Wednesday, July 26, 2017

Mythbusters: 6 Common Misperceptions about Living Trusts

We’ve helped more than 5,000 clients prepare Living Trusts over the years, and if there’s anything we’ve learned, it’s that there’s a lot of confusion when it comes to these documents. Something else we’ve learned: our clients consistently tell us that the process was a whole lot easier than they thought it would be.

Here are a few common myths about Living Trusts:

Myth #1: A Revocable Trust is Always Complicated. FALSE

These days a Revocable Living Trust is the basis of a solid estate plan for the majority of people because the benefits far outweigh those of a Last Will and Testament. A Living Trust protects your privacy, while a Will becomes a public probate record.
We excel at making the process straightforward–our clients really do comment on how easy this is—they credit our team and our workbooks. You just need to be thinking about who should receive your assets and what trusted person should administer your estate.

Myth #2: A Revocable Living Trust Reduces Estate Taxes. FALSE

A Revocable Living Trust has absolutely nothing to do with your estate tax bill. Its primary purposes are to protect your privacy, plan for disability and avoid probate.

Myth #3: A Revocable Living Trust Always Avoids Probate. FALSE

  • A Revocable Living Trust can’t avoid probate by itself; the Trust must be fully funded to avoid probate.
  • There may be quirks in an individual estate that make probate necessary, such as the need to defend or initiate a lawsuit or deal with creditors, but these situations are rare.
Simply creating your Living Trust isn’t enough; it must be funded. If you have property, deeds must be retitled and moved into the Trust. Assets, such as life insurance and brokerage accounts, must also be moved into the Trust. California Document Preparers transfers the deeds for our clients and helps with financial accounts.

Myth #4: A Revocable Trust Protects Your Assets Against Lawsuits. FALSE.

A Revocable Living Trust does nothing to protect your assets against lawsuits for two reasons.
  1. You can change the terms of the Trust at any time and put assets in and take them back out.
  2. You still personally own the assets titled in the name of the Trust.
Unfortunately, a Revocable Living Trust can’t shield your assets from the claims of creditors. For this, you would need to create an asset protection plan in addition to your Trust. The time to do this is long before a lawsuit is filed against you, and despite the widespread fear of lawsuits, most people will never be involved in one and do not need to plan for such a situation.

Myth #5: A Revocable Living Trust Eliminates All of the Work after the Trustmaker Dies. FALSE.

Sadly, when a loved one dies, there are still many details that will need to be resolved. Your heirs won’t have to go through the agony of probate, but your Successor Trustee will likely need to deal with a number of tasks before the beneficiaries can collect their checks.
Consider the matter of selling the family home and other articles of value, consolidating total assets and items of sentimental value and distributing them among the beneficiaries. If a loved one had been undergoing medical care or was in a nursing facility, there’s a good chance that outstanding bills will continue to trickle in from a variety of healthcare providers that will need to be paid. With a Living Trust, the process is streamlined, but there is a considerable amount of unavoidable administrative work involved in finalizing an estate and, depending on the complexity, this can drag on for quite some time.

Myth #6: Revocable Trusts are Only for Wealthy People. A great big FALSE!

People often underestimate their net worth. Do you own your own home? Have a life insurance policy, savings account, brokerage account and/or a 401K? Expensive jewelry/antiques/cars/artwork? What if you just have very few assets, but you do have life insurance and young children? These are all considered assets. Many people, naïve about their net worth, think they don’t need a Living Trust. The truth is that if you have assets and a family, a Living Trust will save your loved ones the agony of probate at an already difficult time filled with grief and loss. You will also be saving a big chunk of their inheritance—probate is always expensive.
If creating a Living Trust is on your to-do list, we encourage you to come in to one of our California Document Preparers offices to get started. Our comprehensive Trust package includes a Power of Attorney and Advance Healthcare Directive.

Tuesday, July 11, 2017

What We Can Learn About Estate Planning from Yogi Berra

It’s baseball season. In the Bay Area, both the A’s and the Giants are struggling. There are moments of brilliance, an occasional little winning streak when we hold our collective breath and hope our luck is changing, but we end up disappointed once again. We’ve learned to love our Giants for their ability to play killer ball when it really matters, but this year may be the exception. And the A’s? Well, there’s still a lot of baseball to play.

But let’s take a look at Yogi Berra

Yogi Berra, who made an extraordinary contribution to baseball, died last fall at the age of 90. Every baseball fan has his or her heroes, but Yogi Berra was extraordinary, a little guy who earned a big spot in the pantheon of stars. Yogi was voted into the Baseball Hall of Fame in 1972 on the first ballot and had a historic baseball career: a .285 lifetime batting average, 358 home runs and 1,430 runs batted in. Not only was he a catcher for both the New York Yankees and the Mets, but he also managed and coached both teams. Yogi appeared in 21 World Series as player, coach or manager–and won 13 of them. No other player can touch this kind of record.

Another contribution: Yogi was a financial planner and adviser

But Yogi was also insightful, thoughtful and a savvy financial planner. We’re left with many of Yogi’s pearls of wisdom which we can apply to investing, managing money and planning for the future.
  • It ain’t over till it’s over. You’re investing for the long term, so stay focused on your long-term goal—college planning for your kids or retirement.
  • It’s déjà vu all over again. The fact that stock prices have been down much of this year isn’t unusual. We’ve seen declines before, and we’ll see them again. We’re enjoying a robust economy right now, but we all remember the recession. Economic cycles repeat themselves, so we should never get too comfortable.
  • When you come to a fork in the road, take it. You don’t need to choose between owning stocks or bonds; your portfolio should be diverse and should probably include both.
  • I usually take a two-hour nap from 1 till 4. If you’re wondering about investing in the latest hot stock, sleep on it. Do some research and talk to a financial advisor.
  • Pair up in threes. You should rely on a financial planner, a tax advisor and create a Living Trust.
  • It gets late early out here. If you haven’t started preparing for retirement, start today. If you’re waiting until you get old to create a Living Trust, “old” may have arrived. Yogi knew that you don’t have to be old or have an estate to need an estate plan, and that a Living Trust is an important component of this.
  • If the world were perfect, it wouldn’t be. It’s impossible to be completely correct with every financial decision or preparation for end-of-life care. We live in a world of constant change, and there are too many variables over which we have no control. In the words of Warren Buffet, another sage who can afford to build his very own pantheon, “It’s better to be approximately right than precisely wrong.” This is the time to get started.

Our comprehensive Living Trust package includes a Power of Attorney and Advanced Healthcare Directive. Call the California Document Preparers team today to make an appointment to get started on your Trust.