By Lee R. Phillips

I have recently watched a disaster unfold.  Many of you won’t be directly affected by this disaster scenario, but you may have family member in the situation where they are in danger, and you could help.  So, it’s probably worth a couple of paragraphs in an email to you.

Divorce is ugly!  Some couples decide to just separate, and they live their separate lives.  They live in different cities.  They live with other people.  They are divorced by all indications, but rather than go through the legal pain of a divorce they are just estranged.  This is a disaster situation.

There are different “degrees” of separation.  There is a “we agree we will live apart and still be married.”  There is a legal separation, where the spouses agree on terms of a separation and then write up the agreement and then get a court order of separation (called legal separation).  And, then there is divorce that dissolves the marriage.

If you know you are going to get divorced, you should file for legal separation during the time you are waiting to get divorced.  This stops your legal obligations and liabilities related to your spouse. (more…)

By Lee R Phillips

As Gary Coleman was unconscious in the hospital, his ex-wife, Shannon, gave the order to cut off life support.  Now Coleman’s parents have come forward accusing the hospital of stopping the life support prematurely without the proper permission, saying Shannon no longer had the right as she was not his wife.  The hospital is not worried because Mr. Coleman had a living will giving Shannon the authority.  It is an unbelievably sad situation to have someone taken so young, but just such a situation is the reason that you do your estate planning now.  Have you signed your own living will?

A living will is the legal document that defines your “right to die.”  It usually states that you do not want to have your life artificially prolonged by modern medical technologies.  You can specifically define the means which you do not want used or do want used.  Increasingly hospitals are reluctant to stop life support on the order of a family member, unless a living will grants this permission, because they don’t want to be held responsible in a lawsuit.   Gary Coleman’s case is a good example of why they want the document in place. Let this case act as a cautionary tale for you to get your own living will in place.  I have a living will document available in My Accumulation and Preservation of Wealth Course so you don’t have to leave the house to get it done. Or you can simply go to your local hospital and get their fill in the blank form.  Whichever course you choose, get it done today.

By Lee R. Phillips

I had a client bring a “living trust” to me last week.  The client thought the trust was going to solve all of his estate planning problems.  NOT SO!!  It was done by an insurance agent, and this guy had set him up with an “irrevocable personal residence trust.”  The agent had made himself the trustee with one of the client’s children as a co-trustee.  The client had no clue why this trust was created.  I thought it might be for asset protection, but the client was actually retired when the “living trust” was established.  He had almost a zero chance of lawsuit.

The mess the insurance agent / estate planner extraordinaire had created was truly extraordinary.  An irrevocable trust isn’t a “living trust.”  Actually, if you want to get technical, it is a living trust, because it was made when the client was living, but it isn’t the living trust people use for estate planning.  Because the irrevocable trust was “irrevocable” and someone other than the client was named as the trustee, the IRS is going to treat it differently.  The standard living revocable trust aka living trust has you as the grantor (guy who creates the living trust), you as the trustee (guy who manages the living trust), and you as the beneficiary (guy who gets all the benefits from the living trust).  If the living trust is revocable and same guy holds all three positions in the living trust, it is know as a “grantor trust.”

With a grantor trust (the standard living revocable trust) the IRS ignores the trust.  You file your 1040 tax form using your social security number, and the trust is “invisible” to the IRS while you are alive.  When you move your house into the living revocable trust, you still get the tax benefits, i.e., deduct the interest, sell the house after living there 2 of 5 years and get the profit tax free, etc.  However, if the trust is an irrevocable trust, plus you don’t hold all three positions, the IRS says NO, NOT your house.  It’s just a house owned by a trust that you are living in.  You don’t get the tax benefits.  This is true even if you have a revocable “land trust.”  If you don’t hold all three positions you are toast in the IRS’s eyes. (more…)