Not everyone needs a Living Trust. If, for example, you have little or no property in your name alone, and no minor children, you probably don’t need a living trust. A simple will may suffice. By “property”, we don’t mean only real estate, but also personal property, such as cars, furniture, jewelry and other “stuff.” If however, you do have more than nominal assets, some estate planning may be in order.
Here is a magic number to bear in mind:
If, at the time of your death, you have assets in your name alone, having a gross value of over $100,000, those assets will be subject to probate. Probate is a legal procedure in which your will is approved by the court, a personal representative is appointed, your creditors are notified, your assets are evaluated, your debts are paid or otherwise discharged, administrative expenses are paid and the remainder of your estate is distributed to your beneficiaries or heirs, all under court supervision. This procedure takes over eight months to a year or sometimes longer, costs thousands of dollars (primarily for attorney’s fees), is a matter of public record and is typically a burdensome process for the personal representative. You can avoid probate altogether, however, by means of some simple estate planning: If you prepare a revocable living trust and hold title to your assets as trustee of that trust, those assets will not be subject to probate, at your death. Rather, they may be administered and distributed to your beneficiaries by your successor trustee, without court involvement.
Here’s another magic number: If your net worth exceeds three million dollars, your estate will be subject to Federal Estate Tax. In 2011, that number will revert to one million dollars, unless Congress revises the Federal Estate Tax exemption sooner. A properly drafted Living Trust for married couples may avoid hundreds of thousands of dollars of otherwise applicable Federal Estate Tax.
So, do you need a living trust? It pays to discuss this subject with your tax professional and with a knowledgeable attorney.
Jerry Kessler practices law in Santa Clarita. For more information, please call 661-255-1001.