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The Living Trust War

By: Berber

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The living trust is a powerful legal tool, if it is written well and used properly. Should I use one, you may wonder? Numerous high priced lawyers advise their clients to disregard living revocable trusts. While other attorneys give seminars on living trusts saying if you don't have one your hair will fall out, your teeth will rot, and your kids will hate you. Or when you buy insurance your agent will tell you that you don't have to pay the big bucks to get a trust, he will give you one as a spiff. Two major issues, the necessity of living trust and probate, constitute most of the battles that take place in the living trust wars. The fight over living revocable trusts persists as lawyers, trust promoters, insurance agents, and senior advocacy groups all hurl stones at each other. They would all be well to think about the proverb about glass houses and throwing stones. Remember the proverb about glass houses and throwing stones. The trust promoters are correct, a living trust is very useful and it will avoid probate in all 50 states. Sorry to say, some who bite on the hard sales pitch don't actually avoid probate with their living trust. Their living trust salesmen, seminar attorneys, or insurance agents mislead them. The high priced attorneys scream that the public is being duped, and they are right because there are those people who have living trusts that don't avoid probate. Hence here are the battles in the living trust war. Firstly, is probate avoided by the living trust? Secondly, ought you to avoid probate?

Probate isn't an evil disease. It can be a great legal apparatus. But, the horror stories you have heard about probate, unscrupulous attorneys, and pushy promoters are mostly true. Unless you have a legal reason to make use of probate, you should try to steer clear of it. You'll want to be aware of all the legal alternatives, so that you can understand all the information that is given to you and make informed choices. Of course you want to pass as much as possible to your family without any estate taxes, but there is a caveat that you must heed.

It is not sufficient to form a trust and forget it. You need to understand why it avoids probate and how to utilize the trust throughout your life. It isn't difficult to comprehend and use a trust, once somebody takes the time to show you. The problems arise because your lawyer, insurance agent, and or other promoters usually don't take the time to train you once they have your initial payment. The lawyers are correct when they say it is a waste of money to get a trust, unless you know how to use a trust and what probate is for.

Probate is the court process that a family goes through to get legal authority to sign dad's name when he is dead. Dad has to sign before stocks and bonds or the house can be sold, before savings can be withdrawn, or to get into the safe deposit box, etc. He is deceased, how can he sign, so who can sign in his place? The probate proceeding allows the court to grant the personal representative (executor or executrix) the authority to sign of behalf of the deceased. Before the court grants this authority, it must be satisfied that all the debts have been paid, and the heirs are protected, as dictated by the will if there is one.

Any time an asset is owned by a dead person and the person's signature is required to transfer the asset, there will have to be a probate proceeding.
The living trust avoids probate by providing the family with a "legal loophole." The trust becomes a legal entity that owns property such as houses, stocks, bank accounts, etc. when it is established properly.
The trust document allows a manager or "trustee" to have control over all of the property the trust owns, and the document says that the trustee is to use the property and all of the income it generates for the benefit of the "beneficiaries." Naturally, you and your heirs are generally the trustees and beneficiaries named by your trust. Technically you don't hold your property in you name, but you control the trust property and get all of the benefit from it. Your trust holds your property. Consequently the owner of your property won't die when you do. Just the manager has died. The trust document says that when you are dead, your spouse, one or more of your children, your parents, your banker, or whoever you choose will be the new trustee. They will liquidate the trust property and then divide the proceeds up between your heirs, or they will use the trust property for your family as your trust directs.

Since they aren't owned by a dead person, not one of the assets properly held in your trust will need to be probated. The new trustee has full control over the trust's assets and can sell them or manage them without any further authority. The trust functions easily. Nix the probate! EXCEPT, if you haven't "funded" or used your trust by changing ownership of all your assets to the trust's ownership or acquiring your new assets in the name (ownership) of the trust, then there will be a probate, because at your death your name is on the bottom line of your property. The court's authority to sign your name will be required. Sure, your name is actually on the trust's assets, but only as the trustee, and the laws governing trusts automatically give the new trustee power to sign as trustee after you die or resign.

Pretend for a minute that you are managing a company when you manage your trust. Although, forming a trust is very different from forming a company, it makes a good analogy. When the president of IBM dies, all of IBM's assets don't have to be probated. The laws say that a new president can be appointed and the new president will have full power over all of the company's assets, at the death of a president. In a trust, a similar procedure occurs. No probate is required another trustee is appointed.
A probate is not needed, a new trustee is assigned. The majority of people don't avoid probate when they form a trust because they never actually make certain that their trust owns their assets. Even though there is a trust, probate is not avoided. Therefore, the lawyers scream that the trust is no good and a sham. Living trusts are not a sham, but because they aren't drafted properly or managed properly, they often don't deliver the benefits that were promised. Trusts supplied by insurance agents or the promoters may fall short as well as trusts drafted by attorneys. Telling their client how to use the trust so probate can be avoided is often overlooked by attorneys. Unfortunately, a lot of the insurance agents, promoters, and even attorneys just don't understand well enough to instruct you.

Not only do you have to have the education to use the trust, you have to be sure you get a well written trust that complies with the IRS laws. Less than five percent of lawyers can properly draft a living trust according to reports from groups like AARP and several others. A well drafted trust that is used correctly WILL avoid probate. The query, "Should I avoid probate?" is more difficult to resolve. You can use probate to your advantage in a number of ways. You can settle property disputes, cut off the estate's liabilities, get some tax advantages in rare cases with your probated estate, plus the estate can receive payments of insurance and government assistance which a trust cannot. Probate is not the problem or hardship it is often thought as, particularly in states with up-to-date probate laws.

Most states have legislated some variety of the Uniform Probate Code to standardize the probate process across the United States and streamline the process. Sadly, probate is a nightmare, time consuming, and very expensive for most families, even in the states where the Uniform Probate Code has been adopted. Subsequent to dad's death, the lawyers, among others, sometimes take advantage of mother and the children who are in a weakened position. When a family member dies, probate is a primary way through which mom and the kids can be swindled.

Probate can and should be avoided by most families. Without a doubt, when the family can probate an estate and it will help them, then they should use the probate advantage. While most of the estate passes through the trust that is in place and avoids probate, a proceeding can still be conducted for part of the estate. Probate is always an option, even if there is a trust.

When all is said and done, the living trust is a powerful estate planning tool. It can give most families big benefits when a family member dies, and if it is drafted properly and used properly, it can have a huge positive impact when mom or dad becomes incompetent and can't handle their business affairs. Don't blindly trust your attorney, insurance agent, or any promoter to follow though and protect your assets, instead get educated about living trusts and the promised benefits. You need to educate yourself about living trusts if you want to get the promised benefit from your trust.

Lee R. Phillips and Kristy S. Phillips are attorneys and authors of the popular book, Guaranteed Millionaire - Using the Law to Protect Yourself and Make Money.

Article Source: http://depositarticles.com/

My Living Trust Will is an information site aimed at helping prepare you and your family for the future through creating a usable living trust will.

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