Serving Kitsap, Mason, Pierce, Jefferson, and Clallam Counties
What is Probate?
Probate is the legal mechanism used by the court to transfer property from the deceased to their heirs. Each state has its own rules governing the probate process. Many states have streamlined the system so that it is no longer as much of a financial and time consuming nightmare. You may wish to consult your local bar association or law library to learn about the nature of probate in your state.
If I have a will do I avoid probate?
"Where there's a will, there's a way --- to probate!!!"
What is a trust?
A trust is a legal arrangement whereby one person (the Trustee) agrees to hold property belonging to another (the creator or trustor) for the benefit of a third person (the beneficiary). In a Living Trust, one person may initially wear all three "hats".
Trust arrangements are more common than you might think. Many homes are financed with a deed of Trust. The new owner of the property (grantor) deeds an interest in the property to a trustee (normally a title insurance company) for the benefit of the lender (beneficiary). The trustee is instructed to deed the property back to the grantor once he pays off the loan to the lender. If the grantor fails to live up to his obligations, the trustee is instructed to foreclose and sell the property to pay off the lender.
What types of Living Trusts are there?
There are numerous types of Living Trusts. However, they may be divided into two general categories: Revocable and Irrevocable. A Revocable Trust can be altered, amended, or as the name implies, revoked at any time prior to the Creator's death. Property may be removed from the Trust at any time by the Creator.
By contrast, an Irrevocable Trust is "cast in concrete" once it is created. Any property given to the Trust becomes Trust property. While the character of the property may be changed (i.e. real estate sold and converted to cash), the asset remains in the Trust and may only be distributed pursuant to the Trust terms. Any transfer of property to a Trust is considered a gift because the owner gives up all ownership rights to that property. Irrevocable Trusts are typically set up either to keep life insurance policies out of the Creator's estate or to allow a controlled gifting program for children.
Most people want to retain control over their assets. An irrevocable Trust may be advisable in some cases for insurance policies and certain high growth assets in very large estates. However, the disadvantages far outweigh the advantages for most people.
Revocable Living Trusts generally take one of three forms:
(1). Standard Trust--designed for a single individual or a husband and wife with an estate worth less than the Federal Estate tax exemption (currently $1,000,000).
(2). A/B Trust--designed for a couple either with an estate exceeding $1,000,000 or the need (due to prior marriages) to keep assets separate.
(3). Q-TIP Trust--qualified terminable interest Trust designed for estates where each spouse wants to retain control over the distribution of his or her share of the estate.
What happens when I die?
The answer to this question depends on your circumstances. If you are single, your named Successor Trustee takes over the management of your estate. He/she will distribute the estate property in accordance with the terms you set forth in the Trust Agreement.
If you are married and the second to die, the same rule applies. If you are the first to die and have a standard Trust, your spouse continues to administer the property as you are now doing. He/she retains the authority to modify, amend or revoke the Trust Agreement.
The Trust becomes somewhat more complicated if you have an A/B or Q-TIP Trust. In that situation, your spouse and the Successor Trustee will divide the property between the A and B Trusts and, where appropriate, a Q-TIP or C Trust according to the Trust instructions. Your spouse will retain full control over the A Trust and its property. The Successor Trustee will administer the assets of the B and Q-TIP Trusts per the Trust instructions. The latter two Trusts are irrevocable. On the death of your spouse, the successor will administer all three Trusts and distribute the assets per the Trust instructions.
How does my successor take title to my property?
It is typically quite simple to pass title to Trust property. Normally your successor will only need to produce a copy of your death certificate and either the Trust or a notarized summary from your Trust attorney. These are delivered to the bank, transfer agent, or title insurance company.
You are the key to making this a smooth transaction. If you placed your titled property in the Trust and maintained a record of that property, your successor will have an easy and inexpensive task to complete. On the other hand, If you failed to maintain the proper records, he/she may be forced to employ professional help to clear title.
Can my Trust be challenged in Court?
Any legal document can be challenged in court. However, an agreement is presumed to be valid unless proven otherwise. The courts are more prone to uphold a Trust than a Will. The challenger is faced with the possibility of paying the Trust's legal fees if he brings the case in bad faith. Additionally, the Trust usually provides that anyone who, without cause, challenges the validity of the Trust forfeits his/her rights under the Trust.
Neither the government, the courts, nor the legal profession will challenge your Living Trust. The government is only concerned that taxes are paid. Since this document is not designed to evade taxes, the government is happy. The courts have more than enough to do and are happy that you are not clogging up their dockets with another probate. Even if the legal profession had some standing to challenge the Living Trust, which it doesn't, it is not going to make its reputation any worse by appearing to attack a legal means for reducing attorney's fees. Besides, there are enough attorneys who recognize the value of a properly drawn Living Trust that they will defend your right to use this instrument as part of your estate plan.
Probate is the legal mechanism used by the court to transfer property from the deceased to their heirs. Each state has its own rules governing the probate process. Many states have streamlined the system so that it is no longer as much of a financial and time consuming nightmare. You may wish to consult your local bar association or law library to learn about the nature of probate in your state.
If I have a will do I avoid probate?
"Where there's a will, there's a way --- to probate!!!"
What is a trust?
A trust is a legal arrangement whereby one person (the Trustee) agrees to hold property belonging to another (the creator or trustor) for the benefit of a third person (the beneficiary). In a Living Trust, one person may initially wear all three "hats".
Trust arrangements are more common than you might think. Many homes are financed with a deed of Trust. The new owner of the property (grantor) deeds an interest in the property to a trustee (normally a title insurance company) for the benefit of the lender (beneficiary). The trustee is instructed to deed the property back to the grantor once he pays off the loan to the lender. If the grantor fails to live up to his obligations, the trustee is instructed to foreclose and sell the property to pay off the lender.
What types of Living Trusts are there?
There are numerous types of Living Trusts. However, they may be divided into two general categories: Revocable and Irrevocable. A Revocable Trust can be altered, amended, or as the name implies, revoked at any time prior to the Creator's death. Property may be removed from the Trust at any time by the Creator.
By contrast, an Irrevocable Trust is "cast in concrete" once it is created. Any property given to the Trust becomes Trust property. While the character of the property may be changed (i.e. real estate sold and converted to cash), the asset remains in the Trust and may only be distributed pursuant to the Trust terms. Any transfer of property to a Trust is considered a gift because the owner gives up all ownership rights to that property. Irrevocable Trusts are typically set up either to keep life insurance policies out of the Creator's estate or to allow a controlled gifting program for children.
Most people want to retain control over their assets. An irrevocable Trust may be advisable in some cases for insurance policies and certain high growth assets in very large estates. However, the disadvantages far outweigh the advantages for most people.
Revocable Living Trusts generally take one of three forms:
(1). Standard Trust--designed for a single individual or a husband and wife with an estate worth less than the Federal Estate tax exemption (currently $1,000,000).
(2). A/B Trust--designed for a couple either with an estate exceeding $1,000,000 or the need (due to prior marriages) to keep assets separate.
(3). Q-TIP Trust--qualified terminable interest Trust designed for estates where each spouse wants to retain control over the distribution of his or her share of the estate.
What happens when I die?
The answer to this question depends on your circumstances. If you are single, your named Successor Trustee takes over the management of your estate. He/she will distribute the estate property in accordance with the terms you set forth in the Trust Agreement.
If you are married and the second to die, the same rule applies. If you are the first to die and have a standard Trust, your spouse continues to administer the property as you are now doing. He/she retains the authority to modify, amend or revoke the Trust Agreement.
The Trust becomes somewhat more complicated if you have an A/B or Q-TIP Trust. In that situation, your spouse and the Successor Trustee will divide the property between the A and B Trusts and, where appropriate, a Q-TIP or C Trust according to the Trust instructions. Your spouse will retain full control over the A Trust and its property. The Successor Trustee will administer the assets of the B and Q-TIP Trusts per the Trust instructions. The latter two Trusts are irrevocable. On the death of your spouse, the successor will administer all three Trusts and distribute the assets per the Trust instructions.
How does my successor take title to my property?
It is typically quite simple to pass title to Trust property. Normally your successor will only need to produce a copy of your death certificate and either the Trust or a notarized summary from your Trust attorney. These are delivered to the bank, transfer agent, or title insurance company.
You are the key to making this a smooth transaction. If you placed your titled property in the Trust and maintained a record of that property, your successor will have an easy and inexpensive task to complete. On the other hand, If you failed to maintain the proper records, he/she may be forced to employ professional help to clear title.
Can my Trust be challenged in Court?
Any legal document can be challenged in court. However, an agreement is presumed to be valid unless proven otherwise. The courts are more prone to uphold a Trust than a Will. The challenger is faced with the possibility of paying the Trust's legal fees if he brings the case in bad faith. Additionally, the Trust usually provides that anyone who, without cause, challenges the validity of the Trust forfeits his/her rights under the Trust.
Neither the government, the courts, nor the legal profession will challenge your Living Trust. The government is only concerned that taxes are paid. Since this document is not designed to evade taxes, the government is happy. The courts have more than enough to do and are happy that you are not clogging up their dockets with another probate. Even if the legal profession had some standing to challenge the Living Trust, which it doesn't, it is not going to make its reputation any worse by appearing to attack a legal means for reducing attorney's fees. Besides, there are enough attorneys who recognize the value of a properly drawn Living Trust that they will defend your right to use this instrument as part of your estate plan.
Common Questions About Estate Planning
Asset Protection
Asset protection planning consists of organizing your assets in such a manner as will allow you to enjoy their benefits while reducing the risk of losing them due to unforeseen circumstances in the future.
Asset Protection Planning is Legal.
Some people believe that there is something illegal about sheltering your assets. Quite the opposite is true in most cases. Hiding assets from known creditors, including the IRS, is fraudulent and may often be illegal. The best asset protection strategy may fall short in such circumstances. However, appropriate strategies can protect you and your family from a catastrophic financial disaster that may be beyond your control.
If I do not have any creditors, why do I need to be concerned?
We live in a very litigious society. Literally millions of lawsuits are filed every year. Any experienced attorney can tell you about many instances where families are financially devastated because they failed to protect their assets. The following are some examples of such catastrophes.
Asset Protection Planning is Legal.
Some people believe that there is something illegal about sheltering your assets. Quite the opposite is true in most cases. Hiding assets from known creditors, including the IRS, is fraudulent and may often be illegal. The best asset protection strategy may fall short in such circumstances. However, appropriate strategies can protect you and your family from a catastrophic financial disaster that may be beyond your control.
If I do not have any creditors, why do I need to be concerned?
We live in a very litigious society. Literally millions of lawsuits are filed every year. Any experienced attorney can tell you about many instances where families are financially devastated because they failed to protect their assets. The following are some examples of such catastrophes.
A grandmother loaned money to her alcoholic grandson. He used the money to purchase a truck. Shortly thereafter, he struck and seriously injured a young man. The young man sued both the driver and his grandmother. The grandmother was found liable under a theory of "negligent entrustment." The verdict exceeded $600,000.
A father owned a small business. His son took a company vehicle to run business errands. The son was intoxicated. His car collided with another and the other driver was killed. The father’s business was held liable. Since it was a sole proprietorship, all the father’s personal assets became subject to the ensuing judgment.
How do I assess my risk?
Obviously not everyone is in significant danger of being sued. However, there are a number of factors that increase your chances of being dragged into litigation. These factors include, but are not limited to:
Obviously not everyone is in significant danger of being sued. However, there are a number of factors that increase your chances of being dragged into litigation. These factors include, but are not limited to:
Asset Protection Devices
There are a number of different devices that can be used to shelter assets from creditors. They include:
There are a number of different devices that can be used to shelter assets from creditors. They include:
| · | Failure to carry adequate liability insurance; |
| · | Self employment (particularly if you have employees, high customer traffic, or engage in work that may be dangerous in any degree); |
| · | Rental property ownership; |
| · | Teenage drivers; |
| · | Leadership in public or private organizations. |
| · | Limited Partnership; |
| · | Limited Liability Company; |
| · | Corporation; |
| · | Asset Protection Trust. |
© 2009 Law Office of David Carl Hill - All rights reserved.
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