)
It avoids guardianships and
conservatorships: This benefit often is
overlooked, but a fully funded living
trust can sidestep restrictive rules
relating to guardianships and
conservatorships. If the trust is
structured properly, beneficiaries
will have access to assets without
interference from a judge if you
are incapacitated. Otherwise, a
guardianship or conservatorship
can last much longer than probate.
It provides privacy. As opposed
to probate, which is open to the public,
the provisions of a living trust are
protected from prying eyes. A will has
to be filed with the appropriate court
but a living trust does not. This can
be a major advantage if you treasure
your privacy.
It helps you plan ahead. When
you contemplate using a living trust,
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