The two biggest reasons for choosing a living trust are for the privacy and efficiency of avoiding public probate and for the protection that can be provided to beneficiaries, like protection from divorce, creditors, nursing home costs, and legal actions.
The Green Bay Press-Gazette’s recent article, “Common questions about a living trust,” notes that this can be especially important for a beneficiary who may have special needs. A Special Needs Trust can be created so their government program benefits, like Medicaid, won’t be impacted by their inheritance. Let’s look at some specific situations:
Avoiding probate. A living trust can help avoid probate, but a trust only controls assets that are in the trust. You must put assets into the trust to “fund” the trust. A person can have a well-drafted trust, but if it’s not properly funded, they will most likely lose out on some of the trust benefits.
Tax savings. There may be some tax savings, but most folks aren’t worried about estate taxes. An individual can pass up to $5.49 million without any estate taxes in 2017. Anything above that is subject to a 40% estate tax. Note that a living trust can be structured, so a married couple can pass double the exemption amount free of estate tax between the two of them. There’s usually no estate tax due when the first spouse passes away. However, the surviving spouse, who may inherit from his or her spouse, would be potentially subject to estate tax at his or her death. A living trust can be used to potentially avoid that and pass the maximum assets without any estate taxes.
Assets requirements for a living trust. There’s no specific dollar amount required for a trust. More importantly, it should be a discussion with your estate planning attorney about your goals and how they can best be accomplished.
There is some expense with creating a trust, but most of the time the amount you spend on a living trust is less than what the cost would be for your family and loved ones to administer your estate plan after you pass away.
Talk about your options for a trust with an experienced estate planning attorney, and then decide.
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Jeffrey Bellomo, Esq.
Reference: Green Bay Press-Gazette (June 29, 2017) “Common questions about a living trust”