Estate planning a critical step
By Barbara "Bobbie" Shufani Special to the Acorn

Estate planning, including a revocable living trust, is critical if you want to preserve your assets and have them left for heirs of your choosing at the time of your death. No matter the value of your assets, it's crucial to have a revocable living trust. Without it, important matters will be left to the government to decide.

A revocable living trust allows you to design how your assets can be distributed in a manner which is ideal for you and helps ensure that you are taking care of your loved ones.

Why and how were revocable living trusts established? The concept of estate planning started in 16th century England because the king's court handled all land transfers and would keep a portion of the land for itself. Therefore, landowners created trusts to avoid probate.

Estate taxes started in the United States in 1797 to fund the undeclared war with France and were repealed and reinstated several times. Trusts are designed to help avoid or reduce estate taxes.

What are the basic elements of a revocable living trust, and what are the pitfalls? The first thing is to establish a trustor (creator) or trustees, and make a list of the assets and assign beneficiaries. The creator can revoke the revocable living trust up until the time of death of one of the trustors, and at that point it becomes irrevocable. A common problem in estate planning is when individuals change the title of their home to include their heirs in order to avoid probate which, in turn, can put them into jeopardy of losing their assets and exposing them to liability.

What are some steps in creating a revocable living trust for homeowners? When one owns a home, the home becomes the ownership of the family trust and you become a manager of the trust. When the trustee dies, the trust passes to the beneficiary to manage the trust.

How probate works

Wills are designed to go through probate. The problem with probate is that it's time consuming and can take 20 to 24 months. Costs are generally between 3 to 8 percent of gross estate and become part of a public record, so privacy is lost. Federal estate tax is due within nine months and prepayment must be made in cash.

How much money can be passed through trusts, and how does it differ for single and married individuals? Single people can pass $450,000 through their trusts. AB trusts are for married couples, and they can pass $2 million, for a total of $4 million to their heirs.

What are the top 10 reasons to have a revocable living trust?

+A revocable living trust is developed by an attorney and is tailored to each individual client and outlines the specific wishes of that client.

+Creators have control of their assets and have a specific plan if they become incapacitated.

+Having a revocable living trust creates peace of mind.

+A revocable living trust avoids probate.

+The establishment of a revocable living trust eliminates the California gift tax.

+A trust also reduces federal estate tax.

+Privacy can be maintained by developing a revocable living trust.

+By having a trust in place, one's wishes cannot be revoked.

+A revocable living trust is important for individuals who have children and who want to ensure that their heirs receive what is rightly theirs. It also avoids any custody issues that might otherwise be of concern.

+A revocable living trust is good nationwide, no matter where one resides.

Do you have any final thoughts why individuals should prepare a revocable living trust? In the high profile Anna Nicole Smith case, which brought world attention to this very issue, her wants and desires would have been clear and concise if there had been a trust in place. We can all learn some valuable lessons from this.

Shufani, of AIG Financial Advisors, may be reached at phone at (805) 484-1011, ext. 154, or by e-mail at bshufani@ aigfinancialadvisor.com.