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Alamo Today ~ November 2013 - Page 21
Common Estate Planning Myths By Robert J. Silverman
A considerable number of myths exist about Estate Planning and in particular, Revocable Living Trusts. Although increased media coverage and a higher level of consumer sophistication have helped debunk many of these misconceptions, I still encounter quite a few. I’ve outlined some of the more common ones below and attempted to set the record straight as to each. 1. Myth: If you are not wealthy and you have a Will, you do not need a Revocable Living Trust. Reality: Residents of California who die with or without a Will (but no Trust) and whose assets are valued at more than $150,000 (other than certain kinds of assets, such as automobiles, joint or P.O.D. accounts, joint tenancy assets, and insurance and retirement accounts with named beneficiaries) are subject to Probate. Probate is a public, court supervised estate administration process. It typically takes nine months to a year or longer, and it requires a great deal of paperwork and hassle, substantial attorneys’ fees, executor fees, and other costs which are incurred. Revocable Living Trusts are an excellent “Will substitute” in most respects. Note that you should still have a simple “pour-over” Will that accompanies your Trust as a “safety net” – to catch any assets when you die that may not have been transferred to your trust. Fortunately, all assets in your Trust are simply exempt from Probate under the law. So, Probate is easily avoidable, trust administration is generally handled privately, it is much less expensive and inconvenient than Probate, and avoiding Probate usually results in significantly more money going to your loved ones and a lot less to attorneys, executors, the court, and other third parties. 2. Myth: It is time consuming and complicated to establish a Revocable Trust, fund, and manage a Revocable Living Trust. Reality: It takes little more time to establish than a Will, it does not have to be more complicated than a comprehensive Will, Trusts are generally quite straightforward to fund (retitling your assets), and managing your own trust assets is virtually identical to the way you manage them before you establish a Trust. 3. Myth: There are income tax implications and extra tax filing requirements when you establish a Revocable Living Trust. Reality: Establishing a Trust for yourself triggers no additional income taxes or property taxes nor any additional tax filing requirements. 4. Myth: You should be afraid to do a Trust because you’ll be locked into the decisions you make. Reality: A Revocable Living Trust is revocable and amendable. You have the ability to revise your trust any time and as many times as you wish. As your personal, familial, and financial position changes, it is quite easy and affordable to work with your estate planning attorney to revise your document so that it continues to reflect your current wishes. In fact, a good rule of thumb is to undergo an estate planning review at least every 3-5 years. In contrast, Irrevocable Trusts, which are not commonly used, generally cannot be changed, however, they can, in some instances, have benefits that outweigh the disadvantage of irrevocability. 5. Myth: If I sign a Power of Attorney, I don’t need a Will or Trust. Reality: Every adult should have a Power of Attorney. It vests legal authority in someone you trust to transact financial business for you in the event of incapacity. If you become incapacitated and don’t have a valid Power of Attorney, a very expensive and cumbersome conservatorship court procedure may become necessary to enable someone to manage your finances. However, as helpful as a Power of Attorney can be during your life, it has no effect whatsoever once you’re gone; it dies when you do. Your Trust and/or Will then become the necessary governing document(s). 6. Myth: If you establish a Revocable Living Trust, your trust assets will be protected from your creditors. Reality: As fantastic as Revocable Living Trusts are, they are not useful to protect your assets from your creditors. If a Trust conveyed that benefit, everyone would establish a Trust and no creditors would be able to be paid; thus, no credit would be available! However, in contrast, if a Trust is drafted with appropriate provisions, very robust creditor protection is available to those assets kept in your trust for your loved ones after you die. Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 240, Walnut Creek, CA 94596; (925) 705-4474, rsilverman@ rsilvermanlaw.com, www.silvermanlaw.com. * Estate Planning * Trust Administration & Probate * Real Estate * Business This article is intended to provide information of a general nature, and is not intended nor should it be relied upon as legal, tax and/ or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein. Advertorial
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area who cannot afford such treats for the holidays. There will be barrels set up for Shelter, Inc. to collect nonperishable items such as canned or boxed goods. The barrels will also be set out several days before the tree lighting event in front of Richards Arts and Crafts. We encourage all to participate in one of this charitable organization, but it is not necessary to enjoy the fun festivities for the evening! If you are interested in helping with a monetary donation or for more information, please visit www. AlamoChamberofCommerce.com. During the event, one lane of Danville Boulevard will be closed between Stone Valley Road and Jackson Way. North and south bound traffic will be allowed along the open lane.
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