| If you own real estate or own your own business, a revocable living trust is likely your best option in estate planning. Whereas a last will and testament requires you to go through the probate courts to resolve your last affairs, a trust avoids any court involvement in your personal or business affairs.
Example: If the president of General Motors dies, you don't see GM closing its doors and telling its workers to go home. Instead, the board of GM simply hires a new president. Likewise, a trust simply replaces the trustee if the original trustee dies or is otherwise incapacitated. The trust itself doesn't die, but keeps on running despite the death of an original trustee.
Avoiding business disruptions and allowing for the transfer of property without court intervention (and the legal challenges that can be brought by heirs and creditors) when you die is one of the main reasons why revocable living trusts trump the use of last wills and testaments.
Estate planners prefer trusts over last wills and testaments for their clients because it avoids the trappings of probate. Besides interuptions in business, one of the other main concerns that estate planners have with probate is the time it takes to transfer assets and resolve creditor issues.
Probate can take up to two years or longer to adminster, depending upon the complexity of the estate and contests by heirs. In contrast, a trust can be administered within about sixty days total and there is not even a day missed in running a business or selling a property.
Example: Selling property in probate is a nightmare. In Nevada, after you have opened up an estate, you will likely need to sell property of the estate. First, you have to have persmission or powers to sell the property, which takes at least thirty days. AFter you have received the powers to sell the property, then you must publish in a newspaper your intent of selling the property and asking for the highest bidder. Concurrently, the executor will hire a real estate agent to solicite the best bid. Typically, the real estate agent finds a good buyer and then that buyer must defend the contract entered into with the real estate agent against any bidders coming from the solicitation in the newspaper. You would think it would end there, but it doesn't. The successful bidder from this first stage then advances to a second bidding process. The attorneys file a pleading called "return on sale" and the successful bidder must now go to court and defend the initial bid against bidders that might come to court and bid in open court. As real estate has boomed in Las Vegas, you are almost guaranteed to have bidders in probate court. If another party bids higher than the party that won out during the first bidding stage, then a deal must be struck with the prevailing party at the court's bidding session. If that party fails to perform, then another bidding session must occur. Simply selling property through probate becomes a trip through wonderland. Most property is sold without incident, but a significant percentage of properties end up on the treadmill of confusion, which can result in substantial delays and frustrations by the buying parties and the selling executor.
Now contrast this example by the sale of property through a trust.
Example: With a trust, after the death of the original trustee, the successor trustee assumes control of the trust. The successor trustee contacts a real estate agent and lists the property for sale. While the property is on the market, the successor trustee files a "Certificate of Incumbancy" with the recorder's office to indicate that they are now in charge of the trust in question. When the real estate agent finds a good buyer, the property is sold and the money comes into the trust for distribution.
Now you can see why estate planners prefer revocable living trusts to the probate process. It is a better way of doing things.
So how does a revocable living trust work. In short, after you create a revocable living trust, you transfer all of your property into the name of the trust and manage your assets as "trustee" instead of managing them in your own name. You still have absolute control and there is very little difference between you owning the assets individually and having the assets owned through the trust. You still file taxes the same way. You can buy and sell assets as you like. You can withdraw money and go on vacation. You can invest in your favorite stock.
One Major Exception: There is one major exception. You keep your IRA's, 401k's and SEP's in your own name and name beneficiaries directly. Why? Because only individuals can own retirement accounts and there are substantial tax benefits to keeping pension plans outside of the trusts. The most important advantage is that beneficiaries to your pension plans have five (5) years to withdraw the funds. If those funds were in trust, the trust would have to pull the money out all at once -- which could result in a substantial income tax liability for the year the money is taken out. In contrast, a beneficiary named on the account can spread the withdrawals out over several years to reduce the income tax liability. In some cases, the retirement funds may be able to be transferred to a beneficiaries own pension plan without any tax liability.
Another Factor: Consider putting your insurance in the name of your trust to avoid any problems if you are in a car accident or your house burns down. You never want to give your insurance a way out of paying for casualty damage.
Another Factor: Putting all of your assets in the trust means you will need to go to your bank or investment account company and transfer your accounts into the name of your trust. Simply take a copy of your trust down to your customer service agent and they will take care of the rest. Very few financial institutions will have any difficulty making this transition as they work with trusts on a daily basis.
Planning for those with "issues:" Like it or not, most families have one or two beneficiaries who will need special attention. Whether it is helping a child through a maturing process, or keeping money at bay until a child kicks an alcohol or drug problem, trusts are amazingly effective at helping beneficiaries make better choices. As the person creating the trust, you have absolute control on how and when your estate will be distributed.
Example: In one case, a client had a son who had a severe drug and alcohol problem. This client put restrictions on how and when the money would be distributed. He set forth a maturity standard over a five year period. If his son did not show maturity in that time period, then the money was to be distributed to other beneficiaries. After the client died, the law firm managed the funds and set down a list of criteria for the beneficiary to meet. As the beneficiary progressed over the five years, money was sprinkled out to the son -- essentially rewarding good behavior. The son, who had previously been on a path to self-destruction, began to immediately improve and over this period has maintained a steady job, he has been free from alcohol and drugs for over two years and has repeatedly thanked the law firm for saving his life.
Good estate planning does make a difference in the lives of others!
If you live out of state and want to come to Las Vegas to take advantage of your trust being administered under the laws of Nevada (which has no estate tax), then call ahead and we will arrange to have your trust created while you are here.
Call today to set up an appointment and discuss with an attorney your needs and desires. The meeting is absolutely confidential. The first meeting is also without charge so you can see if estate planning will work for you. |
