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Revocable Living Trusts
Revocable Living Trusts Lawyers
In the past, Wills were the most common method of Estate Planning, but changes in the law have made Revocable Living Trusts one of the best Estate Planning tools available. Revocable Living Trusts are becoming the standard device for individuals to pass their possessions to their loved ones while avoiding costly probate and reducing estate taxes. Additionally, Revocable Living Trusts have become critical in securing financial stability during times of medical need or disability.
A Revocable Living Trust is a form of trust in which the settler of the trust is also the trustee and the beneficiary of the trust. This trust allows an individual to have complete control over his or her assets but still avoids the costly and lengthy delay of probate. Furthermore, the implementation of a trust allows an individual to name a person as successor trustee, who will be responsible for managing the assets of the trust in case of a medical emergency or unanticipated disability.
Finally, the Revocable Living Trust utilizes tax shelters necessary to minimize or even eliminate estate taxes. One of the most important reasons to utilize Revocable Living Trusts is to avoid the costly Estate Taxes. Estate tax is tax that is paid on the total value of your estate on the date of your death. The lowest estate tax rate is 39% but the highest tax rate is 55%. Meaning that on every $10,000.00 which is taxable, up to $5,500.00 will be paid in tax.
However, with the use of trusts, this tax could be reduced or even eliminated. The example below demonstrates just how costly estate tax can be and how much implementing a Revocable Living Trust can save. The example is based upon an estate of $1,000,000.00. Although this may sound large, it is quite common when all factors are considered, including homes, retirement plans, closely held business interests and even life insurance.
Now let's take a look at the difference before and after the implementation of a Revocable Living Trust.
|Before the Plan
|After the Plan
As you can see without the plan, this individual’s estate will pay almost $200,000.00 in tax, as compared to the second example, which utilizes Revocable Living Trusts, in which there is absolutely no estate tax liability. That means that this individual will leave an additional $200,000.00 to the people that they care about. Revocable Living Trusts also avoid the time and expense of probate. Probating any will necessitates a six-month delay with the court system. During this time, the estates' assets will be tied up in the court system and will be subject to creditor claims.
The estate will also incur costs of almost $400.00 as soon as the estate is opened with the court and if there is a will contest, the probate expense will be enormous. Normal legal fees in a probate estate can easily range from 3% to 5% of the total estate, but if a Revocable Living Trust is in place, these costs can be significantly reduced. The Graph below demonstrates the savings to the estate of implementing the use of a Revocable Living Trust.
As you can see, between estate taxes and probate expenses almost $230,000.00 of the estate assets have been wasted in the first example as compared to the second example where Revocable Living Trusts have been implemented.
Furthermore, Revocable Living Trusts protect the beneficiary in times of medical need or disability by allowing a successor trustee to help the beneficiary to manage their financial affairs, should they be unable to do it for themselves. This can be a critical tool for your own care as you progress in age and to avoid an embarrassing court-supervised guardianship. Finally, the Revocable Living Trust organizes your estate for easier and more efficient asset management.
Overall, the Revocable Living Trust is one of the most efficient and effective estate planning tools available. It reduces or even eliminates costly estate tax. It avoids the mandatory six-month delay of probate. It eliminates the legal expense and costs of opening a probate estate with the courts, and it protects us in case of illness or disability while organizing your assets for efficient management.
A trust is a document that can be used to provide a Trustee to administer your estate without the need to open a Probate estate with the court. The document outlines how the Trustee should manage and distribute your property during your life time and after you pass away. Upon execution the trust must be funded with your assets. Property deposited at banks or financial institutions or real estate should have the ownership changed to the Trust name. In most cases you would remain the Trustee of your trust, naming successor or co-trustees to handle the trust when you are no longer able to do so.
Trust documents can also be crafted to provide for minor children or individuals under a disability. They also have the benefit that they may assist with avoiding the costs and time of probate. A trust can also be set up to provide for an individual that may have financial difficulties to prevent a lump sum inheritance from being taken by their creditors.
It is important that you discuss all your needs with a skilled estate planning attorney so they can design the trust to meet your specific needs. Contact Urban & Burt, Ltd. at 708-687-5200 to schedule a no cost consultation.
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