If you’re looking to protect your assets and minimize taxes, estate planning is crucial. A financial strategist and retirement planning specialist I’ve gleaned wisdom from for over 15 years, Doug Andrew, explains the benefits of having a living trust over just a will, as well as the concept of dying intestate and the role of estate tax.
Andrew has been helping thousands of people in America optimize their assets for five decades. He emphasizes the need to protect assets from unnecessary estate tax, which can be as high as 67% under President Joe Biden’s plan. Estate tax is sometimes referred to as the inheritance tax and is dependent upon the tax code of the time. Andrew simplifies the process of estate planning by explaining the basics of how a trust works and why it’s important to have one, even if you don’t have a large estate.
Understanding Living Trusts
A living trust is a legal document that allows you to transfer your assets into a trust during your lifetime. The trust is managed by a trustee, who can be you or someone else you choose. Here are six distinct advantages of having a living trust over just having a will or no will:
- Avoiding Probate: A trust avoids probate, which is the legal distribution of your assets to who you want to inherit those things under the jurisdiction of a court. Probate can be expensive and time-consuming, taking sometimes a few years. When you use a trust, your estate can be settled in one day, and then you only probate it in order to have a small little asset so that you can have the creditors of the deceased hold their peace after the period has expired.
- Privacy: Probate is a public process, which means that your assets and beneficiaries become a matter of public record. With a trust, your assets and beneficiaries remain private.
- Control: A trust gives you more control over how your assets are distributed after you pass away. You can specify how and when your beneficiaries will receive their inheritance, and you can also set rules for how the trust is managed.
- Asset Protection: A trust can protect your assets from creditors and lawsuits. If you are sued, your assets in the trust may be protected.
- Tax Planning: A trust can be used for tax planning purposes. For example, if you have a large estate, a trust can help you minimize estate taxes.
- Incapacity Planning: A trust can also be used for incapacity planning. If you become incapacitated, the trustee can manage your assets on your behalf. This can be especially important if you have a business or other complex assets that need to be managed.
In conclusion, a living trust can provide many advantages over just having a will or no will. It can help you avoid probate, maintain privacy, have more control over your assets, protect your assets, plan for taxes, and plan for incapacity. Consider consulting with a financial strategist or retirement planning specialist to determine whether a living trust is right for you.
Advantages of Trust Over Will
If you’re looking to protect your assets and minimize taxes, a living trust may be the way to go. Here are six advantages of having a trust over just a will:
- Avoiding probate: A trust allows your estate to be settled in one day, avoiding the delays and costs of probate. Probate can take years and can be expensive due to court costs, attorney fees, executor fees, and more.
- Privacy: Probate is a public process, meaning anyone can access the information about your estate. A trust, on the other hand, is private.
- Control: With a trust, you can control how your assets are distributed after your death. You can also set up rules of governance to ensure your children don’t ruin their inheritance.
- Protection: A trust can protect your assets from creditors, lawsuits, and divorce.
- Flexibility: A trust can be changed or revoked at any time, giving you the flexibility to adapt to changing circumstances.
- Tax benefits: A trust can help minimize estate taxes, which can be substantial. Depending on the tax code at the time, the value of your estate over a certain amount may be taxed at a high rate.
Overall, a trust can offer many advantages over just having a will or no will at all. It’s important to understand how a trust works and to consult with a financial strategist or estate planning attorney to determine if a trust is right for you.
The Concept of Dying Intestate
Dying intestate means dying without a will. When you die intestate, the state has a will for you, which may not align with your wishes. Therefore, it is crucial to have a will or a trust to ensure that your assets are distributed according to your wishes.
Probate is the legal process of distributing your assets according to your will or the state’s will. However, probate can be time-consuming, expensive, and public. It can take a few years to complete, and the court costs, attorney’s fees, executor’s fees, and creditors’ claims can reduce the value of your estate.
On the other hand, a living trust can help you avoid probate and ensure the efficient distribution of your assets. A trust can be settled in one day, and the distribution can be private. Moreover, a trust can provide other advantages, such as:
- Flexibility: You can change the trust’s terms anytime during your lifetime.
- Control: You can appoint a trustee to manage the trust’s assets and ensure that they are distributed according to your wishes.
- Protection: A trust can protect your assets from creditors, lawsuits, and divorce.
- Tax benefits: A trust can help you minimize estate taxes and reduce the tax burden on your heirs.
- Privacy: A trust does not become public record, unlike a will, which can be accessed by anyone.
- Continuity: A trust can ensure the continuity of your assets’ management and distribution, even after your death.
In summary, dying intestate can lead to the state distributing your assets in a way that may not align with your wishes. Therefore, it is essential to have a will or a trust to ensure that your assets are distributed according to your wishes. A trust can provide several advantages, such as flexibility, control, protection, tax benefits, privacy, and continuity.
The Role of Estate Tax
If you have accumulated a lot of assets and wealth, protecting them from unnecessary estate tax is crucial. Estate tax, also known as inheritance tax, is dependent upon the tax code of the time. In the 1990s, any value of your estate over $600,000 started to be taxed at 36-37%, topping out at 55%. As of the recording of this episode, the exclusion is substantial, but President Joe Biden wants to lower the exclusion back down again, maybe to a million or two million dollars, and then take the estate tax up to even 67%.
Sometimes, estate tax does not get any type of a tax consideration until after the second death. In other words, it isn’t until the second death between a husband and wife that all of a sudden, within nine months, you have to file a 706 form with the IRS. You have to list all of the assets that were owned by the deceased, all the way down to their underwear and what it was worth, so that they can determine if there is an estate tax due. That form is due within nine months after the death of the second person in a marriage, and it’s based upon the value of the assets at death.
Having a living trust can be advantageous over just having a will or no will, especially if you want to avoid probate. A trust avoids probate, which can often take time and is expensive. When you use a trust, your estate can be settled in one day, and then you only probate it in order to have a small little asset so that you can have the creditors of the deceased hold their peace after the period has expired.
Here are some of the basic advantages of having a trust:
- A trust avoids probate, which can often take time and is expensive.
- A trust can be settled in one day.
- A trust offers privacy, which probate does not.
- A trust can be conducted in any state where real estate is owned.
- A trust can be set up with rules of governance so that you don’t ruin your children.
- A trust can be used to protect your assets from unnecessary estate tax.
In conclusion, having a living trust can be advantageous over just having a will or no will. It can help you avoid probate, offer privacy, and protect your assets from unnecessary estate tax.
The Importance of Estate Planning
If you want to protect your assets and minimize taxes, estate planning is crucial. Estate tax, also known as inheritance tax, can be a significant burden on your heirs. Depending on the tax code, the value of your estate over a certain amount may be taxed up to 55 percent. President Joe Biden is proposing to lower the exclusion back down to a million or two million dollars and take the estate tax up to even 67 percent. Therefore, it’s essential to have a plan to protect your estate from unnecessary taxes.
One of the most significant advantages of estate planning is the ability to avoid probate. Probate is the legal distribution of your assets to who you want to inherit those things under the jurisdiction of a court. However, it often takes time, sometimes a few years, and can be expensive. When you use a trust, your estate can be settled in one day, and you only probate it to have a small asset so that you can have the creditors of the deceased hold their peace after the period has expired.
A trust has many advantages over a will, even if you don’t have a large estate. A will only names who gets your things after you pass away, and if you die without a will, the government has a will for you, which you may not like. On the other hand, a trust avoids probate and allows you to name the guardian of minor children, specify who inherits specific items, and make decisions instead of having the government make them.
When you set up a trust, it’s essential to have rules of governance to ensure that you don’t ruin your children. Many estate planning attorneys recommend setting up equal opportunity trusts, rather than equal distribution trusts. However, the advantages of a trust include avoiding probate, protecting your assets, and having more control over who inherits your estate.
The Function of a Will
A will is a legal document that outlines how your assets will be distributed after your death. It allows you to name who will inherit your property, including any real estate, bank accounts, investments, and personal belongings. If you have minor children, you can also name a guardian to care for them in the event of your death.
However, if you die without a will, the state will distribute your assets according to its laws, which may not align with your wishes. This is known as dying intestate. It’s important to note that the state’s distribution may not be what you would have wanted, and it could cause unnecessary stress and conflict for your loved ones.
Having a will also means that your estate will go through probate, which is the legal process of distributing your assets. Probate can be time-consuming, expensive, and public, as it involves court proceedings and legal fees. Creditors and other claimants can also come forward during probate, which can further delay the distribution of your assets.
While a will is an important document, it’s not the only option for estate planning. A living trust, for example, can offer several advantages over a will. In the next section, we will explore the distinct advantages of a living trust.
The Process of Probate
Probate is the legal process of distributing your assets under the jurisdiction of a court. When you file for probate, your assets are distributed to the people you want to inherit them. However, probate can be a lengthy process, taking a few years in some cases. It is also expensive, with costs such as court fees, attorney fees, and executor fees.
Probate is conducted in every state where real estate is owned. It is a very public process, which is not private, and once you start it, you cannot stop it until it is completed. There is also a list of seven people in order of priority, and the heirs are usually seventh or eighth down the list. The process of probate ensures that everyone is satisfied and paid what they are owed.
One of the advantages of having a living trust is that it avoids probate. When you use a trust, your estate can be settled in one day, and you only need to probate it for a small asset to have the creditors of the deceased hold their peace after the period has expired. A trust is a legal document that allows you to transfer your assets to a trustee, who then manages them for the benefit of your beneficiaries.
A trust is a good option for many people, even if they do not have a large estate. It is a function of having assets, and many people want the advantages of a trust, even if they do not have a large estate. Trusts can be set up with rules of governance to ensure that your children are not ruined.
In summary, probate is a legal process that distributes your assets under the jurisdiction of a court, which can be a lengthy and expensive process. A living trust is a good option for many people, even if they do not have a large estate, as it avoids probate and can be settled in one day. Trusts can be set up with rules of governance to ensure that your children are not ruined.
The Advantages and Disadvantages of Probate
Probate is the legal distribution of your assets to who you want to inherit those things under the jurisdiction of a court. Probate has its advantages and disadvantages, as described below.
Advantages of Probate
- Probate ensures that all creditors of the deceased have a certain window of time, usually 60 or 90 days, to make claims against the estate. This prevents creditors from coming out of the woodwork years later and opening up a lawsuit against the deceased’s estate.
- Probate can be used to settle small debts and disputes, such as those involving old tractors or motorcycles.
- Probate is a public process that ensures everyone is paid what they are owed.
Disadvantages of Probate
- Probate can be expensive and time-consuming, sometimes taking several years to complete.
- When you go through probate, there is a list of seven people in order of priority who get paid first. The heirs are last on the list, and it may take years to determine that everyone is satisfied.
- Probate is a public process, which means that anyone can access information about your estate.
Overall, probate can be a useful tool for settling debts and disputes, but it has its drawbacks, especially when it comes to time and expense. It is important to consider all of your options, including setting up a trust, before making a decision about how to distribute your assets after your death.
The Use of Trust
If you’re looking to protect your assets, especially from unnecessary estate taxes, a trust may be the best option for you. In this episode, financial strategist and retirement planning specialist Doug Andrew explains six distinct advantages of having a trust over just having a will or no will.
Avoiding Estate Tax
Estate tax, also known as inheritance tax, can be quite substantial. Depending on the tax code of the time, any value of your estate over a certain amount can be taxed at a high percentage, sometimes up to 55%. Currently, the exclusion is substantial, but President Joe Biden may lower it and increase the tax rate. By having a trust, you can protect your assets from unnecessary estate tax.
Simplifying Asset Distribution
When someone dies, their assets may not get any type of tax consideration until after the second death in a marriage. This means that it isn’t until the second death that all the assets are listed and valued for tax purposes. By having a trust, you can simplify the asset distribution process and avoid the need for probate court.
Naming Guardians for Minor Children
In a will, you can name the guardian of minor children if you happen to die and still have minor children. However, if both you and your spouse were killed in a common accident, a will cannot ensure that your children will be raised by the person you want. By having a trust, you can designate who you want to be as guardians to your children.
Avoiding Probate
Probate is the legal distribution of assets to those who inherit them under the jurisdiction of a court. However, this process can often take time and be quite expensive. By having a trust, you can avoid probate and ensure that your estate is settled in one day.
Maintaining Privacy
Probate is a very public process, which many people do not like. By having a trust, you can maintain privacy and keep your estate distribution process private.
Establishing Rules of Governance
By setting up a trust, you can establish rules of governance to ensure that your children are not ruined by inheriting too much money too soon. This can help you protect your children and ensure that your estate is distributed in a responsible way.
Overall, having a trust can provide several advantages over just having a will or no will at all. It can help you protect your assets, simplify the asset distribution process, and ensure that your children are taken care of.
Setting Up a Perfect Trust Structure
If you’re looking to protect your assets and minimize taxes, setting up a trust can be a great option. In fact, there are six distinct advantages to having a trust over just having a will or no will at all. Here’s what you need to know.
Advantages of a Trust
- Avoiding Estate Tax: Estate tax, also known as inheritance tax, can be a significant burden on your assets. With a trust, you can protect your estate from unnecessary taxation, which can be especially important as tax codes change over time.
- Avoiding Probate: Probate is the legal distribution of your assets under the jurisdiction of a court. It can be a lengthy and expensive process, but a trust can help you avoid it altogether.
- Privacy: Unlike probate, a trust is a private matter. This means that the details of your estate and its distribution will remain confidential.
- Control: With a trust, you have greater control over the distribution of your assets. You can set rules of governance to ensure that your heirs are protected and that your wishes are followed.
- Flexibility: A trust can be tailored to your specific needs and circumstances. You can include provisions for minor children, charitable donations, and more.
- Speed: Unlike probate, which can take years to complete, a trust can be settled in just one day.
Why You Need a Trust
Even if you don’t have a large estate, there are still many advantages to having a trust. With a will, you simply name who gets your things after you pass away. But with a trust, you have greater control over the distribution of your assets, and you can protect your heirs from unnecessary taxation and probate.
In conclusion, setting up a trust can be a smart financial move, no matter your circumstances. With the right structure and provisions, you can protect your assets, minimize taxes, and ensure that your wishes are followed.
This weeks action steps:
Begin the framework for your living trust.
- Determine if a living trust is right for you based on this article.
- Choose a trustee.
- Create the trust document.
- Fund the trust: To make the trust effective, you will need to transfer ownership of your assets to the trust. This includes real estate, bank accounts, investments, and other assets.
- Update beneficiary designations: Make sure to update the beneficiary designations on any accounts that you transfer to the trust.
- Review and update the trust regularly.
Keep in mind that the process of setting up a living trust can vary depending on your individual situation and the laws in your state. It’s always a good idea to consult with an estate planning attorney to ensure that your trust is set up correctly.
That’s it for this weeks Newsletter. See you next week!
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