Phillip B. Rarick, J.D.. Introduction Why Living Trusts? – People want to avoid probate in the...
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Understanding Living Trusts for Florida Residents Phillip B. Rarick, J.D.
Phillip B. Rarick, J.D.. Introduction Why Living Trusts? – People want to avoid probate in the event of disability or death. Estate planning is not just
Introduction Why Living Trusts? People want to avoid probate in
the event of disability or death. Estate planning is not just for
the wealthy. Well show you how to keep legal control in the family
and stay out of the court.
Slide 3
5 Basic Ways People Plan Their Estates 1. Losing Control With a
Will 2. Losing Control By Doing Nothing 3. Losing Control With
Joint Ownership 4. Losing Control By Giving Away Assets 5. Keeping
Control With a Revocable Living Trust
Slide 4
1. Losing Control With a Will A will does not avoid probate
when you die. All wills must be admitted to the probate court. A
will does not avoid guardianship the legal process where the court
steps into your life if you become mentally incapacitated and
appoints a guardian to manage your personal and/or financial
affairs.
Slide 5
What is probate? Why do we go through it? Probate is the legal
process where the court makes sure that: your will is legally
valid, Your debts are paid, and Your assets are distributed
according to your will & Florida law. It is bureaucratic,
costly, and time consuming.
Slide 6
What assets go through probate? Not everything you own is
automatically subject to probate. Jointly owned assets that
transfer to the surviving owner and assets that have a valid
beneficiary designation (like an insurance policy) generally do not
go through probate.
Slide 7
Whats bad about probate? It can be expensive Attorney fees are
usually 3% or more of the estates gross value. Personal
Representative fee, if not waived, can be up to 3% of the total
probate estate. It takes time usually 9 months to 2 years During
this time, the assets will likely be frozen. Loss of privacy
Probate is a public process interested parties can find out who the
heirs are, what they will receive, and their addresses. Loss of
control & intervention of the court in your family affairs The
probate judge has supervision over how your Will is interpreted,
how much probate will cost, how long it will take, and what
information is made public. Wills cannot plan for disability If you
cant handle your affairs because of mental or physical incapacity,
and you have not legally given another person the legal authority
to sign for you, you can not transfer assets without the
intervention of the probate court.
Slide 8
2. Losing Control By Doing Nothing If you own assets in your
name & become incapacitated, the court can take control. When
you die, your estate will go through probate & your assets will
be distributed according to Florida law. Under Florida law, if you
are married & have children, they will receive a share of your
estate. If you have minor children, the court will control their
inheritances & appoint guardians.
Slide 9
3. Losing Control With Joint Ownership JTWROS means Joint
Tenancy with Right of Survivorship. Upon the death of one person
holding as JTWROS, the survivor takes everything. Problems JTWROS
can cause: It could defeat the objectives of your will. Putting a
savings account in joint name with a son/daughter will expose that
money to the creditors of that child. For married couples with a
taxable estate over $10.5 million, jointly held property can have
adverse estate tax consequences.
Slide 10
4. Losing Control By Giving Away Assets The primary problem
with giving away an asset is its gone. What if you want or need it
back? What if the son/daughter becomes mired in a divorce? What if
the child is in an auto accident and is sued? Another problem is
the gift tax. If the value of the asset you give away exceeds
$14,000 per person annually, a gift tax return should be
filed.
Slide 11
5. Keeping Control With a Revocable Living Trust What is a
Revocable Living Trust? Revocable mean you have unfettered
discretion to alter, change, amend, or revoke the trust. It is a
legal document that includes your instructions for what you want to
happen to your assets when you die. It avoids probate at death. It
prevents the court from controlling your assets if you become
incapacitated.
Slide 12
How does a Living Trust avoid probate & prevent court
supervision at incapacity? When you set up a Living Trust, you
transfer assets from your individual name to the name of your
Trust, which you control. Technically, you no longer own anything,
so there is nothing for the courts to administer when you die or if
you become incapacitated. This is what keeps you & your family
out of the courts.
Slide 13
Do I lose Control of the assets I put into my Living Trust? No,
you keep full control. You can still buy, sell, and invest. You can
make changed or even cancel your Trust. Nothing changes but the
names on the titles.
Slide 14
How does a Living Trust work? When you set up a Living Trust,
you become the Trustmaker, Trustee, and Beneficiary. If you are
married, you & your spouse can be Co- Trustmakers, or you can
be Trustmakers of your own separate Trusts. Only you, the
Trustmaker, can make changes to your Trust.
Slide 15
What happens if I become incapacitated? If you have named
someone else as your Trustee or to be a Co-Trustee with you, they
will continue to manage your financial affairs according to your
Trusts instructions for as long as necessary. If you are the only
Trustee or your Co-Trustee is unable to act, your hand-picked
Successor Trustee(s) will step in and act for you.
Slide 16
What happens when I die? Your Trustee or Co-Trustee essentially
has the same duties as a Personal Representative. He/she collects
any income or benefits, pays your remaining debts, sees that tax
returns are filed, and distributes assets according to your Trusts
instructions.
Slide 17
Who can be a Successor Trustee? Successor Trustees can be
individuals (your adult children, other relatives, or a trusted
friend) and/or a Corporate Trustee, such as a bank or trust
company. If you choose an individual, you should name more than one
in case your first choice is unavailable or unable to act. You can
name 2 or more to act together.
Slide 18
How do I know my Successor Trustee will do what I want? Trustee
are fiduciaries. Under Florida law, they have a legal duty to
follow your Trusts instructions & act in a prudent
(conservative) manner. If you Successor Trustee were to abuse
his/her duties, he/she could be held legally liable.
Slide 19
Does a Living Trust reduce my taxes? A Revocable Living Trust
has no effect on your income taxes. Depending on the size of your
estate, a Living Trust can help reduce or even eliminate estate
taxes when you die.
Slide 20
What is the Current Estate Tax or Death Tax? For U.S. citizens:
Estate tax exemption for 2013 is $5.25 million. Estates above $5.25
million are taxed at the rate of 40%. For non-residents: Estate tax
exemption for 2013 is $60,000. Estate above $60,000 are taxed at
the rate of 40%.
Slide 21
Important Planning Notes Estate tax law is fluid &
difficult to predict. This makes it essential that you establish
& maintain a relationship with an estate planning attorney who
will keep you advised of the latest changes in the law.
Slide 22
To Determine You Net Estate Add up the present value of your
assets and subtract your debts. Your assets are everything you own:
home, other real estate, investments, personal belongings,
retirement benefits, IRAs, death benefits, & life
insurance.
Slide 23
Is there anything I can do about estate taxes? Yes if you plan
NOW. If you are married, and you and your spouse are U.S. citizens,
use the marital deduction. When you die, you can leave an unlimited
amount to your spouse tax-free. When your spouse dies, the estate
will be entitled to your exemption along with your spouses
exemption ($10.5 million in 2013). You can make gifts up to $14,000
($28,000 if married) per year without gift tax implications. This
will remove that amount from the estate permanently.
Slide 24
Whats involved in setting up a Living Trust? You make the basic
planning decisions by deciding who will be your Trustee, Successor
Trustees, and Beneficiaries. The legal document is prepared from
your decisions. After youve approved & signed the document, you
transfer your assets to your Living Trust. This is called funding
your trust.
Slide 25
Do I need to fund my Living Trust now? If you want the control
weve been talking about, you must fund your Living Trust now. Your
Living Trust can only control the assets that have been transferred
into it.
Slide 26
Is it hard to put assets into my Living Trust? No your
attorney, financial advisor, & insurance agent can help. You
will need to change titles on real estate and other assets with
formal titles, such as savings accounts, stocks, CDs, other
investments, insurance, safe deposit boxes, etc. Tax deferred
savings plans, like IRAs and 401(k) plans are exceptions. If you
are married, there may be valid tax reasons for you to name your
spouse as first Beneficiary and your Trust as second
Beneficiary.
Slide 27
Doesnt it take a lot of time to change titles & beneficiary
designations? It will take some time. But you can do it now, or you
can pay the courts & attorneys to do it for you later when you
cant. One of the benefits of a Living Trust is that it organizes
all you assets under one plan, with one master set of
instructions.
Slide 28
Should I have an attorney prepare my Living Trust? Yes,
preferably an experience attorney who specializes in Living Trusts.
Do-it-yourself trusts generally dont meet Florida law requirements
or fulfill the familys needs. These attempts to save money result
in expensive fix- ups, expensive litigation, family headaches, and
family division.
Slide 29
Is a Living Trust expensive? Not compared to the costs &
loss of control that come with probate at death & court
supervision at incapacity.
Slide 30
How much does a Living Trust Cost? The cost depends on how
complicated your estate is & whether you need to do tax
planning. I can tell you the exact cost following our initial
meeting.
Slide 31
How long does it take to get a Living Trust? It will only take
2 3 weeks to prepare the documents after you make the basic
decisions.
Slide 32
Are Living Trusts new? No, not at all. Trusts are as old as
Wills. They have been used effectively for hundreds of years.
Slide 33
When should I set up a Living Trust? Now, while you are healthy
& you dont think you need one. With estate planning, you dont
get a second chance to keep control in your family, and out of the
courts.
Slide 34
Consultation: Call Rarick, Beskin & Garcia Vega, P.A. at
(305)556-5209
Slide 35
Estate Planning Checklist Answer each question YES or NO 1. Has
it been more than 3 years since you reviewed your estate plan,
including your Will, life insurance policies, and any other
documents? 2. If you or your spouse passed away today, are you
uncertain about what would happen to your property? 3. If you
became incapacitated, would your family have to go through court
proceedings to carry on your affairs? 4. Do you have minor children
or other people who are dependent on you? 5. If a death occurred
& court approval was required to release accounts for working
capital, could it disrupt your business or family life?
Slide 36
Estate Planning Checklist Cont. 6. Would you like to avoid
probate of your estate? 7. Does the total value of you & your
spouses assets (including life insurance, pensions, real estate,
and any other assets) exceed $5.25 million (or $10.5 million for
married couples)? 8. Does your life insurance or other accounts
name a minor child as a beneficiary? 9. Do you have children by a
previous marriage? 10. Have there been any major changes in your
family since you last signed your will, such as marriage,
separation, divorce, birth, etc.?
Slide 37
If you answered YES to any one of the above questions, you may
need estate planning now. YES answers indicate potential problems
in the areas of tax, cost & delay of probate, or simply lack of
a plan. Planning now can help solve these problems later!