The Value Of Trusts In Estate Planning
An estate planning discussion is not complete without exploring the use of trusts as some component of the estate plan. For many people, that discussion starts with a good explanation of what a trust is and how they can be beneficial. Our philosophy is to keep things simple unless there is a good reason to complicate them, and trusts are one such “complication” that provides significant benefits, but whether the benefits of the use of a trust or trusts outweigh the burdens is a decision we leave up to our clients.
Types Of Trusts
Trusts can be created that take effect during life or after death. Many estates utilize both living trusts (trusts created and made effective during life) and testamentary trusts (trusts created and taking effect after death) as well as other types of trusts for different purposes. Living trusts are usually used as the primary estate planning vehicle. With a living trust, the will plays second fiddle, and the trust is intended to be the primary vehicle of the estate administration. The will exists only to transfer assets not placed into the trust during life into the trust after death.
A combination of a living trust, testamentary trust and a “pour-over will” is the most comprehensive and effective estate plan. The use of trusts provides the maximum control and flexibility to address all of the “what ifs” that thorough estate planning should cover.
The Benefits of Trusts
Creating a trust and transferring assets into the trust is the best and most effective way for people to eliminate the cost, delay and burden of the probate process. The probate process is a court proceeding in which even the simplest of estates are costly (running anywhere from $2500 to $4000+), time-consuming (taking anywhere from 9 to 12+ months) and burdensome (involving an attorney, notices, publication, accountings, inventories and the oversight of a judge).
While many people wrongly believe that trusts, in and of themselves, avoid estate taxes, trusts can be employed in such a way as to minimize or even eliminate estate taxes altogether. If state and/or federal estate taxes are a concern, trusts are the centerpiece of most estate tax planning. Federal estate taxes applied to estates over $5.43 million in 2015, and that threshold goes up by a factor each year. (The threshold for state estate or inheritance taxes varies by state.)
Contact Drendel & Jansons Law Group To Discuss Whether A Trust Is Right For You
Even if a person decides not to incorporate a trust or trusts into his or her estate plan, having an understanding of trusts and what they can accomplish is important. Every initial estate planning discussion should cover the topic of trusts and the benefits and burdens in estate planning. If you have not considered how the use of trusts can benefit you and your estate plan, please call us at 630-523-0543 or fill out our online contact form to set up an appointment.