Even if the government allows us to exclude over 10 million dollars of our estate for tax purposes, estate planning is
still important to a lot of people.
Although, one day there may be no taxes due when we die, we still have the legal system to contend with. Any person who dies who has assets over $100,000, this includes cash, personal property and real estate, their assets cannot pass to their beneficiaries until there is court permission. This is called probate of assets. This process is supposed to protect the people who are truly entitled to your assets and any creditors that you have not paid. In addition, this process is a big money maker for the courts and legal profession. Your asset values will be decreased by approximately 30% after paying for probate and legal costs.
All this can be eliminated by just establishing a living trust. This is a document that allows you to hold your property under a trust and it directs your wishes when you die. These wishes are carried out by a successor trustee.
This trustee basically steps into your shoes and distributes your assets based on the directions explained in the trust agreement.
The best time to first establish this trust is when you
have any assets in your name or even when you first have children. This document will secure and ensure the safety and care for your children just in case you are not there to do it yourself.
Another important trust that can be beneficial to establish when you have children is an irrevocable trust. With this trust you can contribute money or you can hold an asset for the benefit of your children. This trust is helpful if you don’t believe your children will be capable of handling their finances when they are older. This trust also helps to move money out of your estate in case your estate does become taxable.
As you can see, estate planning is not just to save money on taxation of your estate. You want to make a devastating event easier for those you left behind.