Do I need a trust? Can I just have a will?
If your estate plan is to establish a will, or to take no action at all,  you are giving your kids a possible lawsuit that allocates your assets. Every will has to be probated in most states to make it enforceable. In the end, your children will pay 5-8% of the value of your estate for the privilege of doing that. The only people that come out of here after probate as winners are your creditors, but it does not have to be that way. You can avoid those fees by making a revocable living trust for a fraction of the cost. A trust will allow you to avoid probate altogether.  Additionally, everything happens in private. Don’t force your your heirs into a lawsuit. Make your death easier for them by establishing a trust..

 

Is going  through probate a big deal?
Probate is a big deal and it isn’t  a fun process. For every ten people you talk to who have experienced going through probate for a loved one who has passed away, seven would not describe it fondly. Creating a trust makes sense. It’s typically cheaper in the long run and it will be a gift for your heirs.

 

Do I need a revocable trust or an irrevocable trust?
A revocable trust allows you the ability to amend or revoke it at any time.A revocable trust allows you to change the trustee or the beneficiary. You can put assets in the trust. You can also take assets out of the trust, and in the eyes of the law, there’s not much difference in terms of ownership of your assets. A revocable trust does not give you protection against lawsuits, creditors, or ex-spouses.

There are two reasons why you might want a revocable trust:  If you become incapacitated, a revocable trust  allows your successor trustee to step in and handle everything on your behalf. It also provides more legal authority to do those things than you would receive under a power of attorney. Secondly, it avoids probate. If you only have a will, and you want it to be legally enforceable, you’ll have to go through probate. The cost of probate could amount to about 5% of the value of your estate. Probate is not private either. For example, you can google the net worth of various public figures’ estates, such as Aretha Franklin and Prince, because the estate had to go through probate court.

Why would you want to consider an irrevocable trust?  Irrevocable trusts can be changed, but it’s a little bit more challenging to do so. The person you name as your trustee and your beneficiary must agree to the changes that you make to your trust, but you aren’t giving up control of the asset. However, it is no longer solely in your name. One benefit you get by including your assets in an irrevocable trust is that the asset is no longer a part of your estate. 

The federal estate tax is very high right now. It’s about $12 million. However, many people are concerned that the current threshold will be lowered. Because of that, more people are becoming interested in removing assets from their estates so  they won’t be subject to the federal estate tax when they die because those assets in an irrevocable trust normally don’t get a step up in basis. Those taxable gains are passed to their beneficiaries if they sell the assets. On the flip side, revocable trusts do receive a step up basis so that any gains are dependent on the asset’s value when the the grantor passes away.

An irrevocable trust also protects against lawsuits and creditors once the asset has been there for a certain period of time. For example, to be protected against Medicaid for long-term care benefits, the asset must be in the trust for five years. Other types of protection generally require two years before they become protected. Also, an irrevocable trust will generally be more expensive to create than a revocable because it’s a very customized estate plan.

 

Do I need to pay an estate attorney to add any assets to my revocable trust?
No. You can add assets  on your own. While some people prefer to have their estate attorney add any future assets to their trust, it’s essential to know that you can add them yourself, bypassing an unnecessary expense.  For instance, if you decide to purchase a new car, buy it in the name of the trust and then title that asset in the name of the trust.

 

Does my debt go away when I pass away?
For the most part, your debt will not go away when you die. Mortgage debt won’t disappear. The co-borrower will become responsible. Or, if a member of the family wants to take over the home, they must assume responsibility for the mortgage debt. Medical debt doesn’t disappear either, and your estate will probably be responsible for paying that off. The same goes  for any credit card debt.  But there is, with one exception.  If you have federal student loans, those loans will go away, and your estate will not be responsible. 

Is your estate plan in order? While it may sound odd, a solid estate plan is one of the best gifts you can leave to those you love after you pass away. Not only will they remember you affectionately, but you will also have helped to ensure that your beneficiaries won’t have to go through the probate process and Uncle Sam won’t be an unintended beneficiary that ends up with a large portion of your estate. Want to find out more? Click HERE to speak to one of our Estate Attorneys about creating an estate plan or receive a second opinion on your current plan.