WHAT IS A TRUST? A trust is a legal document created by you that names an individual or institution to manage the assets placed in it. It is also a set of instructions for asset management and distributing the assets to beneficiaries.

WHAT IS MEANT BY A "LIVING TRUST"? A living trust, or revocable living trust, is an estate planning tool that goes into effect during your lifetime. When you establish a living trust, you re-register your assets to the "trust", and the trust becomes the owner of the assets. You are the manager, or "Trustee". When you die, because the trust owns the assets, and not you, the assets will avoid probate.

WHAT IS PROBATE? Probate is the formal, court-supervised process which validates your will and distributes assets to your heirs.

WHAT ARE THE BENEFITS OF AVOIDING PROBATE? There are three important advantages to avoiding Probate. First, your heirs are not forced to pay probate costs, which can be significant. The national average for probate costs is 7.4% of the gross value of the estate. If the gross value of your estate, including life insurance, exceeds only $400,000, in most cases, probate costs alone will consume some $18,500 or more. Second, probate proceedings typically take from nine months to two years to complete. If funds are needed, even for living expenses, heirs cannot access them without court approval. Avoiding probate skips these delays. Thirdly, once in probate, the details of your estate become a matter of public record. Avoiding probate generally protects your privacy and that of your heirs.

ESTATE TAXES, CAN A LIVING TRUST HELP? A living trust does not by itself save estate taxes, but it can be a very effective tax planning tool. Federal and state estate and gift taxes are imposed upon an estate when the owner dies. An Unlimited Marital Deduction allows a spouse to pass his or her entire estate to the other spouse, free from estate and gift taxes. In addition, under the Unified Tax Credit, an estate valued at $1,000,000 (in 2002) or less, is exempt from federal estate and gift taxes. For married couples, the exemption applies to estates with values up to $2.00 million (increasing to $7.0 million in the year 2009), and possibly eliminated in the year 2010. However, due to poor tax planning, many couples lose half of their tax credit, and end up paying substantial taxes. This is where a living trust will help.

WHEN WILL THE ESTATE TAX BE ELIMINATED? The House and Senate have agreed upon a tax plan to phase out, and entirely repeal the Federal Estate and Gift tax in the year 2010. Unfortunately, this very repeal is repealed, and the current law goes back into effect at the same time. Other changes will take place along with these, making proper estate planning all the more challenging and important.

HOW DO I SET UP A TRUST? A trust is a legal document, and must be properly prepared to avoid Probate, and to provide estate tax help. You need the assistance of a qualified estate planning attorney to establish and set up a trust. There will be some costs involved, which will be minimal when compared to the costs associated with probate.

WHO CONTROLS MY ASSETS ONCE THEY ARE IN THE TRUST? The named Trustee controls the assets. A living trust allows you to name yourself as Trustee, which means you can still buy, sell, manage, borrow, or transfer assets at any time. A revocable living trust allows you to change the terms of your trust, or do away with it completely, at any time during your life.

WHAT SHOULD I DO NEXT? You should E-mail or fax the LAW OFFICES OF JEFFREY T. SCHOENHERR, with your specific questions or concerns, and begin the steps to maximize your estate for your intended beneficiaries.