Weekly Topic

"Estate Planning Tips"

More information on Bruce’s Best Estate Planning Tips is available in the best- selling book, "Bulletproof Your Financial Future," published by POCKET BOOKS. To order your copy call 1-800-422-9997.

SHOULD I HAVE A "WILL" -- INSTEAD OF A TRUST?

Yes, if the following statements apply to you:

1. Your estate situation is basically uncomplicated, (that is, you have no investment real estate, no family-owned businesses, etc.).
2. Your will is not likely to be contested or disputed by any of its potential heirs.
3. Your estate is not large. That is, it does not contain a great sum of money or unusually valuable items (that go beyond such things as your house, home furnishings, etc.). More than $650,000 in total assets is a good rule of thumb to measure the definition of large.
4. Your assets are held in mostly joint tenancy. Rights of survivorship are clearly assigned. This will ensure your assets are transferred directly to the surviving tenant with no interference by the probate court.
5. You have any disputed property. The court during the probate process can often better settle this circumstance. Probate removes all claims, thereby unequivocally settling any and all previous disputes.

OR . . . SHOULD I HAVE A "TRUST?"

Yes, if the following statements apply to you:

1. Your estate is likely to be disputed. If there is any worry of this happening, a trust should be used, as it is a much more powerful document than a will and very difficult to break.
2. Your estate is rather complex. The more complex your estate, the greater the probate costs will be in processing a will. Using a trust dramatically reduces those potential costs.
3. You want to avoid the typical delays associated with probating a will. The greater your assets, the greater the potential delays. Delays, in turn, increase the probate costs of a will. Many probate cases have remained in court for more than 10 years, costing thousands of dollars.
4. The possibility exists that you or your spouse may not be competent at some time to manage your estate’s assets. If this is the case, a trust is a wise idea, since you can appoint a trustee today to manage the assets in the future.
5. Your estate is worth more than $650,000. Any estate of this amount, or more, MUST be placed into a trust to avoid costly inheritance taxes. A trust (through 1999) will allow you to transfer as much as $1,300,000 to the next generation with NO estate taxes! This UNTAXABLE transfer amount will continue to increase to $2,000,000 by the year 2006. Without a trust, only $650,000 can be passed untaxed to the next generation.

TRUST TIPS!!

1. Fund your trust. The trust works ONLY if your assets are in the NAME of the trust. Otherwise, those assets are forced to go through the probate process. You will have wasted all the money you spent to create your trust, but worse, you will have failed to evade the "Demon Probate" and its enormous costs, taxes, and delays.
2. Double-check any "testamentary" trust. Some states do not recognize these as valid trusts, which may complicate your IRA accounts. (The same applies to wills containing "pour over" provisions.) The testamentary trust may be forced into the probate process, causing funds to be spent to create a valid trust. Hence, the testamentary trust was unable to protect the money and failed all together to prevent probate.
3. Pause before making that taxable $650,000 gift. Beneficial changes in the estate laws are a growing possibility in the upcoming future.
4. Think twice before making "irrevocable" changes. If the estate laws change as dramatically as is hoped, this could mean enormous benefits to trusts. If at all possible, put off any irrevocable changes to your trust to see if the new laws will benefit you. Irrevocable means just that: it can NOT be changed!

UNLIMITED EXCLUSIONS

1. Another’s tuition. You may pay another individual’s school tuition, but that is all. Books, supplies, dormitory rent, board and room, and similar costs are NOT permissible. You may, however, make a $10,000 gift to that individual in addition to his tuition, as there is an unlimited exclusion for tuition. The tuition payment must be made by you – NOT by the student – directly to the institution.
2. Another’s medical expenses. An unlimited exclusion exists also when you want to pay another person’s medical expenses. It applies in the same manner as for tuition. Again, be certain that YOU pay all money and pay it directly to the medical provider.

PREVENTING UNDESIRABLE SITUATIONS

1. YOU determine the time your beneficiaries inherit. Although the law states when an individual "legally" becomes an adult, you are the better judge of the maturity of those who will inherit your assets. Using a trust enables you to set the time or age when an individual may receive the assets.
2. Probate brings on publicity. During probate proceedings, things that you wish to remain as private matters can become public information, even printed in newspapers. A testamentary trust or a will can NOT prevent this from occurring. All possibilities of publicity can be erased ONLY through the use of an irrevocable living trust.
3. YOU make the guardianship decisions. Be very precise (be it in a will or a trust) of whom you wish to be the legal guardians of any minor children you have. Without this, your children are at the mercy of the judge and court’s decision.
4. Not your first marriage? – Decide whose children get what. If you have remarried but wish the bulk of your assets to go to your own children, you must make the correct provisions in a trust. Otherwise, the current spouse’s children stand to get all . . . and your own children nothing.
5. Make time today to set up a proper will or trust. Even the most "adventurous" sort has to face reality: none of us is getting out of here alive. So, you better get prepared! Otherwise, you can expect a court-appointed attorney (picked randomly) to act as the administrator of every little bit of your worldly goods, deciding willy-nilly who gets what. If none of that bothers you, then by all means, don’t bother with those pesky wills or trusts. Rest comfortably knowing that a sizable portion of your estate will go to that "administrator" you never laid eyes on, and even more of your money will go here and there for other little court costs. If, however, you would prefer that family, friends, organizations, or charities receive your estate, set up a living trust. You can appoint whom you want to be the administrator (family, friend, etc.), and it may cost little or nothing to your estate compared to the court-appointed routine. If you insist on a lot of risk and danger, why not go bungee jumping – but don’t confuse risk and danger with foolhardiness. Complete your living trust or will BEFORE that jump!