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What is Estate Planning?
A Living Trust is a vital component
of an estate plan, and part of estate planning documents prepared
for you while you are alive. In order for a Trust to work
properly, you must transfer most of your assets to your living
trust. Title to some assets cannot be transferred to the trust,
such as IRA accounts. While you are alive and well, you are the
Trustee of the Trust. Since you are the trustee, you manage the
day-to-day operations of the Trust while you are alive and well.
Normally, while you are alive and have capacity, the Trust is
revocable. This means that you have full control over the assets
and that can spend all the money in the Trust, revoke or cancel
the Trust, amend or change the terms of the Trust, and change any
of the beneficiaries of the Trust. You select one or more
successor trustees in your Trust document. The successor trustee
is the person or persons who will manage the Trust after you are
no longer able to do so. Call our Los Angeles Estate Planning
Attorneys to consult with us regarding your estate planning
matters.
Why prepare a Trust?
In the event of your incapacity or
death, the successor Trustee steps in and manages the Trust for
you. If the trust is properly funded, and all important elements
of your estate plan are properly implemented, the selection of the
successor trustee in estate planning helps in avoiding a
conservatorship proceeding. The successor Trustee can give you
income and principal for your benefit while you are alive.
Normally, the primary successor trustee is your spouse, if you are
married. For most unmarried persons, the Successor Trustee can be
one of a child, another person, or a bank.
Probate Avoidance and Cost
Savings
Assets which are properly
transferred to the Trust normally escape Probate. Estate Planning
can result in a significant savings to your heirs. Probate Fees in
California are Statutory and Extra-Ordinary and can range between
two percent and ten percent of your estate.
Estate Planning Planning, Tax
and Elder Law Planning Opportunities
In case of married persons, the
Trust can take advantage of the Marital Deduction and can be set
up to save a substantial amount of estate taxes. Each person is
allowed to transfer a certain limit during their lifetime, or
after their death, tax-free. In 2007 ans2008, the amount that can
pass without Federal Estate Tax is $2,000,000. In 2009, this
amount is increased to $3,500,000.
For 2010, a decedent's executor/
surviving spouse can elect not to pay any estate taxes. For
2011-2012, there are temporary rules regarding estate tax
exemptions, which exemptions are currently $5,000,000. Contact our
Los Angeles Estate Planning Lawyers to discuss the most current
tax rules.
This is called the Exemption
Equivalent Amount (unified credit). This means that if a married
couple's trust is set up properly, then that couple can transfer
up to $4,000,000, by using the marital deduction, tax-free. If the
married couple does not take advantage of the marital deduction
and does set up their estate plan properly, by leaving all of his
or her estate to the other spouse, then that couple loses one of
their unified credits. This can result in a $2,000,000 loss, and
can cause a substantial amount of estate tax.
In order to take advantage of both
exemption equivalent amounts (formerly Unified Credit), a married
couple can create an AB Trust. When both spouses are alive and
well, the A and the B Trust are totally revocable. The income or
principal is paid both spouses. When one spouse passes away, the
Trust is divided into two SubTrusts. One Trust is called the
Decedent's Trust and the other Trust is called the Survivor's
Trust. The Decedent's Trust contains the deceased spouse's marital
share of the assets. The Decedent's Trust becomes irrevocable on
the death of the first spouse. To protect the Decedent Spouse's
wishes, the surviving spouse cannot change this portion of the
Trust. However, all income of the Decedent's Trust will normally
be paid out to the surviving spouse. The principal of the
Decedent's trust is available to the surviving spouse if he or she
needs it for his or her health, education, support or maintenance.
When the surviving spouse passes away, the balance of each
SubTrust is paid out to the beneficiaries of that Trust. Each Los
Angeles Estate Planning Attorney at our law offices, can advise
you of the different ways to save on estate taxes.
The surviving spouse's share is
called the Survivor's Trust. The Survivor's SubTrust remains
revocable by the surviving spouse. The surviving spouse can spend
all the assets in the Survivor's Trust, can amend or change that
SubTrust, can change the beneficiaries, and can revoke or cancel
the Trust. The entire income and principal of this SubTrust are
paid to the surviving spouse. When the surviving spouse passes
away, the remaining balance of the Survivor's Trust is paid out to
the beneficiaries of the Survivor's Trust.
One benefit of AB Trust planning is
that both spouses can make use of the Exemption Equivalent Amount,
thus taking advantage of a significant tax savings.
Since many of the new estate tax
laws involve portability of estate exemptions, you should contact
our Los Angeles
Estate Planning Attorneys to insure that you receive proper
advice regarding your estate plan.
For most people, the main benefit
proper Trust planning is that the estate can avoid Probate. The
heirs can benefit by between two and ten percent of the gross
estate by proper estate planning. Additionally, an estate plan can
eliminate a substantial amount of time taken in Probate
Administration.
This articles and our e-course are
not intended to replace specific advice of an attorney and is
intended to be educational only. We highly recommend that you meed
with a qualified attorney for specific advice regarding your
estate and for professional preparation of all legal documents.
WOULD
YOU LIKE TO CONSULT WITH US ABOUT ESTATE PLANNING? Call our Los
Angeles Estate Planning Attorneys now at: 818-340-4479 and
800-300-9977.
IF YOU ARE A GENERAL PRACTICE ATTORNEY
AND WOULD LIKE TO CONSULT WITH US ABOUT YOUR CLIENT, PLEASE LET US
KNOW IN ADVANCE SO WE MAY DO A CONFLICT CHECK.
CALL US FOR A FREE ESTATE PLANNING
CONSULTATION VOUCHER:
818-340-4479
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