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Guarding Your Wealth for Seniors
To Trust or Not to Trust? That is the Question for
Seniors
Is a Living Trust right for you and how to go about
getting one if needed
By Jeffrey D. Voudrie, CFP
Oct. 4, 2005 - Living Trusts have become very
popular and are being heavily promoted to seniors. Should you Trust or
not Trust? That is the question. Read on to learn some simple guidelines
that will help you know whether a Living Trust may be right for you and
how to go about getting one if needed.
A Living Trust is considered a separate legal
entity much like a corporation. As a result, any assets ‘owned’ by the
Trust at your death avoid Probate and can pass to your heirs simply and
easily. It also provides for the management of your assets if you become
incapacitated.
Living Trusts can be complex documents that allow
you to precisely detail your wishes or they can be a straightforward
means of handling your estate. Even though the Trust is considered a
separate legal entity, you retain complete control over everything you
own. In fact, a Living Trust can allow you to control assets from the
grave.
A Living Trust will not protect your assets from
lawsuits or creditors. It won’t ‘hide’ your assets from Medicaid should
you need to go into a nursing home. It won’t automatically eliminate all
estate taxes, though it can help eliminate some and reduce others. And a
Living Trust only controls those assets that are ‘owned’ by it, so
unless you re-title your home in the name of the Trust, for instance,
the Trust will not protect it from having to go through Probate.
Living Trusts are being heavily promoted through
seminars. If you attend one, you may come away feeling that everyone
needs a Trust. That’s not true. Although many people will benefit from
one, they are not for everyone.
Take ‘Lily’, an 82-year old widow from LeHigh
Acres, Florida who recently called me. She was being pressured to get a
Trust after attending one of these seminars. “If you don’t get one, you
will have to pay thousands of dollars in taxes when you die,” the
salesperson told her. That is completely untrue. In fact Lily didn’t
need a Trust at all.
Lily’s assets consisted of a few small bank
accounts, an IRA at a brokerage firm and a modestly priced condominium.
She had already named beneficiaries on her bank accounts and IRA, so
these assets would avoid Probate when they passed to her heirs. The only
asset that would be subject to Probate was her condo.
Lily has a good relationship with her kids, so she
can title the condo in their names. Sometimes there can be a gift-tax
issue when transferring ownership of an asset to a child. I almost never
recommend adding a child’s name to your home, but in this case it makes
sense and she shouldn’t incur any tax liability.
Another option for Lily was to set up a Living
Trust on her own. There are a number of off-the-shelf computer programs
that provide all sorts of legal documents, such as wills, powers of
attorney, contracts, and Living Trusts. Trusts created using this
software may not have all the special features of those costing $2,000,
but most people don’t need them anyway.
Anne and her husband in South Carolina set up a
Living Trust this way. They used an inexpensive software program to put
together their Trust. It’s critical that you have an attorney review it
when you’re finished. Their local attorney reviewed it, made sure
everything was as it should be and only charged them $100.
If you are able to do this, then there isn’t any
reason not to have a Living Trust. Even if it is to handle the transfer
of your real estate at death, the time you take now will make things
much easier for the loved ones you leave behind.
There are, however, several situations where it
pays to go ahead and have a professional draw up a Trust for you. These
include your estate being worth more than $1.5 million, having children
that are handicapped or disabled, or having children from a previous
marriage. Professional help should be sought if you want to have
incentives to financially motivate your heirs or if you want them to
receive their inheritance over time instead of all at once.
Still unsure if a Trust is right for you? Have another financial question? Send me an email and
I’ll personally respond, free of charge. Go to
www.guardingyourwealth.com and click on ‘Ask Jeff’. You can also
reach me by email at
jeff@guardingyourwealth.com.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For booking information, email e-mail
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