Revocable Living Trust – A Beneficial Product, But Is It Right for You?

July 28, 2011 by · Leave a Comment 

By Adil Daudi, Esq.

Recently I was given the opportunity to speak at The Islamic Center of Greater Lansing on “Simplifying your Shariah Estate Plan.” My primary focus for the presentation was two-fold: (a) to provide a greater understanding for the community on the differences between a Revocable Living Trust and a Last Will and Testament; and (b) to inform the community on the importance of a Durable Power of Attorney and a Health Care Power of Attorney.

As the presentation ended and the question and answer period began, I realized that the focus of the questions was on the differences of a Trust and a Will, and which would be more suitable for them individually. Seeing how my article “To Will or Not to Will” has drawn attention from many in our community, I wanted to take the opportunity to write on the other product, the Revocable Living Trust, and hopefully shed some light on the benefits of obtaining such a product.

If you are at the stage where you are prepared to create an estate plan, you may be well-aware of the requirements that are placed on us Muslims: Narrated by Ibn Umar, Prophet Muhammad (s) once said: “It is not right for any Muslim person who has something to bequeath to stay for two nights without having his last will and testament written and kept ready with him.”

The following is a concise list of facts about Revocable Living Trusts that many may or not be taking into consideration when deciding on their estate plan. I would strongly advise for you to consult with an Attorney about these issues and to get a better, clearer, understanding of how a trust actually operates versus a Will.

1. Avoid Probate: One of the primary advantages of establishing a Trust is that you avoid the probate process; therefore, you avoid having the courts involved in your estate. This is extremely beneficial for multiple reasons: (a) allows you to distribute your assets almost immediately; (b) helps reduce the cost that your estate would otherwise pay; (c) allows you to avoid having lawyers involved; and (d) ensures a much smoother process for handling the estate’s affairs.

2. Costs: One of the biggest drawbacks of establishing a Trust is the upfront cost that is typically associated with it. From my experience, this is what usually deters clients away from creating a trust; however, more often than not, this is because they do not fully understand the benefits and the possible savings a Trust can actually provide. The average cost of going through the probate process is approximately 3-5% of your entire estate. Now, depending on the value of your estate, this cost can be excessive. However, in contrast, once you create a Trust, the only fee you will be required to pay is the actual cost of the Trust. 

If you are currently speaking to an Attorney about a Trust, be sure to ask whether there are any hidden costs, e.g. extra charges for making changes or costs for speaking to the Attorney about the Trust after it is created. Although I can only speak on behalf of my firm, we ensure that a client who purchases a Trust with us is given no additional fees, and has essentially retained us for the duration of their life (for their estate planning needs). Please make sure you understand your Attorney’s fee structure before signing up for any estate planning documents.

3. Private Information: Another important advantage with a Trust is that you do not open yourself up to the public. In other words, under a Trust, your information is kept private between you, your spouse and your immediate family (or whomever you choose). Unlike a Will, where once it is filed with the court, it is open for the public to see; with a Trust there is no requirement of having it filed with the court. For many, this is a very serious issue, as not many Muslims are keen on the idea of having their assets openly disclosed to the public. However, these are also issues that you need to address when creating your own personal estate plan.

It has become far too common for clients to focus too much on the type of estate plan they should create (trust vs. will), and less focused on the requirements that have been placed upon us. If you have yet to establish an estate plan, and if you are stalling the process because you confused on which product is more suitable for you, I highly advise for you to at least satisfy the bare-minimum requirement that Allah s.w.t. has made mandatory on us, and draft a Will; at least until you have informed yourself of the advantages to a Trust, and decided whether or not a Trust is in fact, the better product.

In addition, it is always important to discuss and understand these issues with your Attorney. Make sure you speak to an attorney who will not charge for the initial consultation and is knowledgeable in the area; especially in relation to Shariah law. With Ramadan approaching in less than two-weeks, there may be no better time than now to take advantage of completing a deed and satisfying your requirements; as well as ensuring you have protected your assets and have them distributed pursuant to Shariah law, and not Michigan law.

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Business Litigation, Corporate Formations, and Family Law. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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To Will or Not To Will…

July 7, 2011 by · Leave a Comment 

By Adil Daudi, Esq.

A few weeks ago I was approached by a client who stepped in to discuss his estate plan. He began the meeting by telling me he wanted to create a Shariah compliant Will that will ensure his assets are distributed pursuant to the terms given to us by Allah s.w.t. Before proceeding with his demands, I asked him if he was fully aware of the benefits of creating a Will and whether he knew he had other options.

This scenario is all-too-common. Under the right circumstances, there is nothing wrong with drafting a Will as part of your Estate Plan, however, prior to taking any steps, it is important to be informed on what you are drafting and why.

A Last Will and Testament is very commonly used, but many are not sure what it exactly entails. Although it is very easy to draft a will, be sure to consult with an Attorney on the benefits and drawbacks of actually having one.

Prior to any plan it is always important to know why you should even have one. For any Muslim, having an estate plan is not discretionary, but rather mandatory. Narrated by Ibn Umar, Prophet Muhammad (s) once said: “It is not right for any Muslim person who has something to bequeath to stay for two nights without having his last will and testament written and kept ready with him.”

The following are certain factors, or facts, that should be considered when drafting a will.

1. Every Will must go through Probate: Probate is a court system that determines the validity of your will and helps facilitate in the process of distributing your assets. Note:  assets cannot be distributed until this process has completed. On average, the entire probate process can take between four-to-six months. 

2. Costs: Here is a very common misconception concerning a Will. “I got a Will because it is cheaper than a Trust.” Do not fall into the trap of thinking a Will is the best estate planning tool just because it is the cheapest. I have heard many clients proudly claim they created their Will for free online. But what they don’t realize are the costs that are associated with the Will after they die. Probate costs are not cheap. On average the entire probate process can cost between 3-5% of your estate.

It is important to realize that when discussing your estate planning options, it should not be dependent on how much you pay today, but rather how much your estate will pay at the end.

3. Public Information: Depending on how much value you place on privacy, the administration of a Will provides you with none. Once your Will is filed with the court, it becomes accessible to the general public.

These are some of the issues that you should consider when contemplating your estate plan. Fortunately, there are other options available for you to consider that can be cheaper and more effective. That is why it is important to speak with an Attorney to discuss your options and more importantly to discuss the options on how best to effectuate the distribution requirements pursuant to Shariah law. With the proper planning, you will have set up the best method that suits your individual needs, saves you money, and satisfies the requirements of Allah (s.w.t.)

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Business Litigation, Corporate Formations, and Family Law. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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