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Complete Your Estate Plan and Set Up a Living Trust


By Ellie Tipton-Ortiz
LEGAL DOCUMENT SERVICE PROVIDER

A living trust is an important part of a comprehensive estate plan and provides for the management and distribution of your assets, both during your lifetime and after your death.

If you have not already done so,
two things you should do in the New Year are complete your estate plan and set up a living trust. Living trusts can be set up by attorneys or non-attorney legal document services. The difference between using an attorney and a non-attorney legal document service is that attorneys can give you legal advice and non-attorney legal document services cannot; they prepare standard estate planning documents at the request of the client.

The cost for a complete estate plan using an estate planning attorney ranges from $2,500 to $8,000. The cost for a complete estate plan using a legal document service provider ranges from $750 to $1,500. Regardless of whom you use to complete your estate plan or set up a living trust, there are several benefits to having a plan prepared and transferring your assets, such as real estate, into the trust.

The cost for a complete estate plan using an estate planning attorney ranges from $2,500 to $8,000. The cost for a complete estate plan using a legal document service provider ranges from $750 to $1,500. Regardless of whom you use to complete your estate plan or set up a living trust, there are several benefits to having a plan prepared and transferring your assets, such as real estate, into the trust.

Living Trust

This document establishes your trust and provides for the management and distribution of your assets, both during your lifetime and after your death. You may modify or revoke your living trust during your lifetime.

Certification of Trust

This brief document summarizes the terms of your trust and should be presented when you are transferring an asset into your trust or opening a new account.

Pour-Over Will

While your living trust is the primary document governing the distribution of your estate, your will acts as a “backup” device that “pours over” any of your assets inadvertently owned outside your trust, into your trust. All such assets are then managed and distributed according to the terms of your living trust.

Power of Attorney— Financial

This durable power of attorney permits your appointed representative to make financial decisions on your behalf, enabling him or her to purchase, sell, or otherwise transfer your assets in accordance with your wishes.

Power of Attorney—Healthcare

This document authorizes your named agent to make healthcare decisions for you if you are no longer able to communicate your wishes regarding such care. Your agent must follow your expressed desires.

Avoid probate

Save your loved ones the cost, stress, and delay of going through the legal process.

Step up in basis

A step up in basis means that your beneficiaries will receive a readjustment of the value of an appreciated asset for tax purposes upon inheritance. For instance, if you purchased your property for $250,000 but the value at the time of your death is $1 million, then your beneficiaries will inherit the property with the basis of $1 million, which means they will not have to pay taxes on the increased value.

The personal estate tax exemption

The personal exemption allows a set dollar amount of property to pass tax-free, no matter who inherits it. For deaths in 2017, the individual exemption is $5.49 million. The amount is indexed for inflation, so it will probably increase in future years. If you have made taxable gifts during your life, the amount of your personal exemption will be reduced by the amount of those taxable gifts.

The marital deduction

All property left to a surviving spouse passes free of estate tax. The marital deduction is not allowed for property left to noncitizen spouses, but the personal estate tax exemption can be used for property left to noncitizen spouses. See Internal Revenue Code Section 2056(a).

The charitable deduction

All property left to a tax-exempt charity is also free of estate tax. See Internal Revenue Code Section 2055(a).

Special rules for married couples

A surviving spouse gets a big tax break. If the deceased spouse did not use up his or her individual tax exemption, the survivor can use what is left. That gives the couple a total exemption of twice the individual exemption amount, which can be split between them in any way that provides the greatest tax benefit. For example, say a man dies and leaves $4 million to his widow; no estate tax is owed because property left to a spouse is tax-free. The widow then dies, leaving $7 million (her own $3 million plus the $4 million she inherited from her husband) to their children free of tax.

Ellie Tipton Ortiz is a certified mediator and a bonded and certified legal document service provider. She opened Laguna Legal in 1998 and, over the course of her career, has assisted thousands of clients with their legal documents. Her email address is admin@laguna-legal.com.