Paul Deloughery - June 2019



JUNE 2019


I dedicate this front page article to address one of the sacrosanct beliefs held by all respectable and educated persons — namely, that trusts avoid probate. HERE’S THE MYTH: The marketing says that you need a “Living Trust.” Otherwise, your loved ones will need to spend thousands of dollars struggling through the horribly long probate process. Not only that, but all your family information becomes public. How could you put your distraught loved ones through that while they’re grieving your loss? THE REALITY: First, going through the probate process isn’t so bad. In fact, I probated both of my parents’ estates. Assuming your family isn’t fighting, the cost is around $5,000 if you use a lawyer. However, simple probates can be done by yourself using forms available online. There is some time investment up front. The whole process takes about six months, but most of that time is simply waiting for the four-month creditor waiting period to lapse. A huge advantage is that, at the end of the process, you know with absolute certainty that there aren’t going to be any creditors coming out of the woodwork. Second, having a trust doesn’t guarantee that you avoid probate. However, having a well-drafted trust does increase your odds of avoiding probate. Around the retirement addressing myths and “shiny objects” that don’t work. This month, I’d like to

communities here in Arizona, you’ll see billboards that advertise “Living Trusts” for only $297. I can see this working if you have limited wealth that isn’t going to significantly impact your heirs’ lives. Also, it requires that your heirs don’t take each other to court, fighting over who gets what, and that you properly transfer your assets to the trust. Third, and I think most importantly, a trust becomes problematic if you have any significant wealth accumulated (for instance, more than $100,000 per heir). That’s the point at which your heirs’ inheritance can do more than just pay off their credit card debt and car loans. The vast majority of people inheriting wealth can’t hold onto it for more than a few years. One study says that happens 70 percent of the time, though I suspect the actual percentage is higher. There are also other options for distributing your wealth. Rather than simply giving everything to your next of kin when you die, you can distribute it in stages — for example, 25 percent immediately, 25 percent in five years, and 50 percent when they reach age 65. If you have at least $500,000 (including life insurance proceeds), you could have a corporate trustee hold it in trust and distribute it only as needed. It’s very common to say that beneficiaries are entitled to receive distributions for their “health, education, maintenance, and support.” For larger estates, this could mean

that your heirs get monthly allowances so large that they no longer need to work. Did you really work so hard during your lifetime so your kids and grandkids could sit around and live off their inheritance? Finally, merely having a living trust does not prevent your heirs from fighting with each other or with the trustee. These fights often end up in probate court (the division of the judicial system that handles disagreements involving trusts). There are ways of preventing this from happening, including (a) having a Trust Protector with authority to amend the trust or resolve questions of interpretation, (b) requiring that all disagreements be resolved using mediation or arbitration, and (c) including a no contest clause that states that anyone who contests the trust will lose his/her inheritance. (The information in this article is not to be construed as legal advice, and this newsletter does not create an attorney- client relationship. Your particular situation is unique, and you need to consult with an attorney (such as me) to discuss your particular needs.)

–Paul Deloughery, Esq.

602-443-4888 • 1

Published by The Newsletter Pro •

Made with FlippingBook - professional solution for displaying marketing and sales documents online