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Joint Tenancy... A Dangerous Choice
What do the tax experts say?
1. Title passes the instant death occurs. This will cause problems where 2 people die at the same time.
2. The New Joint Tenant's creditors, lawsuits and even their family, all have access to your assets.
3. A gift may have occurred which requires filing of Federal Gift Tax return or face penalties and interest.
4. You cannot sell or even refinance real estate without your children's consent AND that of their SPOUSES if married.
5. Appreciated assets lose the benefit of a stepped-up basis at death. This can mean huge Capital Gains taxes for our loved ones.
6. If only one child is named, that child, when distributing to other children will be making gifts that are potentially taxable.
7. It automatically forfeits one of the 3,500,000 Federal Estate Tax equivalent exemptions.
8. Upon death, the surviving joint tenant takes ALL, which may conflict with the wishes of the first to die. It could mean the unintentional disinheriting of other children or other loved ones.
9. It does NOT eliminate the cost involved in transferring assets over into the name of the surviving Joint Tenant's name only.
10. It does NOT eliminate probate except upon the first to die.
Favorite sites:
http://www.eluxury.com/estore/index.jsp
jim.jebbia@morganstanley.com
Don't forget to include your pets in your Revocable Living Trust.
List of Documents and Services
Revocable Living Trust
Pour-Over Will
Financial Durable Power of Attorney
Health Care Durable Power of Attorney
Living Will
Community Property agreement
Certification and Abstract of Trust
Schedules A, B, and C
Assignment of Personal property
Assignment of Community Property
Assignment of Separate Property
Quitclaim Deed(s)
Preliminary Ownership Report(s)
Non-Qualified Asset Assignment and Notification
Letters to Financial Insitutions
Beneficiary Notification Letters for Qualified Assets
Estate Portfoilo Funding Instructions
Notary, Document Execution, and Funding of Assets
Services
Periodic review, and Updating Services
Catastrophic Illness and Elder Care Instructions
Personal Letter of Dirction and Certificates of Personal
Property
Distribution Information for Survivors upon Incapacity
or Death
Overview and Instruction for Estate Settlement
Convenient In-Home Service
One-Time Membership in Legacy Prepaid Legal
Program
*Personal Consultation with an Attorney to determine appriateness of documents.
*Twelve Issues of Legacy Update to help
understand the use and maintenance of your
trust.
*Notification of technical and required legislative
changes that may impact your documents.
*Unlimited support via toll free 800 telephone
number and/or e-mail.
All information provided is considered personal and confidential for the purpose of document preparation.
We never sell your information.
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If something happens to me, who has control? If you and your spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or you are the only trustee, your handpicked successor trustee will step in. If a corporate trustee is already your trustee or co-trustee, they will continue to manage your trust for you.
What does a successor trustee do? If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you automatically resume control. When you die, your successor trustee pays your debts and distributes your assets. All this is done quickly and privately, according to instructions in your trust, without court interference.
Who can be a successor trustee? Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or corporate trustee. If you choose an individual, you should name more than one in case your first choice is unable to act.
What is probate? Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you don't have a valid will, your assets are distributed according to state law.
What is so bad about probate?
* It can be expensive. Legal/executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state.
* It takes time. Usually 9 months to 2 years. During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval. If your family needs money to live on, they must request a living allowance, which may be denied.
* Your family has no privacy. Probate is a public process, so any "interested party" can see what you owned and who you owed. The process "invites" disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors.
* Your family has no control. The probate process determines how much it will cost, how long it will take, and what information is made public.
Does my trust end when I die? Unlike a will, a trust doesn't have to die with you. Assets can stay in your trust, managed by the person or corporate trustee you have chosen - until your beneficiaries (including minor children) reach the age(s) you want them to inherit, or to provide for a loved one with special needs.
I have a will. Why would I want a Living Trust? Contrary to what you've probably already heard, a will may not be the best plan for you and your family- primarily because a will does not avoid probate when you die. A will must be verified by the probate court before it can be enforced.
Also, because a will can only go into effect after you die, it provides no protection if you become physically or mentally incapacitated. So the court could easily take control of your assets before you die- a concern of millions of older Americans and their families.
Fortunately, there is a simple and proven alternative to a will- the revocable living trust. It avoids probate, and lets you keep control of your assets while you are living- even if you become incapacitated- and after you die.
Doesn't a trust and a will do the same thing? Not quite. A will can contain wording to create a testamentary trust to save estate taxes, care for minors, etc. But, because it's part of your will, this trust cannot go into effect until after you die and the will is probated. so it does not avoid probate and provides no protection at incapacity.
Is a living trust expensive? Not when compared to all the costs of court interference at incapacity and death.
Should I have an attorney do my trust? Yes. But you need the right one. An attorney with considerable experience in living trusts can provide valuable guidance and peace of mind that yours is done properly.
If I have a living trust do I still need a will? Yes, you need a pour-over will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will "catches" the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your living trust plan.
Is a "living will" the same as a living trust? No. A living trust is for financial affairs. A living will is for medical affairs. It lets others know how you feel about life support in terminal situations.
Are living trusts new? No, they have been used for hundreds of years.
Who should have a living trust? If you own titled assets and want your loved ones to avoid court interference at your death or incapacity, consider a living trust. You may want to encourage other family members to have one so you won't have to deal with the courts.
Doesn't Joint ownership avoid probate? Not really- it just postpones it. With some assets, especially real estate, all owners must sign to sell or refinance. So if a co-owner becomes incapacitated, you could find yourself with a new "co-owner"- the court- even if the ill owner is your spouse.
Why would the court get involved at incapacity? If you can't conduct business due to mental and physical incapacity (Alzheimer's, stroke, heart attack, etc.) only a court appointee can sign for you- even if you have a will. (Remember, a will only goes into effect after you die.)
Once the court gets involved, it usually stays involved until you recover or die. The court, not your family, controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming and difficult to end if you recover. And it does not replace probate at death- your family could have to go through the court system twice!
Does a durable power of attorney prevent this? A durable power of attorney lets you name someone to manage your financial affairs if you are unable to do so. However, many financial institutions won't honor one unless it's in their form. And, if accepted, it may work too well- giving someone a "blank check" to do whatever he/she wants with your assets. It can be very effective when used with a living trust, but risky when used alone.
What is a living trust? A living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die. But, unlike, a will, a living trust avoids probate at death, can control all of your assets, and prevents the court from controlling your assets at incapacity.
How does a living trust avoid probate and prevent court control of assets at incapacity? When you set up a living trust, you transfer assets in your name to the name of your trust, which you control such as from "Bob and Sue Smith, husband and wife" to "Bob and Sue Smith, trustees under trust dated (month/day/year)."
Legally you no longer own anything (don't panic, everything now belongs to your trust), so there is nothing for the courts to control when you die or become incapacitated. The concept is very simple, but this is what keeps you and your family out of the courts.
Do I lose control of the assets in my trust? Absolutely not. You keep full control. As trustee of your trust, you can do anything you could do before- buy/sell assets, change or even cancel your trust (that's why it's called a revocable living trust). You even file the same tax returns. Nothing changes but the names on the titles.
How can I find out more? This information is from the best selling book, Understanding Living Trusts, by Vickie Schumacher and Jim Schumacher.
Living Trusts are not just for your grandparents and parents anymore. Do you own a home? Do you have children? You may need a Living Trust!
Why are living trusts so popular now?
With people living longer, they worry about what will happen if they become incapacitated.
With second (and even third) marriages so common, many worry about how to provide for their surviving spouses without disinheriting their children and grandchildren.
With the high rate of divorce and lawsuits, they worry about their assets ending up in the hands of their children's spouses or creditors.
With today's "spend now, save later" attitude and values so different from their own, many worry that their children will not be responsible with the assets they worked all their lives to accumulate.
With so much of our personal information available to others through giant computer databases, they worry about how to protect their privacy.
And with tax rates and legal fees so high, they are concerned about how much of their assets their loved ones will actually receive.
At Incapacity:
(Unable to handle your financial affairs)
At Death
Court Costs, Legal and Executor Fees
Time
Flexibility & Control
Privacy
With No Will With A Will With A Living Trust
Court Control: Court Appointee
oversees your care, must keep
detailed records, reports tp court,
and usually must post bond (even
if appointee is your spouse).
Court approves all expenses,
oversees financial affairs.
Probate: Court Orders your debts paid and assets distributed according to state law.
At Death: Often estimated at 3-8% of estates value.
At Incapacity: Impossible to estimate.
At Death: Usually 9 months to 2 years before heirs can inherit.
At Incapacity: Court involved until recovery or death.
None: Court processes, not you. Family has no control at incapacity and death. When you die, assets are distributed according to state law.
None: Court proceedings are public record. Family can be exposed to disgruntled heirs, unscrupulous solicitors.
Court Control: Same as no will.
Probate: Same as no will, but assets distributed per your will (if valid and any contests are unsuccessful).
Same as no will. Cost can increase if will is contested.
Same as no will.
Limited: Same as no will except, when you die, assets are distrbuted according to your will (if valid and any contests are unsuccessful). You can change your will at any time.
Same as no will.
No court control: Your successor manages your affairs according to instructions in your trust for as long as necessary.
No Probate: Debts paid and assets distributed by successor, trustee according to instructions in your trust.
At Death: Usually none, if no estate taxes.
At incapacity: None. (attorney can be helpful for larger estates).
At Death: Usually just weeks. (larger estates may take longer for estate tax filing).
At Incapacity: No delays.
Maximum: You can change/discontinue your trust at anytime. Assets stay under control of your trust, even at incapacity and after your death. More difficult than a will to contest.
Maximum: Living trusts are not public record. Your family can take care of your financial affairs privately.
Happy Birthday!
Pacific Security Financial Clients
A. Escarcega January 23N. Villareal January 24E. Scribner January 24M. Mendeola January 25P. Castellanos January 26N. Rundell January 28B. Jawitz January 28D. Davis January 26I. Heinmann January 29S. Lekvold January 31S. Campbell January 31L. Cuevas January 31L. Albright January 31J. Seats February 2H. Griffith February 2R. Swapp February 2 C. Sowell February 3K. Notestine February 11C. Harrold February 12D. McAnn February 12P. McCaughey February 13E. Pacheco February 13C. Cameron February 13P. Pradmore February 14G. Price February 14K. Trujillo February 15J. Jebbia February 19D. Jamsem Febriary 20K. Laird February 22A. Ordonez February 23D. Warner February 23S. Lathrop February 23T. Linares February 24M. Castellanos February 24R. Landers February 24D. Sowell February 25 | ||||
