Leave A Lasting Legacy: Establishing A Living Trust

You’ve worked hard all your life for your money, and you’ve worked hard at taking care of it. But do you really know what will happen to what you’ve accumulated after you die?

The fact is that if you don’t plan properly now, your estate could be eroded by estate taxes. In addition, subjecting your estate to probate -- the legal process through which the court ensures that upon your death, your debts are paid and your property is distributed according to your will -- may mean additional costs and delays in transferring assets to your heirs. So, if you want your estate to go to your heirs instead of to the IRS, plan carefully now.

Estate planning has three basic goals. The first is to minimize estate expenses and taxes. The second goal is to make provisions in advance for meeting these expenses so that your estate is not forced to liquidate assets in a "distress" sale environment. The third goal of estate planning is to make sure that the distribution of the remaining assets to your heirs is orderly and according to your wishes. Estate planning is essential since the first payments made from an estate are for estate expenses and estate taxes; your heirs actually receive what is left.

Many people believe that a will is the best way to plan for the distribution of their estate, but this is not always true. A will does not avoid probate, and, because a will can go into effect only after you die, it provides no protection for you and your heirs if you become disabled.

What Is So Bad About Probate?

The probate process can be an expensive and time-consuming process, depending on the state where you live. Probate costs, which must be paid from your estate before anything can go to your heirs, are generally estimated at 5% of an individual’s gross estate value, and can be even higher in some cases. The probate process can take one to two years, or longer in some states.

In addition, during probate your family loses control of your estate, as well as privacy. The probate process - not your family - has control, and your assets may be tied up until this process is completed. Additionally, probate files are open to the public, so anyone can get information about your assets and liabilities.

Fortunately, there is an alternative to wills and probate. It’s called the revocable living trust. It avoids probate, and it ensures your estate plan won’t be altered by the court or legal technicalities in the event of your death or disability.

What Is a Living Trust?

If you establish a trust during your lifetime, it is called "living" trust. It’s a legal document similar to a will, but offers much more. When you set up a living trust, you simply transfer most of your assets from your individual name to the name of your trust – which you control. Since there is no probate process with a living trust, upon your death, your assets are transferred to your heirs. All expensive court proceedings and delays are eliminated, your privacy is preserved, and the emotional stress on your family is minimized.

If you have a modest estate and your trust is fairly simple, you may be just fine as your own trustee. However, if your estate is larger, has a variety of assets or requires tax planning, you should probably consider having a professional trustee involved.

Most people select a corporate trustee as their successor or co-trustee, especially if they don’t have the time, ability or desire to manage their own trust, or if one or both spouses are in declining health. Corporate trustees are in the business of managing trusts – they’re experienced investment managers and trained to be objective. Their fees are generally competitive and if something happens to you, your corporate trustee will continue to manage your trust for you according to your instructions. If you and your spouse are co-trustees, either can act and instantly take control if one becomes disabled or dies.

If you die or become incapacitated, or if you are the only trustee, the trustee you selected can automatically step in and take over for you. This successor trustee looks after your care and manages your financial affairs for as long as necessary, using your assets to pay your expenses.

How Is a Living Trust Established?

You make the basic planning decisions – inventory your property, decide who will be your beneficiaries, select your successor trustee, name a trustee and guardian for minor children., etc. Your attorney then prepares the actual legal document that addresses your specific needs. You sign the trust document, it is notarized, and then you change most of your property titles to reflect the name of your trust. You should also change beneficiary designations on appropriate assets.

Customizing Your Estate Plan

Many investment firms have wealth preservation programs designed to help secure the continued growth of your hard-earned assets and enhance your family’s future. These programs can provide referrals to estate planning attorneys and professional trust consultants whose advice and counsel are necessary in helping you customize a plan according to your specific needs. A plan can help you protect the assets you’ve spent a lifetime accumulating so that you not only provide for the future financial needs of your heirs, but leave a lasting, fulfilling legacy for years to come.

UBS Financial Services Inc. does not provide tax or legal advice. You must consult with your attorney and tax adviser regarding your specific situation.

Beth Cutler is a Financial Advisor, UBS Financial Services, responsible for helping clients make investment decisions as they accumulate, preserve, and transfer their wealth. She can be reached by phone at 1-877-202-6340 Ext 113 or by E-mail:beth.cutler@ubs.com

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