Everyone’s estate planning situation is unique. “One Size Fits All” usually doesn’t apply. Nevertheless, some questions keep cropping up. Here are two of the most common:
Q: The value of my house has declined significantly since I bought it several years ago. My stock portfolio has shrunken, and my net worth has decreased dramatically. Do I still need a Living Trust?
A: If the value of assets in your name alone exceeds $100,000 at the time of your death, those assets will be subject to probate, a legal procedure which takes over eight months, costs thousands of dollars and is a matter of public record. A Living Trust, properly drafted and funded, will avoid probate and promote ease of transfer of your assets to your beneficiaries, with some measure of privacy.
Even if your net worth is “only” three or four hundred thousand dollars, that’s “all” the money in your world, and is well worth protecting from the fees and costs of probate.
Q: In light of the current state of Federal Estate Tax, do my husband and I need an AB or ABC trust?
A: Currently, there is no Federal Estate Tax. In 2011, the tax will re-appear, with an exemption of one million dollars per person (down from the $3.5 Million which applied in 2009). So, if you promise to die in the right year, I promise there will be no Federal Estate Tax – unless Congress messes with it further, in which case all bets and promises are off. In the view of many attorneys, accountants and insurance professionals, Congress is likely to reinstate the Federal Estate Tax this year. (It costs money to pay for bailouts, wars and the everyday expenses of government, and dead people don’t have a strong lobby in Congress.) The big question is, what will be the new Federal Estate Tax exemption? Will it still be $3.5 Million, go down to $1 Million, or land somewhere in between? An AB or ABC Trust may still be advisable for married couples with a significant combined net worth. Such taxpayers are well advised to consult with their tax and legal professionals, draft carefully and be prepared to re-examine their estate plans as soon as the tax law is revised.
Jerry Kessler practices law in Santa Clarita. He can be reached at 661-255-1001.