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Subject:  Living Trust

    Let's say that, using a little foresight, you've written a will to
    distribute your assets to your children after your death and now
    you're feeling pretty secure that you've safeguarded your children's
    inheritance.  But this may be a false peace of mind.  You may be
    leaving for your children months, even years, of agony in probate
    court, whopping attorney's fees, hassles with court officials and
    emotional anxiety of waiting for their inheritances.  Surprisingly,
    there's a simple solution to this problem and a growing number of
    people are taking advantage of it.

Revocable Living Trust
    Like many Americans, Jane learned the value of a revocable living
    trust firsthand, but paid a heavy price for it.  When her father
    died four years ago, he left his business, family residence, a
    vacation home in Arizona and other assets to her.  Fortunately,
    he had left a will and at first it seemed everything would go
    smoothly.  But the problems started cropping up almost immediately.
    Although Jane, an accountant by profession, was named the executor
    and sole beneficiary of the estate, she had to hire an attorney
    to probate the will.  She was fairly familiar with her father's
    financial affairs but, when it came to probate, there was very
    little she could do to expedite the process.  It seemed like the
    court and attorneys were getting involved in every decision.
    Finally, the probate was over more than two years later but
    took a heavy financial and emotional toll on Jane.  The once
    thriving business was pretty much ruined.

    After this experience, it did not take much to persuade Jane and
    her husband to set up a revocable living trust.  All of their
    assets were transferred to the trust, with both of them acting as
    trustees.  Because the trust is revocable, they can change its
    terms, or even cancel it at any time.  When one of them dies, the
    surviving spouse will continue to act as trustee and control and
    manage their assets.  In the event of incapacity or incompetence,
    the living trust will allow them to avoid lengthy and costly
    guardianship and conservatorship court proceedings.  As Jane put
    it, "I want everything to be as easy as possible for my kids if
    something happened to me.  I wouldn't want them to go through
    what I did with my father's estate."

Flexibility
    The beauty of a revocable living trust is its flexibility.  In
    setting up the trust, you transfer legal ownership of the assets
    to the trust, but you name yourself as trustee of the trust.
    Thus, although you've relinquished the nominal ownership of the
    assets, you continue to be the beneficial owner; you can manage,
    sell, mortgage or give away your assets as you please and the
    trust won't interfere.  If at some point in time you wish to
    change terms of the trust, including designation of beneficiaries,
    even revoke it in its entirety, you can do so.

Advantages Over Will
    Many estate planners swear by living trusts; their advantages
    over wills are many.  The problem with a will is that it must
    be proved valid in probate court.  To probate a will, you'll
    definitely need to hire an attorney and attorney's fees can run
    into thousands of dollars.  There may be executor's commissions
    and other court costs.

    California's probate fees - set by law - are about average among
    states.  For an estate of $500,000 (by no means a small or uncommon
    estate where home prices start around $200,000,) the cost of
    probate in terms of attorney's fees and executor's commissions
    would range around $22,300.  This is a big chunk out of your
    children's inheritance.

    Worse than the financial blow, probate can exact an emotional toll
    on the surviving family.  Your heirs may have to wait several months
    and sometimes years to collect their inheritances, depending upon
    the efficiency of the executor, attorney and probate court.  Delays
    of eighteen months to two years are not at all unusual.

    Probate records are public records and are available to all kinds
    of salespeople, scrupulous or otherwise.  Many a widow has been
    persuaded to make unwise or unsuitable investments under pressure
    from fast-talking hucksters.

    Living trusts, on the other hand, require no court proceedings;
    a successor trustee (who may also be a beneficiary) simply
    distributes the assets according to the trust's instructions and
    dissolves the trust.  "The process is much quicker, cheaper and
    more private than settling a will, and it may save on taxes, too,"
    according to a well-known authority on trusts in Atlanta.

Few Disadvantages
    According to most estate planners, revocable living trusts have few
    disadvantages.  Inertia may be the biggest foe in most cases.  Most
    trust instruments are relatively simple to prepare, and you'd need
    to formally transfer the title of various assets to the trust.
    This requires some paperwork and you'd need to contact your banks,
    brokers, insurance agents, etc.  In most cases, they are familiar
    with revocable living trusts and you'll get excellent cooperation
    from them.  Once this paperwork is complete, the trust will not
    affect the way in which you control or manage your various assets.

    Along these lines, your setting up a revocable living trust will
    have no effect on your income tax situation.  If you act as a
    trustee of your own trust, as is normally the case, you wouldn't
    need a separate taxpayer identification number.  You would continue
    to report all trust income, losses and deductions on your individual
    tax return under your own social security number.

Can Save Taxes, Too
    Living trusts can, with proper planning, save on federal estate
    taxes.  If a couple has a so-called "A-B" living trust, with
    separate trusts for husband and wife, they can pass on up to
    $1.2 million tax-free to their children, trust attorneys say.
    Under this method, each trust can make the maximum utilization
    of the $600,000 federal estate tax exemption.  The surviving
    spouse can draw the trust income for life, and also have the
    right to invade the principal of the other trust, if there is
    a need.  When the second spouse dies, both trusts go to the
    children.  Without the A-B plan, the children would pay $235,000
    in federal taxes on the $1.2 million estate, says a tax attorney.

Trusts Hard to Contest
    When a will is probated, the executor of the estate is generally
    required to notify all potential heirs - whether they are named
    in the will as beneficiaries or not - that the will is in probate.
    A disgruntled heir, rightfully or wrongfully denied his share of
    the estate, can rock the boat at this time by alleging undue
    influence or lack of mental capacity.  In many instances, he may
    not even need to hire an attorney to start such a will contest.
    Facing the prospect of a long, drawn-out court battle, often the
    executor or the other heirs will settle with the disgruntled
    heir by giving in to the "blackmail."

    This is exactly what happened when J. Seward Johnson, 87, of
    Johnson and Johnson fortune died, leaving the entire estate worth
    $500 million to his third wife, Basia, then 46.  Johnson's six
    children, disinherited by their father, contested the will.
    In a settlement, the children and a charity got $169 million.
    The wife got to keep the remaining fortune and the attorneys
    reaped a $24 million bonanza.

    Living trusts, on the other hand, are extremely hard to penetrate.
    A living trust is set up during your lifetime and, presumably,
    you've been administering the trust for several years.  It would
    be difficult to challenge your competency to set up the trust
    under these circumstances.

    Upon your death, the trust estate is distributed to the named
    beneficiaries almost immediately, without the intervention of a
    probate court.  Anyone wishing to contest the trust would have
    to sue each and every beneficiary - after they've received the
    assets, ruling out the possibility of blackmail.

    Remember, the trust is an entirely private affair and no one,
    other than the beneficiaries, needs to know the contents of the
    instrument.  This precludes disgruntled heirs from using the threat
    of a court battle to tie up the estate in years of litigation.

Joint Tenancy Not a Solution
    Most married couples (and often, a parent and a child) hold title
    to a property in joint tenancy with the right of survivorship.
    Upon the death of one joint tenant, the surviving joint tenant
    inherits the asset without going through probate.

    So far so good.  But when the second spouse dies, unless he or she
    has placed the property in joint tenancy with someone else, that
    property will be probated. A living trust is one sure way to avoid
    that problem.

    Most estate planners advise against joint tenancy for a variety of
    reasons.  For some persons, in certain situations, joint tenancy
    may be a wise decision.  However, in a vast majority of cases,
    joint tenancy spells major disadvantages.

    For instance, say you own your home and care in joint tenancy with
    your son.  If the son gets into an accident, and the injured person
    files a lawsuit, you'd be named a defendant along with your son.
    If an adverse judgment is rendered, your personal assets are at
    risk.

    Or take this scenario.  You and your wife own all assets in joint
    tenancy with a view to avoid probate when one of you dies.  But
    your wife has to be put into a nursing home due to Alzheimer's
    disease.  Now you would need to go to probate court before being
    able to do anything with the jointly-owned assets.  In this case,
    joint tenancy actually turned out to be a curse.

Guardianship
    Living trusts are well-suited to handle just such a contingency.
    A growing number of Americans are putting their assets into living
    trusts because they want to avoid being placed under a court-
    appointed guardian if they become physically or mentally disabled
    and are unable to manage their affairs.  "With a living trust, you
    can designate the person (generally the successor trustee) who will
    take over your affairs in the event you become incompetent," says
    an estate planner who advises senior citizens on a regular basis.
    This avoids the cost and public embarrassment of a court
    conservatorship or guardianship proceeding.

Why Aren't Living Trusts Better Known?
    If living trusts are such a wonderful device for passing on your
    inheritance to your children, why aren't they better known?

    Well, the truth is they are getting increasingly more popular, more
    so in certain parts of the country than others.  You'll regularly
    find articles on living trusts in most major personal finance or
    money magazines and also in newspaper columns.  These articles
    universally laud the benefits of living trusts against wills, or the
    scarier option of dying without a will.

    Along these lines, your setting up a revocable living trust will
    have no effect on your income tax situation.  If you act as trustee
    of your own trust, as is normally the case, you wouldn't need a
    separate taxpayer identification number.  You would continue to
    report all trust income, losses and deductions on your individual
    income tax return under your own social security number.


For further information contact:

Carl H. Starrett II
1660 Hotel Circle North, Suite 304
San Diego, CA 92108-2803
(619) 497-0095





Carl H. Starrett II, Esq.
esquire93@aol.com