Estate Planning Part Four

March 8, 2009

Estate Planning Part Four

A Revocable Living Trust is a legal document that partially replaces a will and is created during the lifetime of the grantor. Similar to a will this trust is “revocable”, which means the grantor can make changes or even eliminate it at a later date. There are three primary benefits of a Revocable Living Trust:

1. Privacy.
2. Quick asset-transfer process.
3. Reduction of probate cost.

After establishing a Revocable Living Trust, the grantor must re-title assets placed into the trust. Assets such as a house, investment property, cars, bank accounts, non-IRA investment accounts, etc. may be included in the trust. Usually, the grantor names himself as trustee and maintains control of the assets until death. However, a Co-Trustee or Successor Trustee can be named to co-manage or manage the assets if the grantor is unable or unwilling to manage them. Detailed instructions are included in the trust documents which specify how the assets will be managed and distributed before and after the grantor’s death.

Following the grantor’s death, the trustee or successor trustee oversees the transfer of assets to the beneficiaries as outlined in the trust. Trust assets do not go through the probate process as with a will, making the asset-transfer process quick and private. With a will, probate records are available to the public.

In some states, probate courts charge a fee based on the percentage of the deceased’s net worth; this fee can be as much as five or six percent. In addition, certain asset types, such as out-of-state real estate and privately held companies, can result in a lengthy probate process of months or even years. However, Washington state has a quick probate process
and fees are one of the least expensive in the country, reducing the advantages of this trust for Washington residents.

Some other points to keep in mind when considering a Revocable Living Trust are:

• A Revocable Living Trust is generally more complex than a will and there are additional costs.
• The necessity and expense of re-titling and transferring assets into the trust can be burdensome.
• Administrative costs for a separate trustee may be significant over time.
• The trustee must be trustworthy and act in the grantor’s best interest.
• Banks may hesitate to lend money secured by assets that are held in a trust.
• Assets in a Revocable Living Trust are not protected from creditors or litigation.
• A will is still needed for assets and conditions not outlined in the trust, such as the nomination of a guardian for minor children.
• A Revocable Living Trust does not avoid income, estate or gift taxes.

At Haberling Financial Group, we recommend you develop a relationship with an attorney who will make estate documentation recommendations based on YOUR goals and objectives. We would be happy to assist you in this process.

■ Stephen Palm

Legal Information and Disclosures
This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. Haberling Financial Group has no duty or obligation to update the information contained herein. Further, Haberling Financial Group makes no representation, and it should not be assumed that past investment performance is an indication of future results. Moreover, wherever there is potential profit there is the possibility of loss. This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicit and securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Haberling Financial Group Inc., believes that the sources from which such information has be obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, included the information contained herein, may not be coped, reproduced, republished, or posted in any form without the prior written consent of Haberling Financial Group.