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					How to Make Sure
 YOUR LIVING TRUST
    Will WORK
                Presented
                   By

      The Alpern Law Firm
         Jack N. Alpern, Esq.
        Charlene E. Burke, Esq.
  “Helping people preserve their wealth”
    Jack N. Alpern
   Attorney at Law since 1971
   Bachelor of Arts, The Ohio State University
   Juris Doctorate, The Ohio State University
   Post-graduate courses in Basic and Advanced Estate
    Planning, Case Western Univ. College of Law
   Family Wealth Counselor
   Co-Author, Total Wealth Management: The Definitive
    Guide to Estate and Financial Planning
   Past Chairman Advisory Board, Salvation Army
   Charter Member, American Academy of Estate
    Planning Attorneys
    Charlene E. Burke
   Attorney at Law since 1988
   Bachelor of Arts, Youngstown State University
   Juris Doctorate, University of Akron School of Law
   Post-graduate courses in Trust Law, Ohio Bankers
    Association
   Past Vice-President and Trust Officer, Butler Wick
    Trust Company
   Board Member, MASCO, Inc. Employs Adults with
    Mental Retardation and Developmental Disabilities
   Board Member, Alzheimer’s Council
Now on the Internet

    www.alpernlaw.com
Your Estate Matters

    Thank You for Coming
            and
      Congratulations !
Procrastination
Lack of Knowledge
    Our Seminar Agenda
   Review basic Living Trust issues
   Review new laws that impact all trusts
   Review the top 10 reasons why most
    Living Trusts fail
   The importance of a regular trust review
   Why coordination with financial
    planning is so very important
   Questions & Answers
Our ” Ground Rules”




  1. Please save your question until the end, and

  2.   Turn off cell phones and pagers.
What Is an ” Estate” ?
But Don’t Forget…
         Retirement Plans
                    IRA

          401 (k)     403 (b)

     Pension Annuities      Stock
                           Savings
But Don’t Forget…
But Don’t Forget…
Wanted!
   IRS
          Probate
          Attorney
Yes, Your Living Trust Was a Great Idea
       So your hard earned assets go to:
   Whom you want
Relatives and Friends
Yes, Your Living Trust Was a Great Idea
      So your hard earned assets go to:
   Whom you want
   When you want
Young, Irresponsible or Disabled Beneficiaries
Yes, Your Living Trust Was a Great Idea
     So your hard earned assets go to:
   Whom you want
   When you want
   Handled by the person you want
Yes, Your Living Trust Was a Great Idea
       So your hard earned assets go to:
   Whom you want
   When you want
   Handled by the person you want
   At the least cost
                             Courts
                             Attorneys
                             IRS         Family
Yes, Your Living Trust Was a Great Idea
          So your hard earned assets go to:
   Whom you want
   When you want
   Handled by the person you want
   At the least cost—Avoiding:
       Living Probate
       Death Probate
       Death taxes
Why Most Living Trusts Don’t Work!
   Most Living Trust plans are:
       Poorly drafted
       Improperly maintained
       “Bare bones” features
   We’ll show you what features a good plan
    should have
   We’ll offer you a free consultation to review
    your current Living Trust documents
 Why Most Living Trusts Don’t Work!
When time passes, we notify our clients that it’s
  time to come in for a “check-up”
Most respond, but many do not
Those who do not could be risking that their trust
  is no longer current in terms of:
  - changes in the law
  - changes in their family situations
  - assets NOT in their trusts
Bill & Mary’s Living Trust
Transfer Assets Into the Trust
Three Trust Positions
            All you need to remember…
   Trustors—Create trust
    and transfer their assets
   Trustees—Manage trust
    assets but can’t spend
    them on themselves
   Beneficiaries—All trust
    assets are for their benefit
Bill & Mary Occupy All 3 Positions
       Trustors




                            Beneficiaries
Trustees
It’s Business As Usual…
                …you are in control!
        The trust can be amended or revoked
   No change in property tax
   No income tax change
   No new tax forms
So, Why Create a Living Trust?
     It’s simply a…
   “Stand-by Device”
 Protection in case you:
   Become disabled, or
   Die

 No court involvement
    Jones Living Trust
        How it works during different time periods
                            Jones Living
Both spouses are alive         Trust

                              First Death

                               Jones
One spouse is deceased      Living Trust

                             Second Death

                               Jones
Both spouses are deceased   Living Trust
    The Living Trust Avoids…
         Death Probate
$   Court fees
$   Publication & bond fees
$   Executor fees
$   Probate Attorney fees
        No lengthy probate
        No public record
        No multiple probates
     AB Trust Tax Planning
                                                           Checking account
                                                              Life insurance

Bill & Mary are the Trustors                                            IRA
and Co-Trustees
                                    First Death
  Survivor’s Trust                                           Family Trust
                                     INCOME
   (Revocable)                                               (Irrevocable)
        “A”                                                       “B”
     $700,000                  PRINCIPAL for HMSE               $700,000
                               PRINCIPAL 5% or $5,000
Mary is sole Trustee and
sole Beneficiary
                                   Second Death

                 John                                   Susan
Federal Estate Tax Is…
             41% to 55%
        Exclusion        Year
        $1,000,000       2002-2003
        $1,500,000       2004-2005
        $2,000,000       2006-2008
        $3,500,000       2009
        Repealed         2010
        $1,000,000       2011
Ohio Estate Tax Is…

             2% to 7%
        Exclusion       Year
        $ 338,333       2005- ????
Will You Be Alive in 2011?
   One simple question – Will you or your spouse
    be alive 5 years from now?
    The Living Trust Avoids…
        Death Probate
$   Court fees
$   Publication & bond fees
$   Executor fees
$   Probate Attorney fees
        No lengthy probate
        No public record
        No multiple probates
                           Year 2011 Jones Living Trust

                                                           Checking account
                                                              Life insurance
Bill & Mary are the Trustors
                                                                         IRA
and Co-Trustees
                                    First Death
Mary is the sole Trustee and
Beneficiary

  Survivor’s Trust                    INCOME                    Family Trust
   (Revocable)                                                  (Irrevocable)
        “A”                 PRINCIPAL for HMSE                       “B”
     $700,000                                                      $700,000
                                PRINCIPAL 5% or $5,000
                                    Second Death

                                   A+B=$1,400,000

                     $700,000                        $700,000
                                                            Successor Trustee
     Top 10 Defects in Most Living Trusts
1.    Improperly Funded
2.    No protection from Nursing Home costs
3.    No protection for untrustworthy heirs
4.    No creditor protection for heirs
5.    No divorce protection for heirs
6.    No asset protection for disabled heirs
7.    No ability to create incentives for heirs
8.    No ability to stretch IRA distributions
     Top 10 Defects in Most Living Trusts
9.    Vague or missing trust provisions
         Defective Trust Tax Instructions
         What happens to trust assets during disability?
         Who is included in beneficiary definitions?
         How effective is the “no contest clause”?
         Are there provisions for new tax laws?
10.   No built in flexibility if things change
         Flexibility for beneficiaries when their needs
          change
         Magic of Special Co-Trustees
Defect # 1 – Improper Funding
#


     Defect # 2 - Nursing Home Protection

    Who Will Need Long-Term Health Care?




                60%          40%
                                           Needing Care
                                           Do Not Need Care
Cost of Nursing Homes in Our Area

    $54,216 per year
    The High Cost of Long-Term Health Care
   Impact of Just 13 Weeks of Long-Term Care
                      34.0%                70.0%
               DESTITUTE       DESTITUTE




            Married            Single


          Below Poverty Line   Above Poverty Line
Driving People Into Poverty
   500,000 families a year become destitute due
    to long-term health care expenses
Long-Term Health Care Costs
   For the elderly:
       Long-term health care is the
        single largest out-of-pocket
        expense
       81% of all health care
        expenses are long-term
        health care costs
How Do “Medicaid Triggers” Work?

                  Living Trust…
                   How does it
                      work?
                       Special
                       Medicaid
                       Triggers
Bill Has a Stroke
  Trust Has “Medicaid Triggers”
                                 Medicaid Triggers
                               Gives Successor Trustee
                                power to:
                                   Legally reposition assets
                               Durable Power of Attorney
                                gives power to:
                                   Speed up Medicaid
                                    eligibility
Mary as Successor Trustee
The Importance of Medicaid Triggers
   Bill’s stroke prevents him from any planning
Defect # 3 - Protecting Untrustworthy Heirs
       What If John Can’t Be Trusted?
                     Jones Living
                        Trust

                      Mary’s Death




                                     Income
                     John’s Share
                       in Trust      Principal

 Outright to Susan
Defect # 4 – Creditor Protection
    What If John Had Creditor Problems?
                 Jones Living
                    Trust


                  Mary’s Death



                                 Income
                 John’s Share
                   in Trust      Principal
Defect # 5 – Divorce Protection
       What If John Gets a Divorce?
     Jones Living
        Trust

                      Mary’s Death




                       Income
       John’s Share
         in Trust      Principal
Defect # 6 – Protecting Disabled Heirs
    What If You Have a Disabled Child?
     Jones Living
        Trust

                       Mary’s Death




                        Income
       Special Needs
           Trust        Principal
  Defect # 7 – No Incentives for Heirs
      What If You Want to Create Incentives?
         Jones Living
            Trust

                           Mary’s Death
                                          Income depends on:
                                         Earned income
               Income                    Education
John’s Share
  in Trust     Principal                 Drug/Alcohol free
                                         Works in family business
Defect # 8 – No IRA Stretch Provisions
   Special technical rules must be followed to be
    a Qualified Retirement Trust
       Special “look through” provisions
           Stretch distributions over longer periods
           Trust beneficiaries get to defer income taxes
       Without “look through” provisions
           All proceeds must be paid out within 5 years
           Accelerating the payment of taxes
     Defect # 8 – No IRA Stretch Provisions
                               Jones Living
                                  Trust

                                 Mary’s Death




After 5 years: $82,132
                               $100,000 IRA
Lifetime Stretch: $1,161,764
                               Distribution
Defect # 9 – Vague or Missing Language
             Dealing With Tax Uncertainties
            Minimizing or avoiding death taxes is
             an important issue
            Before 2001 it was an easy job
            Now it requires enormous flexibility
                2006 – Tax exemption is $2,000,000
                2010 – Estate tax is abolished
                2011 – Tax exemption is $1,000,000
            Special flexible tax provisions needed
Defect # 9 – Vague or Missing Language
               How Is the Trust Managed During
                           Disability?
              Which assets are to be used to
               support the disabled spouse?
                  Only trust share of disabled spouse?
                  The share of both spouses?
                  Only income or principal too?
              Particularly important in 2nd marriages
                  Children from earlier marriages may
                   object
    Defect #9 – Vague or Missing Language
     Who Is Included in the Definition of Heirs?
   Does the client want to include:
        Step-Grandchildren
        Adopted Grandchildren
        Grandchildren born out of wedlock
    Defect # 9 – Vague or Missing Language
         Are There Trust Resolution Provisions?
   What happens if there is a dispute arising from
    trust language?
        Does everyone have to go to court?
        Are there non-judicial arbitration provisions?
   What about a “No Contest” clause?
        Punishing those who attack the trust
Defect # 10 – No Built-In Flexibility
                  Beneficiary Flexibility
   Flexibility is the key to a well-drafted trust
       Circumstances can change
       Trustees need powers to adapt to changes
           Future disabilities
           Future divorces
           Future creditor claims
       Beneficiaries should be able to direct the assets at
        their death
    Defect #10 – No Built-In Flexibility
                      Special Co-Trustees
   They have no regular duties and serve in addition to
    regular Trustees
      Not involved in the day to day trust operation

        Spring into action if:
            Regular Trustees can’t act because of a conflict
            Power to amend or terminate trust in certain
             circumstances
            Resolve disputes between regular Trustees
     Top 10 Defects in Most Living Trusts
1.    Improperly Funded
2.    No protection from Nursing Home costs
3.    No protection for untrustworthy heirs
4.    No creditor protection for heirs
5.    No divorce protection for heirs
6.    No asset protection for disabled heirs
7.    No ability to create incentives for heirs
8.    No ability to stretch IRA distributions
     Top 10 Defects in Most Living Trusts
9.    Vague or missing trust provisions
         Defective Trust Tax Instructions
         What happens to trust assets during disability?
         Who is included in beneficiary definitions?
         How effective is the “no contest clause”?
         Are there provisions for new tax laws?
10.   No built-in flexibility if things change
         Flexibility for beneficiaries when their needs
          change
         Magic of Special Co-Trustees
    Putting the Final Pieces Together

   Property               Estate Plan
Power of Attorney                       Living Trust




             Pour Over Will

                              Health Care   Financial
    Property                  Documents     Planning
   Agreement
The Most Complete Estate Plan
                         The Basics:
                 Living trust
                 Pour over will
                 Property agreement
                 Property power of attorney
                 Health care documents
The Most Complete Estate Plan
                     The Owner’s Manual:
                 Portfolio binder
                 Explanation of documents
                 Trust flow chart
                 Title transfer instructions
                 Certified copy of trust
                 Location lists
                 Anatomical gifts form
                 Audio summary CD
Medical Information Release Form
   HIPAA Authorization Forms included in your
    Estate Planning Documents
       What is it?
       Why do you need it?
       How does it work?
Medical Information Release Form
   Release Form has no impact on your treatment
   Only purpose is allow release of your medical
    information to selected people
       Legal Reasons
           Trustees and Health Care Agents need access to
            perform their duties under your estate plan
       Personal Reasons
           The permitted release of your medical information
            to family members and friends
Living Trust Restatement
                   Restated Documents
               Living trust
               Pour over will
               Property agreement
               Property power of attorney
               Health care documents
               HIPAA
The Most Complete Estate Plan
                    The Owner’s Manual:
                 Explanation of documents
                 Trust flow chart
                 Title transfer instructions
                 Certified copy of trust
                 Location lists
                 Anatomical gifts form
                 Audio summary CD
    A Little Free Advice…
        Avoid bargains when purchasing:
   Parachutes
   Brain surgery
   Fire extinguishers
   Living Trusts
    Putting the Final Pieces Together

   Property               Estate Plan
Power of Attorney                       Living Trust




             Pour Over Will

                              Health Care   Financial
    Property                  Documents     Planning
   Agreement
The Importance of Financial Planning

Even if the estate plan is done flawlessly,

 sometimes the financial planning doesn’t fit.

   Here’s how to avoid that...
    Free Consultation
             Trust Review Checklist

   Improperly Funded
   No protection from Nursing Home costs
   No protection for untrustworthy heirs
   No creditor protection for heirs
   No divorce protection for heirs
   No asset protection for disabled heirs
   No ability to create incentives for heirs
   No ability to stretch IRA distributions
   No ability to handle life insurance
   No management flexibility for beneficiaries
   Vague or missing trust provisions
   What happens to trust assets during disability?
   Who is included in beneficiary definitions?
   How effective is the “no contest clause”?
   Are there provisions for new tax laws?
   No flexibility to amend documents when laws
    change
Wake Up!
           Do it now!
Any Questions?

      Where’s the
      bathroom?
Thank You for Coming…

      …and we look forward
       to seeing you soon

           “Helping People
        Preserve Their Wealth”
                                 Jones Living Trust

                                                         Checking account
                                                            Life insurance
Bill & Mary are the Trustors
                                                                       IRA
and Co-Trustees
                                   First Death
Mary is the sole Trustee and
Beneficiary

  Survivor’s Trust                   INCOME                   Family Trust
   (Revocable)                                                (Irrevocable)
        “A”                PRINCIPAL for HMSE                      “B”
     $700,000                                                    $700,000
                               PRINCIPAL 5% or $5,000
                                   Second Death
                                 Common Pot Trust
                                   A+B=$1,400,000

             $700,000          Successor Trustees       $700,000
                                                        $700,000
  Trust for Single Person
                           Mary Jones Living Trust
                                                        Checking account
                                                           Life insurance
                                                                      IRA

Mary is the sole Trustee




                     •No living probate
                     •No death probate
                     •No estate tax up to $1,500,000

                               Successor Trustees
Complete Estate Planning


              FLP

                                APT
    QPRT     GRAT   GRUT

              CRT   Lifetime   Child’s
    ILIT
                    Giving     Trust
           LIVINGTRUST
Health Care Documents
   Avoid unwanted medical interventions
   Help your family know your wishes
   Protect your life savings
Don’t Leave Home Without It
    Emergency Card
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    Secure storage       are unavailable
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   Avoid unwanted medical interventions
   Help your family know your wishes
   Protect your life savings
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   Health Care Documents are unavailable
   We protect you with DocuBank

				
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posted:12/9/2012
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