Revocable Living Trust

hoffmankimcolorAs Georgia based attorneys, we are very comfortable with the Will-based Estate plan.  Georgia probate courts are friendly and easy to work with, and Georgia law allows a Testator to waive the requirements of a bond, inventory and reporting to the court.  We cannot overlook the importance of a Revocable Living Trust, however, for those clients with out of state assets or where avoidance of probate is simply a desirable goal.

A Revocable Living Trust is, as its name implies, revocable or amendable at will by the Grantor, and living, which means it is funded and used during the lifetime of the Grantor as opposed to solely at death like a Will.  Generally, the Grantor funds the Living Trust with all of his or her assets, and the Grantor is generally the sole Trustee and the primary beneficiary of the Trust.  Though this all sounds somewhat circular, the Trust provides a very legitimate legal solution:  having the trust own all of your assets means you do not need a legal process to change title to those assets upon your passing.

For states like Florida, the Revocable Living Trust is a common estate planning document simply to avoid the probate process.  There, unlike Georgia, courts require the Personal Representative to post a bond, an inventory of the decedent’s assets must be provided to the court, and various accountings are also required to be filed.  The result is a generally a significantly more expensive and time-consuming probate process than in Georgia.   The Living Trust is not just for Florida residents though.  A Georgia resident owning a vacation condo in Florida will be subject to Florida’s probate process at death.  Thus, not only will the Estate be subject to Georgia probate proceedings, but it will need to file ancillary probate proceedings in Florida too.  This rule is applicable to ownership of assets in any other state, not just Florida, as each individual state has their own laws about transferring title at death.  Having a Living Trust own your out of state assets forecloses the necessity of multiple probate proceedings.

Another significant advantage to the Living Trust based Estate Plan is privacy.  Despite Georgia’s ‘friendly’ probate laws, the original Will must still be filed with the Court and it becomes public record.  This means anyone can review the terms of your Will at death.  In addition, all of your heirs at law are entitled to notice of the filing of the Will and a copy thereof.  For those that prefer their bequests remain private, or who perhaps have made an uneven distribution among their beneficiaries, the Living Trust may be a better choice.  A Living Trust can even help avoid a Will contest where certain heirs may be left out of an inheritance.

Revocable Living Trusts can also be significantly beneficial to a Grantor who becomes incapacitated.  Incapacity proceedings are becoming some of the most common probate court proceedings as people live longer but do not necessarily have all of their faculties.  When you form and fund a Living Trust, you name a successor Trustee to take over management of the Trust assets upon either your death or incapacity, again, entirely skipping the court process for doing so.  This provides a seamless, and immediate, transition of control from you to someone else in the event you can no longer manage your affairs.  And, it is a person of your choosing.  Your Trust document can even be very specific as to who and how you are determined to be incapacitated, thus giving you a great amount of control even where you would no longer have the ability to have such control.

The key to an effective Living Trust is fully funding the trust.  Funding the trust is legally transferring title to all of your assets to the Trustee of the Trust.  There are no tax consequences to such transfer as the trust is revocable, the IRS ‘looks through’ the trust and treats the assets as though they were still yours for income and transfer tax purposes.  Funding is accomplished by changing the title on bank accounts and investment accounts and recording deeds to real property.  Your attorney should go through specific funding instructions with you after a detailed analysis of your assets.

Finally,  a Living Trust will contain all of the testamentary decisions and dispositions of a Will, including trusts as needed for the surviving spouse and descendants, charitable bequests and other gifts you want made upon your passing.

For more information regarding this or any other estate planning concern, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

Sopranos Star’s Will Creates Windfall for IRS

James Gandolfini, the actor best known for his years as Mob boss, Tony Soprano, on HBO’s The Sopranos, died of a massive heart attack at age 51 in June.  The actor’s unexpected death leaves estate planners wondering if Mr. Gandolfini had any legal advice when making his Last Will and Testament, as the largest stakeholder of his estate will be the U.S. Government.

Gandolfini’s Will leaves 80% of his estate to be split equally among his two sisters and his infant daughter.  The remaining 20% is payable to his wife. Though a formal inventory is not due to be filed in the New York Courts until later this year, most estimate Gandolfini’s estate to be worth approximately $70 million.  That sounds like everyone gets a nice piece of the pie, but the government gets first bite.  The New York and U.S. government’s combined share is up to 55%, meaning the IRS could get approximately $25 million.  While Gandolfini’s wife’s 20% share is not subject to such taxes, her portion is determined after taxes are paid, leaving her with about $9,000,000.

The IRS’ share is to be paid in cash, and it is due within 9 months of death.  Gandolfini, like many wealthy celebrities, has mostly illiquid assets.  So, his family will likely be forced to sell certain assets to meet this tax liability.

The lesson here is that tax planning could have saved the Gandolfini family millions.  Assets pass tax free to spouses, so there were ample planning opportunities for a marital trust.  Gandolfini could have taken advantage of gifting strategies during his lifetime to reduce the size of his taxable estate.  A Revocable Trust could have been created to avoid the public knowing these details of his estate plan.  And, the property left to his infant daughter could have been placed in trust so she does not receive her entire inheritance in one lump sum upon attaining age 21.

 Alas, we are only left to wonder if this estate plan meets Gandolfini’s wishes.  With such a disproportionate amount of his estate being distributed to the IRS versus his wife and two children, it leaves an unsettling feeling that he just didn’t get the right plan in place before his untimely death.

For more information regarding estate planning, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.

Legal Matters in Starting Your Business

Mike_Hoffman_17Join Mike Hoffman in this 74 minute audio as he hosts the 11th session of the 24 hour MBA in discussing how to get your business off the ground.  There are many different legal options in starting a business, and in this audio session, you will understand the best way to start your business and keep it successful for future generations.  24hrmba-11.mp3