By Tabi Katouzi
Encino , CA
As a US taxpayer and resident, you have a legal right to save money. That is right; you may save money for your heirs by avoiding probate, and in some cases, estate taxes by establishing a Living Trust. As a member of the Muslim community, I am amazed at how few educated people have set up living trusts for their families. It is a duty of every Muslim with assets to take care of their affairs, or write their wassiyat.
Contrary to the popular belief, Living Trusts are not just for the rich. In fact, if you own real property, paid for or not, it is preferable that you hold title to the property in a Living Trust.
If you own a large estate (real estate, cash, stocks, bonds, negotiable instrument) thousands of dollars of your children’s inheritance will be wasted on probate fees, estate taxes and attorney fees without a living trust. Most people who own real property should avoid probate with a Living Trust. The reason that most do not, is simple: there is still a lot of confusion about what a living Trust actually does.
A Living Trust is a legal document that can do everything a will does, but without the anguish and cost of probate. A Living Trust avoids probate and is the proper way to protect your property for those you love. It can save thousands of dollars in legal fees, administration fees, court costs and estate taxes without costly delays.
Even if you already have a will, you still need a Living Trust. A will requires the court process known as Probate. It is common knowledge that Probate is costly, slow and outmoded.
Probate is very expensive and time-consuming. The Probate process may take 1 to 2 years or longer, during which time all of your assets are tied up and can lose value. Your family must petition the court for the use and control of your assets - a legal nightmare.
With a Living Trust, these problems are avoided. You transfer all of your property into the trust. Since almost all of your assets are held in your trust, there is nothing to probate upon your passing away.
Joint Tenancy may avoid probate. But it can have very expensive tax effects. Property that has appreciated in value can result in thousands of dollars in taxed gain. A Living Trust receives a “step-up” in basis usually resulting in no taxable gain.
In addition, if your joint owner is sued, you can lose control of your property. If your joint owner is incapacitated, you won’t be able to sell, rent or refinance without first obtaining the court’s permission (i.e., a conservatorship). My legal advice is simple: joint tenancy is a very poor substitute for a living trust.
A Living Trust also allows you to still maintain complete control over your property, just as you do now, because you become the trustee of the trust. Also, a Living Trust may be changed, amended or revoked at any time.
With a Living Trust, complete with Durable Power of Attorney for Health Care, your spouse, child or trusted relative (i.e. your “successor Trustee”) takes over for you immediately in the event of incapacity. Your successor trustee would continue to follow your wishes as set forth in the Trust. If and when you recover, you will regain control of your Trust. If you die, your successor will make the distribution of your property according to your instructions.
Livings Trust may also substantially reduce or completely eliminate estate taxes. If you are married, certain division of your assets can be done upon the first spouse to die, to receive exemptions from estate taxes. Depending on the exemption amount at the time of first death, this can add up to large savings from estate taxes for your heir.
Most of everything about a Living Trust is advantageous to you and your beneficiaries. It organizes your financial affairs, plans for incapacity, avoids the anguish and cost of probate and can save thousands of dollars in estate and capital gains taxes.
The Muslim community is too smart to continue to throw money away and prepare for their loved ones in case of their passing. Let’s start today and put our affairs in order.
Be smart and act before it is no longer possible to safeguard your estate. Contact me, Tabi Katouzi & Associates at 818-995-9176.
I am an expert in this area of law and have helped hundreds of clients to economically save their homes and other assets over the years through my expertise in estate planning and asset protection. My offices are located at 15760 Ventura Blvd, Suite 1250, Encino, CA 91436-2406.