The benefits of a living trust
By Albert G. Marquis, Esq.
You work hard for your money. You have accumulated assets. But have you thought about what will happen to this property when you are gone? Will there be fights between ex and present spouses? How long will probate take? How much will the federal government extract in estate taxes?
"Estate Planning" is an easy subject to put off until tomorrow. It can be quite complicated, and we all become somewhat squeamish when we are discussing subjects that have to deal with our own demise. Nevertheless, for the sake of your family, this is a subject that you must deal with.
One of the most common reasons that people call us about estate planning is that they have recently witnessed the heartache, aggravation and financial loss that can result when a family member dies without proper estate planning. Family members have to spend hundreds of hours of excess time, and an estate can incur hundreds of thousands of dollars of excess expenses simply because the decedent did not take the time to plan. Don't let this happen to your family.
Of course, you need to decide who will be the beneficiaries of your estate. If you do not make that decision, then your estate will be passed to specified relatives according to the laws of the State of Nevada , and those laws are not always in conformity with an individual's desires. You have the absolute right to decide who your property will go to, and you should exercise that right.
Just as important, you have a great deal to say about how much money will be paid in taxes and probate fees. One of the very best ways to minimize such expenses is to set up a living trust. Among other things, for married couples, such a trust takes advantage of two $600,000 exemptions, (as opposed to one if everything is left to the surviving spouse), and with a trust, there is no need for probate. Thus, the direct benefits of a living trust are: (1) reduced estate taxes for couples; (2) elimination of probate fees; and (3) avoidance of public probate.
To get a rough idea of the kind of money your family could save with a living trust, determine your net worth by adding up the value of all the property you own less whatever debts are owed against those properties. Then add on any life insurance you have (including double indemnity, because all life insurance proceeds will be taxable in your estate as well). The table below makes the assumption that you or your spouse might die in the near future and that the survivor will die in ten years, with assets growing at a 7.2% growth factor. Look at the money you can save by setting up a living trust:
ESTIMATED FEDERAL ESTATE TAX
Assumptions*
|
Total Estate |
First
Estate |
Second Estate |
Combined**
Tax |
Tax Savings***
With Trust |
$300,000 |
$0.00 |
$ 0.00 |
$ 0.00 |
$ 0.00 |
$400,000 |
$0.00 |
$ 52,000 |
$ 52,000 |
$ 52,000 |
$500,000 |
$0.00 |
$119,800 |
$119,800 |
$119,800 |
$600,000 |
$0.00 |
$189,800 |
$189,800 |
$189,800 |
$800,000 |
$0.00 |
$337,200 |
$337,200 |
$285,000 |
$1,000,000 |
$0.00 |
$488,400 |
$488,400 |
$386,600 |
$1,200,000 |
$0.00 |
$653,200 |
$653,200 |
$463,400 |
$1,500,000 |
$0.00 |
$901,000 |
$901,000 |
$488,200 |
* Assumes surviving spouse lives at least 10 years and annual growth rate is 7.2% compounded (i.e., estate doubles in 10 years).
** With Simple Will
*** Utilizing a Family Trust
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Failure to use some form of living trust will create a loss to the family or beneficiary which could have been avoided. For example, for a $1.2 million estate, the loss from failure to use a living trust would amount to $463,400. Taking into consideration the avoidance of probate, the savings would be even more.
Don't put off estate planning decisions until tomorrow, because tomorrow may be too late. Take action now. Once your estate plan is in order, you will sleep better (and you can always make changes in the future).
______________________
Albert G. Marquis is a partner with the Las Vegas law firm of Marquis & Aurbach. He can be reached at (702) 942-2127 or visit the firm's web site at www marquisaurbach.com
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