Estate Planning FAQs

ANSWERS TO THE MOST FREQUENTLY ASKED QUESTIONS
ABOUT LIVING TRUSTS

Q: I HAVE A WILL, ISN'T THAT ENOUGH?

A: A will guarantees probate.  The word "probate" comes from Latin and means, "to prove the will".  Having a will may not be the best way to plan your estate.  The court must verify all wills before they can be enforced.  A will can only go into effect after you die, with no protection if you become mentally or physically incapacitated during lifetime.  A Living Trust avoids probate and is less likely to be modified by the courts if challenged by unhappy family members at your death or disability. 

Q: WHAT IS A LIVING TRUST?

A: A Living Trust is a legal document that allows you to give what you have to whom you want, when you want and in the way you want.  The trust can be changed or revoked according to your wishes while you are alive. The trust avoids probate and can reduce or eliminate estate taxes provided that it is personalized to your needs, properly planned and properly drafted.

Q: WHAT IS "DEATH" PROBATE AND WHAT IS "LIVING" PROBATE?

A: Death probate is a process that makes sure, when you die, your debts are paid and your assets are distributed according to your will.  Living probate is a process by which the court can take control of your assets, decide who should take care of you, and determine how you should be cared for in the event you become incapacitated. 

Q: WHY SHOULD I TRY TO AVOID PROBATE?

A: It is expensive!  A significant portion of your estate's gross value goes for legal/executor fees and court costs.

It is time consuming!  Assets are frozen subject to probate court action during the probate process which lasts at least 6 months, and a year on average.

It is required in every state where you own real estate!  There will need to be a separate probate proceeding in every state where you own real property, including vacant lots, vacation property, investment property and timeshare interests.

It is public!  Anyone can read the probate files to see what you owned, who you owe, to whom you gave your assets and where those beneficiaries live. 

Q: WON'T JOINT OWNERSHIP AVOID PROBATE?

A: No. It will only delay probate until the surviving joint tenant dies.  The property is then probated before it goes to the heirs. 

Q: WHAT IF YOU HAVE A SMALL ESTATE, DO YOU NEED TO WORRY ABOUT ESTATE PLANNING?

A: Yes.  While an estate under $5,000,000.00 (for 2011 and 2012) is free from federal estate taxes, you will probably not avoid a living probate if you become disabled or a death probate when you die.  Remember, probate and federal estate taxes have nothing to do with each other.  Estate taxes are paid to the federal government for the right to transfer property at your death.  Probate fees and costs are paid to the probate court, attorneys and the personal representatives of your estate for supervising the administration of your estate and distributing assets to your beneficiaries.

Q: WILL MY LIVING TRUST AVOID INCOME TAXES? 

A: No.  The purpose of creating your Revocable Living Trust is to avoid living probate, death probate, and reduce or eliminate federal estate taxes. It is not a vehicle for reducing income taxes.  In fact, if you are the trustee of your living trust, you will file your income tax returns in exactly the same way you filed them before the trust existed.  There are no new returns to file and no new liabilities are created. 

Q: IF I TRANSFER REAL ESTATE INTO MY LIVING TRUST, WILL MY PROPERTY TAXES INCREASE?

A: No.  Transfers into your living trust have no effect on your property taxes.                                                

Q: IF SOMETHING HAPPENS TO ME, WHO HAS CONTROL?

A: If you should become incapacitated or die, a back-up trustee, named by you in your trust, will handle your affairs.

Q: WHO ARE THE BACK-UP TRUSTEES?  WHAT DO THEY DO?

A: You can name family members, trusted friends or a professional trustee in the trust document to look after your care and handle your financial affairs for as long as you are physically or mentally incapacitated, using your assets to pay your expenses.  When you have recovered, you automatically are back in control.  At your death your back-up trustee pays your debts and distributes your property  according to your written instrument.

Q: HOW WILL A LIVING TRUST SAVE ESTATE TAXES? 

A: Currently, if you die with an estate of more than $3,500,000.00, federal taxes must be paid.  The Federal Estate Tax can be at rate as high as  35% of all of your assets and that does not include state death taxes! If you are married, a living trust can allow you and your spouse to pass on to your beneficiaries up to $10.0 million free of federal estate tax, for 2011 and 2012.  We expect sweeping changes in 2013, otherwise the Federal Estate Tax laws revert to the laws in place in 2001, which only allowed $1,000,000 per person to pass federal estate tax free at a maximum rate of 55% of all your assets.

Q: IS IT DIFFICULT TO TRANSFER PROPERTY INTO MY TRUST? 

A: No. And your estate planning attorney, banker, insurance agent, financial advisor, etc. can help you.  You simply need to transfer all of your property from your individual name to the name of your trust, which you control - such as from "Bill Smith and Mary Smith" to "Bill Smith and Mary Smith as Co-Trustees Under the Bill Smith Living Revocable Trust, Dated September 15, 2012". 

Q: IS A LIVING TRUST EXPENSIVE? 

A: When compared with the cost of probate and potential federal estate taxes, it is very inexpensive.  The cost will depend upon the complexity of your estate, the amount of your assets, and whether or not you need estate tax planning.  Generally speaking, for single individuals, a Living Trust estate plan can range from approximately $1,500.00 to $2,000.00 for a comprehensive plan.  For married couples, the comprehensive plan can range $2,500.00 to $4,000.00, depending on its complexity and family issues..  There is no fee charged for an initial consultation and an estimate of the fee for your estate plan will be given to you at this meeting. 

Q: HOW LONG WILL IT TAKE FOR ME TO GET A LIVING TRUST? 

A: It does not take long.  For example, if you wish to proceed immediately, WEBSTER & SCHELLI can complete your plan and have your legal documents available within a couple of weeks following our initial meeting with you. 

Q: SHOULD I HAVE AN ATTORNEY DO MY TRUST?

A: Definitely!  And, preferably one who specializes in estate planning. WEBSTER & SCHELLI  practices in various areas of the law; however, we specialize in tax and estate planning. We can provide assistance and guidance for your situation and can work as a "team player" with your financial advisors, insurance professional and your accountant.  You will want your documents carefully and properly prepared.  You should avoid the "Do-It-Yourself" kits and the "boiler-plate" forms some marketing companies are exploiting.  With estate planning, one size does not fit all.

Q: HOW DO I GET STARTED? 

A: It's easy!  You can click on the Contact Us button or simply call our office at (630) 416-4500 and schedule an appointment.

Please take a moment to fill out our Estate Planning Questionnaire