Here is the video of a PowerPoint presentation Matthew C Mullhofer recently gave at a local conference.
In deciding whether or not to use the internet to write your trust, will or estate plan, the old adage holds true: “A man who represents himself in court, has a fool for a client.”
You may wonder, “Why do I need a living trust?”, and that is a very good question, because the answer is not always the same for everyone. For instance, if you own real estate, it is important to hold title to that property in a trust. When you die, your intended heirs cannot transfer, sell, or refinance that property until they obtain a Court order allowing them to do so. This is called probate.
The probate process allows heirs to have the real estate and other personal property like bank accounts, mutual funds, and CD’s to be transferred to their name. The downside to probate is that it takes about 18 months to be final and the costs are extreme.
For example, the cost to probate an estate worth $500,000 would be close to $20,000. This would include attorney’s fees, court filing fees, the posting of a bond and appraiser fees. The cost of a living trust properly prepared and funded by an attorney for a $500,000 estate would cost about $1500.
1. THE COST OF THE IMPROPERLY PREPARED TRUST.
Many people are the do-it-yourself type. But if you haven’t made the right decisions in changing title to every asset that you have worked so hard to achieve, your heirs may be required to go to court to persuade a judge of what you really intended to happen. Internet services do not provide the service of re-titling your assets into your trust.
A trust must have your assets funded or transferred to the trust for it to work properly. Assets have legal title, such as your home, money market accounts or stocks and bonds. The title to your assets must be changed over to your trust.
When you transfer title to the assets, you must have legal documentation properly filed and or recorded with the proper agency. If you miss something, or fail to record a deed, that asset will not pass to your heirs through the trust and will be subject to the probate process. The cost to probate a home worth $250,000 would be close to $12,000. This would include attorney’s fees, court filing fees, the posting of a bond and appraiser fees.
Any asset left out of the trust will have to pass through probate. In addition, the asset will be frozen during this process. So if you have a stock that is selling at a high price, you cannot sell until the probate is final. Again, this may take 18 months, and during that time, the stock market may change and the price of your stock could fall.
2. THE TIME INVOLVED IN PREPARING A TRUST CAN BE UNLIMITED.
Estate planning attorneys usually need about four to eight hours to properly prepare, execute and fund a living trust. The time needed by an individual could be more than twenty hours. And there is no guarantee that the self-written trust is properly completed. It would be like your car’s “check engine” light comes on and you pull off onto the side of the road. You can try to diagnose the problem on your own or you can take the car to a well trained mechanic that will charge you a fee to fix the problem. Which would you choose?
In probate court, judges do not like trusts that were not prepared by attorneys. In my practice, I have had the opportunity to see how probate judges view trusts prepared by non-attorney’s and they look for defects that will allow the trust to be invalidated. Again, the assets will then be subject to probate and more time added to the botched estate plan.
3. THE TAX IMPLICATIONS OF IMPROPER ESTATE PLANNING.
Internet services do not look at your net worth or entire estate to spot potential tax traps that could eat up your hard earned assets. An estate planning attorney will advise you on what to do if your estate is subject to federal estate taxes. As recently as 2007, an estate worth over 2 million dollars would be taxed under the federal estate tax at rates of up to 49%. This means that those assets that you have already been taxed on during your lifetime will be taxed again after your death
4. THE PROPER SUCCESSORS CAN MAKE OR BREAK YOUR PLAN.
When you go online to do estate planning, you are filling out a series of standard questions. One question is, “Who do you want to be in charge of the distribution of the assets after you have died?” There is no discussion as to why you choose that particular person.
As an attorney, I take a very active role in helping my clients decide on who is the right person or persons to act as the successor trustee. Is this person ethical? Does this person have a business or financial background? Do they have outstanding debts or creditors suing them? Do they cave into the pressure of others? Are they reliable? These are all very important questions to consider when choosing your successor. In my practice, I receive many calls each month from disgruntled beneficiaries that want to sue the successor trustee for embezzlement of trust assets.
Another important decision is how should assets be distributed to an eighteen year old beneficiary. A typical eighteen year old lacks the ability to invest assets and manage an estate. A properly drafted trust can avoid the assets being squandered at the craps table in Las Vegas.
Typically missed on an Internet trust application is what to do if a beneficiary is disabled or becomes disabled. Persons with disabilities can qualify for aid from the government if they have a limited amount of assets. But if your beneficiary is disabled and later has an asset transferred to him or her via a trust, they may no longer qualify for the state aid.
In our client interview, there is always a discussion about the age, maturity, and mental capacity of your intended beneficiaries. I also should mention about looking out for the opportunistic gold digger (son-in-law/daughter-in-law). These people are always discussed in our consultation. I have never seen an Internet application that inquires as to whether you trust your son-in-law.
5. THE DUTIES AND LIABILITIES OF A TRUSTEE.
By accepting the role of a trustee, that person takes on responsibilities and potential liability if they fail to follow state laws, the terms of the trust or don’t pay creditors. The trustee can be sued in a court of law for failing to prepare the proper accounting documents on behalf of the trust. Non-attorneys and online services do not have court experience nor the insight on how to counsel clients on how to avoid these pitfalls.
6. WHO IS ACCOUNTABLE IF MISTAKES ARE MADE?
When you use a website to write a trust and things do not turn out properly, you have little recourse in correcting the mistakes. You do not have a warranty. Even if the website offers a money back guarantee, a refund of $300 will not get you very far in the probate court.
Attorneys are required to maintain good standing with the state bar and attend continuing legal education seminars on the recent changes in the law. Attorneys also typically carry malpractice insurance. I always let my clients know that I carry malpractice insurance and that they are covered if a mistake were made.
7. ARE THERE ANY OTHER DOCUMENTS THAT NEED TO BE PREPARED?
The living trust is usually not the only document that is needed to complete your estate plan. Every family has different needs and an in-depth discussion is necessary to spot all of the legal issues. It is important to add durable powers of attorney for asset management, advance health care directives, pour-over wills, irrevocable life insurance trusts, and special needs trusts are other documents to be considered. To make this decision, the client needs full disclosure as to why these documents may be necessary.
I also treat a client engagement as an opportunity to help educate that person on each of these documents and how they work and the importance of each tool. If I am not properly passing on my knowledge to my client, I am not doing my job. I enjoy helping people. That is why I became an attorney. It takes time to explain the importance of these estate planning tools.
8. IDENTITY THEFT AND FRAUD
When you set up a trust, you must disclose information about you and your assets. In today’s world of crimes being committed on the Internet, it does not make sense to disclose sensitive information to a company that you know nothing about. You do not know who the owner is and you never get to meet their staff. Would you give your birthdate, social security number and the whereabouts of your assets to a perfect stranger? When using the Internet to set up your trust, you will be required to disclose private information to people that you do not know. This in itself is a very scary proposition.
For more information, contact the Law Offices of Matthew C. Mullhofer at:
2107 N. Broadway, Suite 103
Santa Ana, CA 92706
Tel: (714) 827-9955
Fax: (714) 827-9966
mcmlaw@protectmyassets.com
TOP 10 REASONS BUSINESS OWNERS SHOULD HAVE A RELATIONSHIP WITH AN ATTORNEY
1. You need properly drafted written agreements containing safeguards to maximize your protection in the event of a dispute.
2. You need to keep abreast of the myriad of governmental regulations you are responsible for complying with and the consequences for failure to do so.
3. By incorporating your business you will eliminate personal liability exposure in the event of a lawsuit and gain tremendous tax advantages.
4. An attorney is aware of the vast number of employment laws you are required to obey with even one part-time employee.
5. An attorney will draw up contractual agreements (e.g. mediation and arbitration) to avoid drawn out litigation and potential for large jury verdicts.
6. You need legal assistance to address situations where a partner wants to leave the business or be bought out.
7. An attorney can identify if you have misclassified workers as independent contractors instead of employees which can result in exorbitant penalties and interest.
8. You will benefit from legal protection against the theft or misappropriation of your company’s intellectual property (ideas, trademarks, trade secrets, copyrights, etc.)
9. You may be unaware of the hidden pitfalls included in office space leases that could, if they arise, substantially increase their cost or lead you into bankruptcy.
10. An attorney can provide an effective plan to collect stale accounts receivables.
For more information, contact the Law Offices of Matthew C. Mullhofer at:
2107 N. Broadway, Suite 103
Santa Ana, CA 92706
Tel: (714) 827-9955
Fax: (714) 827-9966
mcmlaw@protectmyassets.com
1. You can be forced to testify under oath. If you attempt to deny or conceal ownership you will be committing the crime of perjury.
2. Assets can be discovered via the use of computers and the Internet. It is not difficult for creditors to locate assets, including those that have been kept overseas.
3. When a creditor obtains a judgment against you. If a creditor sues you for damages and the assets are relevant to the award, or if you are involved in litigation involving the fraudulent conveyance and the assets are relevant to the discovery, you are required to disclose them.
4. Creditors that are entitled to discovery of the assets of a debtor have great discretion in their examination and procedures.
5. Your spouse can be forced to disclose their finances to a judgment creditor whether or not they are involved in the litigation.
6. Insurance companies may be required to disclose information about your assets to judgment creditors.
For more information, contact the Law Offices of Matthew C. Mullhofer at:
2107 N. Broadway, Suite 103
Santa Ana, CA 92706
Tel: (714) 827-9955
Fax: (714) 827-9966
mcmlaw@protectmyassets.com
1. BEGIN WITH REALITY. Your wealth may be threatened at any time and without adequate warning.
2. OPERATE LEGALLY. Asset protection is a legal tool available to you in order to protect your wealth, however, you must use competent professionals who are familiar with the legal system.
3. MAKE A COMMITMENT. Asset protection requires that you involve your family members and other individuals in a life long commitment to estate planning and investment strategizing.
4. PRIORITIZE. Consider all of your life long financial objectives and make a plan that includes all of them.
5. USE PROFESSIONALS. To design the most effective plan possible you need to include all of your financial professionals including your tax advisor, financial planner, and an attorney who specializes in the field.
6. PROTECT EVERYTHING. Check to make sure that you have protected all of your assets, not just the major ones.
7. LOW PROFILE. Don’t draw any unnecessary attention to your assets.
8. ACT NOW. Effective and successful asset protection takes place before there are creditors or a threat to your assets.
For more information, contact the Law Offices of Matthew C. Mullhofer at:
2107 N. Broadway, Suite 103
Santa Ana, CA 92706
Tel: (714) 827-9955
Fax: (714) 827-9966
mcmlaw@protectmyassets.com
1. Never release your social security number unless it is absolutely necessary.
2. Use a corporation or another entity for major transactions.
3. Avoid writing checks because they leave an extensive paper trail.
4. When investing offshore, ensure that you are in compliance with all laws and reporting requirements.
5. Only disclose what is necessary to financial institutions.
6. Maximize the bearer transactions that are not reported under your name.
7. Use financial professionals that will keep your financial information confidential. Attorneys are bound to keep all of your information confidential.
8. Always have your accountant work through your lawyer to insure confidentiality.
9. Use a post office box or drop box for mail correspondence.
10. Avoid using safety deposit boxes, use private vaults instead.
11. Prepare a living trust to bequeath your property. This will avoid the high cost associated with probate as well as any loss of privacy.
12. Arrange your investments so that you can provide the least possible amount of financial information.
For more information, contact the Law Offices of Matthew C. Mullhofer at:
2107 N. Broadway, Suite 103
Santa Ana, CA 92706
Tel: (714) 827-9955
Fax: (714) 827-9966
mcmlaw@protectmyassets.com
Incorporating in California offers a number of advantages that aid in the protection of both assets and privacy.
Here’s just a few:
- A California Corporation protects an individual from personal liability.
- Stockholders names are not public.
- Availability of corporate retirement plans.
- Corporate fringe benefits: Tax deductible benefits such as health, accident, disability insurance, life insurance, and medical reimbursement plans.
- Unending corporation existence.
- Tax benefits: Corporations with less than 75 shareholders can elect S corporation status which allows for the profits to flow through the company and directly to the shareholders of the corporation without being taxed.
- A single person can hold all office, including: Director, Shareholder, President, Secretary, and Treasurer.
- Available to professionals: Doctors, Dentists, Nurses, Attorneys, Chiropractors, Pharmacists, Accountants, etc.
For more information, contact the Law Offices of Matthew C. Mullhofer at:
2107 N. Broadway, Suite 103
Santa Ana, CA 92706
Tel: (714) 827-9955
Fax: (714) 827-9966
mcmlaw@protectmyassets.com
Matthew C. Mullhofer