Are Living Trusts Still Relevant?
Robert L. Bolick, Esq. – Durham Jones & Pinegar
Living trusts are as important now as ever – possibly even more relevant today than in the past. Many people confuse the whopping $5,430,000 federal estate tax exemption with the $100,000 threshold for probate. They are two completely different things.
The federal estate tax exemption of $5,430,000 per person means that for someone who passes away with assets below this amount, no estate taxes are due. Beneficiaries inherit everything tax-free. A couple can double this amount to make the first $10,860,000 estate tax-free. For most of Americans, estate taxes are largely a thing of the past.
Unfortunately, the same is not true for probate which conversely will affect most of us. If you pass away with assets totaling over $100,000 titled in your name with no beneficiary designation, your estate will land very solidly in court.
Probate is a state court proceeding required to clear title to assets held in your name to your beneficiaries.
Is Probate Really that Bad?
In a word, yes. The primary “costs” of probate are money, time and hassle.
Probates are public proceedings. They require time. It costs money. You get to deal with an attorney. With the other option being to avoid court altogether, why make your heirs needlessly go to court? A properly funded living trust will avoid probate.
Asset Protection for Your Beneficiaries
In my opinion, an even more significant aspect of a living trust than avoiding probate is protecting your beneficiaries. What most people don’t realize is that with a properly drafted living trust, you can provide 100% asset protection to your beneficiaries throughout their lives. Your trust can serve as a “built-in” prenuptial agreement to protect your beneficiaries in a dissolution of their marriage. It can also give your beneficiaries 100% protection over the inherited assets against any future lawsuits, car accidents, business failures or bankruptcies. In short, living trusts can be a very powerful tool to protect your beneficiaries from any financial catastrophe throughout their lives.
The primary benefits of living trusts are to keep your heirs out of court and to enable them to inherit your assets completely protected from all third parties throughout their lives. By getting your planning in place now, you will be doing your loved ones a great service and providing a great benefit to them in the future.
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