Update on New Estate Tax Rules

Here's a quick update on some of the new estate tax rules.

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Living Trust Scams

Living trust scams have recently been on the increase. In fact, in several states, authorities have arrested and prosecuted living trust scam artists. They are most frequently charged under the statutes of Unfair and Deceptive Practices and Unauthorized Practice of Law.

Some of these scam artists are criminals out to steal your identity by getting your personal information. With that kind of information, they can clean out your bank account and ruin your credit.

Many others are more like the old 'Medicine Man shows' of yesteryear. These predators promote living trusts as though they are a cure-all to people who don't need them and don’t know enough to realize that. Usually, the real aim is to sell annuities, insurance and similar products that pay them a commission and they don't care much how they do it.

Pay close attention to this advice – KEEP YOUR WALLET IN YOUR POCKET!!

Regrettably, we live in a world with many con artists make a living selling unnecessary and even dangerous things to people. Some of these scam artists have discovered they can sell living trusts to the unwary as a 'magic bullet' that will fix whatever ails them.

Probate laws, estate taxes and estate planning concepts can be fairly complex. As a result, the general public is vulnerable to being sold something (a living trust) they don’t understand.

There are two facets to the danger.

First of all, a lot of people are convinced to buy living trusts they have no need of.

Second, maybe even worse, a lot of people purchase a living trust that won't do what they were led to believe it would.

So, what can you do about it?

1. Be on guard against salesmen who use high pressure sales strategies to get you to buy a living trust. This is not something you want to make a snap decision about. Before making this kind of decision, take the time to think about it and talk to people you trust.




2. When you receive calls from telemarketers or direct mail, be suspicious. Something else to be wary of is 'free' seminars and people going door to door as these are methods used by living trust con artists.




3. Watch out for pre-printed forms. Don't sign them without checking them out carefully. It is possible that there is a scam involved. Very rarely would such a pre-printed form fit your circumstances. You could end up worse off than if you had done no estate planning at all.




4. Watch out for scammers using sound-alike names of well-know, respected non-profits like the American Association of Retired Persons (AARP).




5. Be careful of people who describe their credentials in general terms like “estate planning specialist” or “certified living trust specialist.” Such titles could mean just about anything. The only legal advice you should listen to is from a licensed attorney. Because it is a legal document, a living trust can only be drawn up by an attorney in most states. So talk to an attorney before signing anything!!

By no means am I saying “don’t get a living trust.” Living trusts can be valuable estate planning tools for many people. Others, however, simply don’t need them. The bottom line is it is important to educate yourself about living trusts before you decide whether to get one.


To find out more about the advantages and disadvantages of living trusts, visit Advantages of a Living Trust and Disadvantages of a Living Trust.

Here's the sitemap for Free Living Trust Information. Lot's of good stuff!


Free Living Trust Information Home Page

Living Trust Blog



What is a Living Trust?

Assets Subject to Estate Tax
Estate Planning and Living Trusts
Estate Tax
Living Trust Definitions
Joint Ownership



Advantages of a Living Trust

Create a Financial Legacy with a Living Trust
Living Trust and Guardianship
How to Avoid Probate
Privacy of a Living Trust



Disadvantages of a Living Trust

Do Your Own Living Trust
Funding a Living Trust
Living Trust Attorney Fees
Living Trust Cost



Types of Living Trusts


Asset Protection Trust
Credit Shelter Trust
Crummey Trust
Disability Trust
Irrevocable Living Trust
Life Insurance Trust
Medicaid Annuity
Medicaid Trust
Offshore Trust
Revocable Living Trust
Special Needs Trust



Living Trust Myths

Do Living Trusts Prevent Will Contests
How to Avoid Probate
Is Probate Lengthy and Expensive?
Living Trust Scams
Living Trusts and Wills
Living Trust Taxes



Living Trust Examples



Living Trust Summary

Probate Attorney Fees
Probate Court
Wills vs Living Trusts



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How bad is probate really?

Many people think that probate is costly and takes a long time, which can be true. There are plenty of horror stories about a probate gone wrong. Indeed, some estates are tied up in probate for years on end, as people fight over who gets what. In these cases, probate can get quite expensive as the fees of the professionals involved (such as accountants, appraisers, lawyers, bankers and so on) add up.

The truth, however, is that this is not the usual way things happen. Probate tends to be quite quick and usually does not cost too much because nearly all estates are simple and small. The delay and cost of probate depends mainly on the size of your estate and what type of assets it contains. Obviously, a large, complicated estate, with many assets, will result in a longer probate.

Nearly all states have a simplified or streamlined procedure if your estate has a fairly low probate value. If your probate assets fall below the state threshold (normally under $20,000) you probably do not need to worry about probate because it is likely to be fast and inexpensive. It could be done in days and cost only a small filing fee.

However, if you have more probate assets – above the simplified threshold (i.e. $20,000) – then your estate will have to go through probate. And, especially for larger estates, probate can be time consuming and expensive.

The most common reason for the delay in living trust or probate is if there are gift tax or estate tax issues. Certain things have to be sorted out before everything can be distributed. Death tax returns are usually due nine months after the death but tricky valuation issues could arise.

The trustee (of a living trust) or the executor (if it is a will) cannot distribute everything properly until he knows how much estate tax or gift tax will have to be paid to the State or Federal government. It can take up to eighteen months after filing the death tax return for the federal and state taxing authorities to review the estate and gift tax returns. If your estate is complicated, it could take several years to complete the probate.

So, the first thing to figure out is the value of your "probate assets."

Everything that is in your name when you die is potentially a probate asset. However, some assets, that are in your name, upon your death, are not considered probate assets. Common examples include bank accounts with ‘payable on death’ (POD) designations. If you designate someone as the POD for your bank account, they will automatically get the account when you die, rather than putting it through the probate. This also applies to life insurance proceeds if you have designated a life insurance beneficiary.

However, most assets, in your name, will have to go through probate. One way to avoid that is to put the assets into a living trust. Any assets you have in a living trust are in the trust's name, rather than in your name, and therefore do not go through probate.


It is important to realize that a living trust will not eliminate delays caused by asset collection or tax issues but it will usually speed up the distribution process because the probate court does not have to approve everything done by the trustee. This is one impediment removed.

Living trusts are very flexible and offer many other benefits as well. If you are considering getting a living trust, you should think about both the pros and cons before making any decision.

To find out more about the costs and delays of probate, or the advantages of a living trust, visit How to Avoid Probate or Advantages of a Living Trust.

Think Twice about a Medicaid Trust

Medical care can be ridiculously expensive if you have the bad luck of becoming incapacitated. Traditional health insurance normally will not pay the costs of disability care or a nursing home.

Unfortunately, Medicare will not cover the costs of extended nursing home care either. Some people work hard all their lives, became sick, and have to sell virtually everything they own to pay for their nursing home care. Medicaid kicks in only when you are almost penniless.

However, that's the trick. The key is how Medicaid defines "penniless." The truth is you do not have to be indigent to qualify for Medicaid care. Through advance planning, it is possible to qualify for Medicaid and not lose all your assets. It is important to think about the issues and have some kind of plan before any crisis occurs.

Disability insurance is one plan. However, it tends to be costly and some people won't qualify for it due to pre-existing medical conditions. Many people are left wondering how to get Medicaid to cover disability care costs without being indigent to qualify for it.

A Medicaid Trust is an often discussed option. A Medicaid Trust is a trust that purportedly shields your assets from Medicaid should you become sick and require treatment.

The problem is that for a "Medicaid Trust" to work, it needs to be an irrevocable trust. When you place assets in an irrevocable trust, you no longer own or control them. If you take this step, you, indeed, become poor enough to qualify for Medicaid.

So, a Medicaid trust is a drastic step that most people will not consider. What makes it even more worrying is that Medicaid has a ‘five year look-back rule’ which lets the government recapture any assets you either placed in trust or gave away within 5 years of going on Medicaid. And, if the government can show you ever gave away assets with the intent of shifting future medical bills to Medicaid, it could deem that transfer as a fraudulent conveyance and recapture the assets.

To use a Medicaid trust, it is imperative that you transfer your assets to an irrevocable trust, which is managed by an unrelated trustee, when you are not in need of medical treatment, and hope that you will not need it within the next five years. There are a lot of risk factors in this plan!

There are some Medicaid estate planning professionals who state that they can create various types of attractive-sounding Medicaid trusts. Some claim that they can draft you a trust that will shield your assets from consideration for Medicaid qualification and still let you access the income from the trust; replace the trustee if you wish; and, allow you to benefit from the trust’s assets. Assets in a trust such as this one might disqualify you from Medicaid -- so be wary.

It is not impossible to create a working Medicaid trust but the laws and regulations concerning Medicaid qualification keep evolving and litigation will continue over the next few years. The recent changes that Congress made as a part of the Deficit Reduction Act of 2005 have complicated the whole thing, especially the five year look-back rule.

If somebody claims that they can offer you a Medicaid trust whereby you can still control and benefit from your assets, be wary and ask to see recent legal precedent supporting their opinion. If in doubt, talk to another attorney experienced in protecting assets from Medicaid.

The good news is you could use a Medicaid Annuity or Disability Trust
to preserve your assets and still qualify for Medicaid. To find out more, visit http://www.free-living-trust-information.com.