Pettit Financial Services

Living Trusts


Why Plan? Today as society gets older, we are finding that more and more people are becoming unable to take care of their own affairs. When this happens, normally the court must appoint a conservator to manage your affairs. Without planning, a court proceeding is required. This is time consuming, expensive and very public. With planning you can avoid a conservatorship. This planning involves preserving your estate during your lifetime. You have three options to choose from when planning your estate: (1) Intestate ( no will); (2) Testate Succession (by Will); (3) the Revocable Living Trust.
After your death, there will always be some fees and some taxes which have to be paid. This is true with or without planning. The fees and taxes will normally be significantly lower with planning. Probate is public, expensive and time consuming. The Revocable Living Trust can help avoid probate of the assets which are in the trust.
What is a Living Trust?

A living trust is a legal document that takes the place of a will. It does everything a will does, plus much more. Not only does the living trust make sure your assets go to the people you choose, it also allows you to avoid probate, eliminate or reduce taxes, and avoid a conservatorship proceeding if you become incapacitated.

Do I lose any control over my assets?

Absolutely not. You name yourself as trustee, and so you control all your assets as before. You report to no one. You can change or revoke the trust at any time.

What happens if I cannot act as trustee?

In the trust document you will name someone, typically a family member or a close friend, to take over for you if something happens to you. We call this person the "backup trustee". This person has nothing to do with the trust and its assets unless and until you become incapacitated or pass away.

What if I own out-of-state real estate?

If you do not have a living trust, your heirs will likely have to go through two probates, one in your residence state, and one in the state where the property is located. A living trust allows you to avoid probate in both states.

Can't I avoid probate with Joint Tenancy?

For married couples, having their assets in their names as joint tenants does avoid probate upon the death of the first of them, but there is typically a high income tax cost to the surviving spouse upon resale since you lose the benefits of stepped up income tax basis. Additional problems will arise when the second spouse dies, or if both spouses die together - a probate will still be required at that point. There are also many problems caused by owning property in joint tenancy with a child. For example, your child's creditors might try to seize your property. Also, at your death, your property could end up going to only one of your children at the expense of your other children or grandchildren. A living trust can avoid all these problems.

Why do I want to avoid a conservatorship?

Medical science is making great strides, but an unfortunate consequence of longer life spans is that an increasing number of older people are unable to fully manage their own affairs. If you become incapacitated by a stroke or some other cause and do not have a trust and durable powers of attorney, your family will have to petition the courts to have a conservator appointed for you. This is a very public, expensive and time consuming process and can ususlly be completely avoided by a trust and durable power of attorney.

Are there any ongoing costs or maintenance?

No, there are no additional charges once the trust has been set up, unless later on you want to amend the terms of the trust. You do not need us to add or delete property from the trust. Also, transferring property in or out will not change your property taxes nor do you need to file special Income Tax forms.

How long have Trusts been around?

They have been used since the end of the Middle ages in England to avoid the Kings death taxes and in the USA since the origination of the country. We feel confident that in the future nothing will be done that will change its clear advantages as the key estate planning device of choice.



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Pettit Financial Services
760-732-3257 or Fax at 760-510-3968


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