Not everyone needs a Living Trust. If, for example, you have little or no property in your name, alone, and no minor children, you may not 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 $150,000, those assets will be subject to probate. (In determining the gross value of your estate, include the market price of your house, not just your equity.) Probate is a legal procedure in which your will, if any, 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. The probate procedure takes about a year and 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 the time of your death. Rather, they may be administered by your successor trustee and distributed to your beneficiaries without court involvement.
Here’s another magic number: If your net worth exceeds 5.43 million dollars at the time of your death, your estate may be subject to Federal Estate Tax. A properly drafted Living Trust for married couples can avoid hundreds of thousands of dollars of otherwise applicable Federal Estate Tax.
Bear in mind, estate planning isn’t going to make you money, but it may save your beneficiaries from significant expense, time and inconvenience.
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. He can be reached at 661-255-1001.