Attorney Fees For Creating a Living Trust

The reason for estate planning is to make sure that a persons wishes will be followed. Whether it be your son or daughter inheriting a family heirloom or your son or daughter inheriting property, with a living trust you can be confident that your orders will be followed without your loved ones going through probate.  Probate is a court process that could take months.

 

The Revocable Living Trust: Is It For Everyone?

we found this interesting article for you to read:

Revocable, or “living” trusts have become popular for purposes from probate avoidance to protection of private information about assets and loved ones.   This planning technique does not, however, offer any estate tax or income tax advantage and generally also does not offer enhanced protection from creditors.  A revocable trust involves some work after the trust agreement is signed; the trust is only effective with respect to property actually transferred to the trust. The appropriateness of revocable trusts depends in part upon the age and stage of the client, the laws of the state where the client makes a permanent home, and the family and business situation of the client.  While not a one-size-fits-all solution, revocable trusts are worthy of consideration for many clients.  Even where a revocable trust is used, a Will is still needed. 

Many clients wonder whether this popular technique  is appropriate for them.  Some have heard from friends or financial advisors that living trusts are the answer.  Some have read that living trusts avoid the problems and expenses commonly believed to be associated with probate of their estates. Some believe (erroneously) that living trusts will save estate or income taxes. Here are some of the issues to consider in evaluating whether this planning approach is an appropriate fit.

What is a living trust and how is it created?

A living trust is a trust that is created while the person who creates it (known as the “grantor” or “settlor”) is still living. The trust is created by the simple act of signing an instrument sometimes referred to as a “Declaration” or “Agreement of Trust.”  However, no property is governed by the terms of the trust until ownership of that property is transferred formally from the grantor to the trustee.  Often, the grantor will act as the initial trustee for as long as he or she wishes, with the result that he or she continues to control property transferred to the trust.  The grantor may also name one or more co-trustees to act with him, as well as one or more successor trustees to serve after him. Alternatively, the grantor may wish to name another person or a corporate trustee, such as a bank or trust company, to be the original trustee.

Most living trusts can be revoked or amended whenever the grantor so desires. While people do create irrevocable trusts during their lifetimes, these are usually set up for specific tax reasons and are not the kind of trust people think of when they hear about living trusts.

The trust agreement provides directions for how the trust assets are to be managed for the grantor’s benefit and perhaps also for the benefit of certain family members during the grantor’s lifetime. The agreement also specifies how the trust assets are to be handled after the grantor’s death (when the trust will become “irrevocable”), either by distributing the assets to the beneficiaries named in the trust agreement or by continuing to hold some or all of the assets in the trust and administering them for the benefit of the specified beneficiaries.

The provisions of the trust agreement are of great importance.  While they may be changed by the grantor throughout lifetime, they will govern disposition of the trust assets after the grantor’s death, when no further changes are possible.  Accordingly, the many choices and decisions involved in designing a living trust are worthy of close attention.

How does property become part of a trust?

The grantor “funds” the trust by transferring to the trustee ownership of whatever assets he or she chooses to include in the trust. A trustee may hold title to most kinds of property, although some assets are less suitable or desirable than others. For example, if a bank or other corporate entity is acting as the trustee, it may not wish to accept title to a car which the grantor or someone else is still driving, or silverware or jewelry not in the trustee’s physical custody, for obvious reasons of liability.

The manner in which property becomes part of the trust depends upon the nature of each asset, and whether title to that asset is a matter of public record.  Securities are re-registered in the trustee’s name: if the shares are held in certificate form, each stock certificate must be transferred, by means of a stock power presented to the transfer agent for each company, on the records of the company in question. If shares are held in street name, in a brokerage or other agency account, then the account must be retitled in the name of the trustee, usually by means of opening a new account for that purpose.  Bank accounts are retitled in the trustee’s name, and title to real estate is transferred to the trustee by means of a deed recorded in the county where the real estate is located.  Untitled property, such as artwork, jewelry or other tangible items, is transferred by means of an unrecorded assignment document signed by the grantor and “accepted” by the trustee.

What becomes of income received by the trust?

During the lifetime of the grantor, income of the trust is fully available to the grantor and is taxed to him or her as if earned directly.  In fact, during lifetime the revocable trust generally will use the grantor’s social security number rather than a separately assigned “employer identification number” for income tax purposes.   No separate income tax return need be completed for the trust, regardless of whether the grantor is acting as trustee.

Does a living trust “avoid probate” and is it a good idea?

Probate and estate administration is the process by which the assets which were owned in a decedent’s name alone are legally transferred to the persons named in his or her Will or, if there is no Will, as provided in intestacy laws of the decedent’s state of residence.  This distribution generally cannot occur until a waiting period has elapsed during which time creditors may come forward to present claims against the estate.  In addition, distribution generally does not occur until after the decedent’s debts (including medical costs not covered by insurance), expenses of estate administration (including executors’ commission and the fees of lawyers and accountants) and any estate or inheritance taxes are paid.

Only those assets owned solely in the decedent’s name or payable to his or her estate (such as a final paycheck or an income tax refund) are subject to probate, in any event, as  property titled in joint names “with right of survivorship” or as tenants by the entireties passes directly to the surviving owner by operation of law. Assets subject to a contract, such as retirement accounts and life insurance proceeds are payable directly to the beneficiaries named by the decedent and are not controlled by the Will, so they are not subject to probate – unless there is no named beneficiary surviving or unless the beneficiary designation reads “to my estate” or words to that effect.

Why seek to avoid probate? While probate laws vary from one state to another, at least historically the probate process has been perceived as a cause of delay and additional expense to the estate. Estates may be required to file inventories listing and valuing all of the assets in the decedent’s sole name, as well as accountings describing in minute detail every penny received into or paid out of the estate. These accountings are then audited by probate court personnel who may require documentation for all transactions.

Many states now have simplified probate proceedings that permit an estate to bypass some or all of the court filings previously required. The District of Columbia has “unsupervised probate” which allows the estate administration to go forward without the filing in court of inventories and accountings. Maryland has “modified administration” which, for an estate whose beneficiaries and personal representatives qualify, permits the filing of only a simplified final report instead of an inventory and an accounting of all estate transactions. Pennsylvania’s probate process is considered less costly and less intrusive than those of many other states.   Nonetheless, Pennsylvania does not allow for such abbreviated proceedings except in very small estates, and the probate process remains a matter of public record.   In Florida, an initial inventory of estate assets is required, however, during the estate administration interim or periodic accountings are optional unless required by the court.  Moreover, the final accounting may be waived by the consent all interested parties. The probate process in New Jersey is very simple, relatively inexpensive and requires very little  ongoing involvement of the Surrogate’s Court.  In contrast, probate in New York is a complicated process that can require beneficiaries to be served, requires an estate inventory and accountings to be filed. New York probate fees are also quite expensive.

One situation in which a living trust may be particularly useful is that in which the grantor owns real property in more than one state in his or her sole name. In this circumstance, probate would be conducted in the decedent’s state of domicile, but an additional (“ancillary”) probate proceeding would also probably be necessary in each other state in which the decedent owned real estate in order to transfer ownership to the beneficiaries named in the decedent’s Will. Each of these ancillary administration proceedings would entail court costs and likely additional fees for a local attorney.  In some states, a similar proceeding is needed for mineral rights such as interests in oil and gas partnerships.  These interests may be very small and may have little or no value; nonetheless, to complete transfer of their ownership in the orderly administration of a decedent’s estate it may be necessary to open ancillary probate in several states.

If, however, the same decedent had created a living trust during his or her lifetime and deeded title to all of the real property to the trustee, ancillary administration would not be needed in the states where the real property was located because title to the real property would not have been in the decedent’s name at the time of death. It should be noted, nevertheless, that transferring title to the real property to the trustee during the grantor’s lifetime may incur transfer and/or recordation taxes in each jurisdiction, in addition to the cost of deed preparation.

Protection of confidential information

Living trusts are sometimes recommended on the basis that the records of a probate administration are a matter of public record that anyone who wishes to may inspect, while the terms of a living trust agreement and the records of a trust’s assets are private.  While some jurisdictions require that the trust instrument be filed as part of a public record, this occurs only in a diminishing minority of states.  While the privacy afforded by the use of a funded living trust is easy to appreciate for public figures, it may also apply to business owners and to individuals who may not wish to benefit each family member equally.

Finally, avoiding probate is often recommended as a cost-saving technique. It is true that if courts costs and other administration expenses, such as personal representatives’ and attorneys’ fees, are computed as a percentage of the value of the assets subject to probate, then those assets owned by a living trust and, therefore, not subject to probate, will not be included as part of the calculation of such administration expenses. However, much of the expense involved in settling a decedent’s affairs is related to preparing the decedent’s final income tax return and especially the U.S. and any state estate tax returns (if the total assets are large enough to require estate tax returns).

For purposes of the estate tax returns, all assets, including those owned in joint names, in a living trust, or in a retirement account or life insurance policy, must be valued or appraised, and this cost is the same whether the assets are part of the probate estate or not. While some legal and accounting fees are attributable to complying with probate requirements, they are more often largely related to income and estate tax return preparation and tax planning and are a function of the amount of time required to complete the work rather than of the dollar value of the assets.

Where there’s a Will …

While the use of a living trust can greatly reduce the number and value of assets subject to probate, everyone should still have a valid Will because it is fairly common for individuals to have at least one asset which will require probate.  A simple example might be a significant refund.  Less common, and more dramatic, are assets such as a winning lottery ticket not presented during lifetime, or a favorable judgment in a lawsuit.  Even if a decedent diligently transferred everything he or she owned into a revocable trust during lifetime, assets such as these, which arise or which are issued to the decedent after death, may require probate. The Will of a decedent who had most of his or her assets in a living trust can be very simple and merely provide that any property subject to probate should be distributed, or “poured over,” to his or her living trust.

Are there any reasons not  to avoid probate by using a living trust?

The probate laws of each state provide a deadline by which all creditors must file any claims they have against the decedent or the estate. Once this deadline has passed, any claim which was not filed is “barred” — that is, the creditor may not collect it from the estate, the personal representative or the estate’s beneficiaries. This protection is especially useful if the decedent’s debts are difficult to determine or if it is possible that there may be significant outstanding claims against the decedent, such as malpractice actions not yet filed against a professional. This statutory protection against creditors is generally not available to shield assets held in a decedent’s living trust.

Are there other benefits to a living trust in addition to avoiding probate?

Living trusts can provide other benefits in addition to probate avoidance. First, they permit continuity of asset management. Assets held in a living trust can continue to be held and invested as the grantor wishes even after the original trustee (often the grantor) has been replaced by a successor trustee. A change of trustee due to the original trustee’s death, incapacity or resignation does not cause a delay in the successor trustee’s authority to manage the trust assets.

A related benefit is the grantor’s ability, by naming co-trustees and successor trustees, to choose those who will manage the trust assets and make other discretionary decisions in the grantor’s stead.

Finally, a living trust allows the grantor to plan for the possibility of his or her own disability or incapacity. A person who becomes unable to manage his or her own assets and make financial  decisions on his own behalf may need to have a court appoint a conservator or guardian of his property to act for him. Not only is this a clumsy and comparatively expensive process, but it may even result in the court’s appointment of a stranger as the conservator or legal guardian if the court is not satisfied that any of the incapacitated person’s relatives would make a suitable fiduciary. In such cases, courts often make these appointments from lists of local attorneys who have signed up and indicated their willingness to accept this work. The result is that the property owner’s assets will be managed (1) by someone who does not know the owner, his investment preferences, his values or what his relationship with various family members may be, and (2) by someone whose level of investment ability is an unknown quantity. Such a conservator is legally required to administer the assets conservatively for the ward’s benefit and may be unable or unwilling to make discretionary decisions about spending conservatorship funds as the ward might otherwise have done; for example, for the benefit of the ward’s grandchildren.

Does every client need a power of attorney?

It may well be possible to avoid the need for a conservatorship of an incapacitated person’s assets if the property owner (prior to becoming incapacitated) signs a legally enforceable durable general power of attorney which names someone else to manage his or her assets. However, the use of a durable general power of attorney does not solve all problems. Many financial institutions will not honor a general power of attorney unless it is on their own forms and, by the time the attorney-in-fact learns this, the property owner may no longer be able to sign new power of attorney forms. Even worse, some attorneys-in-fact have recently reported that, even if the powers of attorney are on the financial institutions’ own forms, some banks are refusing to honor them if they are more than six months or a year old, thus rendering a “durable power of attorney” not durable at all.

Powers of attorney give an agent (generally referred to as the “attorney-in-fact”) power to act on behalf of a principal with respect to assets held in the principal’s individual name .  While a client who has a revocable trust should not discard a power of attorney, assets transferred to the revocable trust during lifetime will be managed and controlled by the trustee named in the trust instrument, whether that is the grantor or a named successor.  Unless specifically so provided in the trust instrument, the agent generally would have no right to act with respect to property held in a revocable trust.

What if the grantor is declared incapacitated by a court?

In a similar manner, even if a grantor is declared legally incapacitated in a judicial proceeding, the person named to act as guardian, conservator, next friend or committee generally would not become empowered to act with respect to assets held in a revocable trust.  The grantor would cease to be the trustee by the terms of the instrument, and the named successor would  take his or her place.

Who should act as trustee of the living trust?

There is no single answer that is best for all clients.  Some individuals wish to manage their assets as long as possible; others are eager to transfer that responsibility.  Some will prefer an institution or unrelated individual such as a trusted advisor.  Others will look to children or other family members to act as trustee.  In selecting a trustee, the most important factor to consider is whether a person will act in accordance with the grantor’s wishes and in the best interest of the trust and those it benefits. Some of the most important judgment calls in designing a revocable trust  arise in connection with the selection of a trustee or successor trustee, and these issues should be discussed carefully with the lawyer who prepares the trust instrument.

If the grantor expects to use a professional trustee, such as a bank or trust company, at some time in the future, naming that trustee as a co-trustee during the grantor’s lifetime may allow the grantor a sort of “test drive,” an advance look at how well the corporate co-trustee manages investments, how well the grantor likes the co-trustee’s investment style, and in general how smoothly and satisfactorily the co-trustee and its officers work with and for the grantor and the grantor’s family.

What objectives will not  be accomplished by a living trust?

While assets placed in a living trust by the grantor will avoid probate, the living trust will not reduce either the grantor’s income taxes or his or her estate taxes. Because the grantor has the right to revoke or amend the trust at any time, for income tax purposes the grantor is treated as the owner of all of the assets, and all of the income produced by the assets continues to be treated as his or her personal income. In the same way, living trusts also achieve no estate tax savings. The grantor’s retained right to revoke or amend the trust agreement and take back any or all of the trust assets makes these assets part of the grantor’s estate for purposes of calculating estate taxes (not, however, a part of his or her probate estate).

Since there are both advantages and disadvantages to the use of a living trust, it is important for anyone considering this tool to consider all of these factors as they apply to his or her own particular circumstances. While many advisors are conversant with issues that arise in connection with revocable trusts, it is important to consult a lawyer familiar with the estate planning laws of the state in which a client makes a permanent home to make a reasoned determination whether to use this tool and to implement it successfully.

 

http://www.bipc.com/the-revocable-living-trust-is-it-for-everyone/

Probate Court

Read this article we found about how the probate process works:

Probate is the court-supervised process of gathering a deceased person’s assets and distributing them to creditors and inheritors. As an executor, your probate process will depend on whether your state has adopted the Uniform Probate Code (UPC), which is a set of probate laws written by a group of national experts. The UPC’s goal is to make the probate process simpler, especially for small estates, and to give executors more flexibility in how they proceed. For more information on your role as executor, see our Executor FAQ.

Check the list below to find out whether or not your state has adopted the UPC. If your state has not adopted the UPC, read the section immediately below. If it has adopted the UPC, skip to “The Probate Process in UPC States,” below.

The Probate Process in Non-UPC States

Every probate court has its own detailed rules about the documents it requires, what they must contain, and when they must be filed. Bearing in mind that no estate is perfectly typical, here is an outline of the probate process states that do not use the entire UPC. (Almost all states have enacted bits of the UPC.)

Getting Started

You begin the probate process by asking the court to officially make you executor. (To learn more about whether to serve as executor, see Should You Accept the Job of Executor to Settle an Estate?) If you end up acting as executor, you’ll need to:

• File a request (called a petition or application) for probate in the county in which the deceased person was living at the time of death. You will also need to file the death certificate and the original will (if there is one) with the court.
• Publish a notice of the probate in local newspaper according to court rules. Mail notices to creditors you know about.
• Mail the notice to beneficiaries and heirs, as required by the court.
• File proof that you properly published and mailed the notice.
• Post a bond (if required by the court), which protects the estate from any losses you cause (up to a certain dollar amount). The amount of the bond depends on the size of the estate.
• Prove the will’s validity by providing statements from one or more witnesses to the will. This is often done by submitting the “self-proving affidavit” that was signed by the witness in front of a notary at the time the will was signed.
• File other documents required by the court.

Administering the Estate

As executor, you’re in charge of keeping estate property safe during the probate process. You will prepare a list of the deceased person’s assets and, if necessary, get assets appraised. You’ll need to:

• Get an employer identification number for the estate from the IRS.
• Notify the state health or welfare department of the death, if required by state law.
• Open an estate bank account.
• Arrange for preparation of income tax returns.
• Prepare and file an inventory and appraisal of estate assets.
• Mail a notice to creditors and pay debts (state law may impose a deadline on you).
• If the court requires it, file a list of creditors’ claims you have approved and denied.
• If required, file a federal estate tax return within nine months after death. (Most estates are not large enough to owe federal estate tax).
• If required, file a state estate tax return, usually within nine months after death. (Fewer than half the states impose their own tax.)

Closing the Estate

When the creditor’s claim period has passed, you’ve paid debts and filed all necessary tax returns, and any disputes have been settled, you’re ready to distribute all remaining property to the beneficiaries. You’ll need to:

• Mail a notice to heirs and beneficiaries that the final hearing is coming up. (This must be done a certain period of time before the hearing; the court will have a rule.)
• File proof that you mailed the notice as required.
• Get the court’s permission to distribute property.
• Transfer assets to the new owners and get receipts.
• After you distribute assets and all matters are concluded, file receipts and ask the court to release you from your duties.

The Probate Process in UPC States

Although the law is very similar in the states that have adopted the entire UPC for probate, it isn’t identical. You’ll need to learn your own state’s (and sometimes your own county’s) particular rules. Under the UPC, there are three kinds of probate: informal, unsupervised formal, and supervised formal. Here is an overview of each.

Informal Probate

Most probates in UPC states are informal. This relatively simple process is used when inheritors are getting along and you don’t expect problems with creditors. If anyone wants to contest the proceeding, you cannot use informal probate. The whole process is just paperwork — there are no court hearings.

The first step is to file an application with the probate court to begin an informal probate and serve as the “personal representative” (the term UPC states use instead of “executor” or “administrator”).Once your application is approved, you will have official authority — often in the form of a document called “letters testamentary” or “letters” — to act on behalf of the estate. You will need to do the following:

• Send out formal written notices of the probate to heirs, beneficiaries, and creditors that you know about.
• Publish a notice in the local newspaper to alert other creditors.
• Provide proof that you’ve properly mailed and published the notices.
• Prepare an inventory and appraisal of the deceased person’s assets.
• Keep all estate property safe during the probate.
• Properly distribute the property.

After you have distributed the property, you can close the estate informally by preparing and filing a “final accounting” with the court. Finally, you’ll file a “closing statement,” stating that you have paid all debts and taxes, distributed the property, and submitted the final accounting.

Unsupervised Formal Probate

Unsupervised formal probate in UPC states is a traditional court proceeding, much like the regular probate described above. It is generally used when there is a good reason to involve the court — for example, if there’s a disagreement over the distribution of the estate’s assets, the heirs need to be determined (if there is no valid will), or minors are inheriting significant property.

You may need to get the court’s permission before you sell the deceased person’s real estate, distribute property to beneficiaries, or pay a lawyer — or yourself — for work done on behalf of the estate. To close the estate, file an accounting that shows how you handled the estate’s assets.

Supervised Formal Probate

Supervised formal probate is the rarest form of probate. It’s used only if the court finds it necessary to supervise the probate procedure — for example, because a beneficiary can’t adequately look after his or her own interests and needs the court’s protection. As you might expect, you must get court approval before distributing any property in this case.

http://www.nolo.com/legal-encyclopedia/how-probate-process-works-information-32438.html

How Much Does it Cost to Get Help With Your Estate Planning Documents

There are two ways many lawyers use to charge their clients.  They either charge by flat rate or by hour.  A lawyer that charges a flat rate usually charges be $800 and $1,800, but the rate may even go as high as $2,000 to $3,500.  

http://blog.tompkins-law.com/2013/08/how-much-do-attorneys-charge-to-help.html

Amy Renkert-Thomas, on Estate Planning for Wealthy Families

Read what Amy Renkert-Thomas has to say about estate planning for wealthy families:

Amy Renkert-Thomas is the joint-managing director of Withers Consulting Group in New Haven, Conn.

In my experience there’s a gulf between the traditional estate planner’s approach and what ultra-high-net-worth family enterprises want from an estate plan. In the end, families can find themselves without the degree of control over a business or estate that they were used to and hoped they would maintain.

There are ways advisers can help these ultra-high-net-worth families better understand and implement their estate plans.

For instance, restructuring valuable assets in a way that makes them less valuable from an estate valuation standpoint is a common step. But while this makes sense from an estate planning point of view, it can seem foreign to families who are used to managing assets on their own. When estate planners put in new structures, the gulf forms, because the families aren’t familiar with how to run things in this new structure, and their control is limited as a result.

What often happens is when a family starts to run the restructured enterprise, they realize it doesn’t operate the way they’re used to, and they either ignore the new structure or throw up their hands and abdicate. As a result, the planning isn’t as successful as it could have been, and sometimes a plan fails outright.

The adviser can do much to prevent this outcome. First, understand a client family’s DNA–not all families are the same. Advisers should start by talking about a family’s mission and values, as well as the different attitudes and intentions of family members. It’s also important to determine how individual family members differ in their involvement with the family enterprises.

If we can understand those attitudes and intentions, we as advisers can do a better job of creating a structure that works for that particular family.

There are also pieces of the estate planning puzzle specific to ultra-high-net-worth families. For example, some families use a lot of trusts and they don’t always have the time to choose trustees effectively. So it’s important to educate and help families think through their criteria for trustees. It’s also important to create a forum for the family to discuss issues as a group. The broader group will have an opportunity to take a look, speak about and digest the options before any kind of decision is made.

Without these measures, the family can end up distanced from its assets. These assets are not simple to run, and if the family doesn’t actively participate, the business or portfolio can end up going one way while the family heads off in another direction. That’s when the business suffers, and the same is true with investment portfolios. Long-term success depends on knowing what the family needs the portfolio to do, whether philanthropy, venture capital or whatever.

The process of getting to know your clients in a systematic way isn’t easy. It often seems easier to just jump straight in to talking about the technical stuff. But all of us benefit from having a straightforward way of understanding our clients better. And the end result is fabulous–clients who are understood stay with their advisers longer and are far more likely to stay with their advisers through transitions.

 

http://blogs.wsj.com/wealth-manager/2013/08/07/voices-amy-renkert-thomas-on-estate-planning-for-wealthy-families/