Will, trusts keep you in charge of planning estate

Do you have a will or living trust?

If you have neither, you may have lots of company, but you are not doing your loved ones any favors.

At least 50 percent of Americans, and perhaps as many as 70 percent, have done no estate planning at all, according to a 1999 Chronicle of Philanthropy study.

But being part of the crowd is no excuse, says David Peachin, a CPA with the Tucson firm of Peachin & Peto.

“Breadwinners who have not examined the merits of wills, and living trusts and have not set up estate planning mechanisms, risk putting their loved ones through unnecessary emotional trauma. They also risk depleting their estates by incurring a tax bill that reasonable planning could have prevented,” Peachin says.

How much difference can estate planning make?

Well, to cite a couple of celebrity cases, Elvis Presley died with more than $10 million, but estate taxes and costs ate up more than $7 million, or about 72 percent. Yul Brynner, by contrast, died with $5 million, but only $134,000, about 3 percent, went to taxes and costs. Granted, most of us do not have this kind of money, but basic estate planning is important for everybody.

“The emotional costs of the estate planning options are also worth considering,” says Peachin. “Wills must go through probate, a court process that can be costly and time-consuming just when your loved ones are coping with emotional loss. Probate also opens up the terms of the will to the public. Assets that you transfer by a living trust, on the other hand, avoid the delays, costs, and public nature of probate.”

Here’s how the living trust -- one of the most flexible forms of estate planning – works.

“During your lifetime,” explains Peachin, “you place property that does not have a named beneficiary into the trust. You can serve as the trustee and you have the authority to alter the terms of the trust when you wish, so you remain in control of the assets during your lifetime.

“After your death, the assets of the trust will be distributed to the beneficiaries you named, according to the terms of the trust. If you wish, you can stipulate that the assets be transferred to a different type of trust, such as a special-needs trust serving a disabled heir,” Peachin says.

Will or Trust: Which is for You?

For simple estates with relatively limited assets, a basic will may still be the vehicle of choice. When considering the relative merits of wills versus living trusts, there are four crucial factors to consider.

Probate As noted, assets transferred by will go through probate, a court process that can be costly and slow and opens the will up to public inspection. Trust assets do not go through probate and trusts are not public records.

Incapacity A living trust allows you to name a successor trustee to manage trust assets if you become unable to function. With a will, you would need to set up a durable power of attorney to designate someone to manage your assets if you cannot.

Convenience Using a will, you simply leave to whomever you wish any assets that do not have named beneficiaries. In the case of assets such as retirement plans and insurance policies, the beneficiary designation governs. Under a trust, you must transfer title to the property that the trust will own. Otherwise, this property will go through probate.

Cost Simple wills start at $200 and can be done by most attorneys. A living trust (including a complete package of estate planning documents) usually costs $1,200 to $1,500 and can run $5,000 or more for a large or complex estate.

“An important point to keep in mind while doing estate planning is that as your fortunes change, and often become more complicated, it is essential to update your estate planning. If you have not yet done any planning, don’t remain passive about your estate just because so many others are. By consulting with a qualified professional, you can help ensure peace of mind and financial stability for your loved ones,” Peachin says.

Reprinted with permission.

By Matt Lehrer

Arizona Jewish Post

August 31, 2001