An estate plan deals with more than just money and property. A complete estate plan includes a financial power of attorney, health care power of attorney, HIPAA documents, and a living will in addition to a Last Will and Testament or a Revocable Living Trust.
There’s a common misconception that estate planning and trusts are only for the very wealthy. The truth is that many people, regardless of wealth, can benefit from a trust-based estate plan. The reasons range from family dynamics and need, to tax planning, to control, convenience and privacy issues.
When a Revocable Living Trust is Right for You
If your circumstances are similar to any of those described below, you may want to consider an estate plan built on a revocable living trust:
You have minor children or children with special needs.
If you have children under the age of eighteen, what would happen to them if something happened to you and their other parent? A revocable living trust provides for someone you’ve chosen to protect, manage, and invest their financial assets until they have the maturity to do so themselves. With a will, your children come into their full share of their inheritance when they turn eighteen. Few young adults have the financial savvy to properly manage such a windfall.
If you’re responsible for a family member with special needs, especially profound mental or physical disability, you’re likely concerned about their well-being after your death. A special needs trust can let you provide for them financially in a way that doesn’t put at risk their right to federal or state entitlements such as Social Security Disability (SSD). Inheriting money outright through a will could make them ineligible for many beneficial programs.
Your family dynamics are complex.
Modern families often include more than mom, dad, and their children. Many people are divorced, have blended families, or have conflicts between family members. With a revocable living trust, you can customize the timing and conditions of disbursements to meet your family’s particular needs. A living trust allows you to ensure that children from previous marriages receive the assets you want them to have, or protect impulsive beneficiaries from burning through their money or having it seized by creditors.
Even if your situation is more straightforward than many, a trust still gives you a lot more control than a will does. As grantor of a trust, you set the terms for how assets are distributed after your death. You can also provide for successor beneficiaries. A living trust can easily be designed to provide your surviving spouse with an income stream for life, then distribute the remaining assets to children, grandchildren, charities, or anyone you designate.
You have business interests or need to incorporate tax planning.
Trusts are especially crucial to an estate plan if you do have significant wealth and want to minimize taxes on your estate. People whose estates are larger than the federal estate tax exemption (over $5 million for individuals, or over $10 million for married couples) can use a trust that is properly structured to reduce estate taxes or eliminate them altogether. Families with significant wealth can also use “dynasty” trusts to preserve and protect wealth for future generations.
If you have a family business, you may also want to consider a living trust-based plan. Many business owners have so much of their assets tied up in the business that they lack the liquidity to pay estate or other taxes. Their families are forced to sell the business when they die in order to meet tax obligations. A trust can be the beneficiary of a life insurance policy, and the benefit used to pay taxes so that the business remains operating under family control.
You want to avoid probate.
Perhaps the most common reason people choose a trust-based estate plan is to avoid probate. Although probate is less burdensome than it used to be in the past, many people can avoid probate altogether with a trust-based plan. Assets pass according to the terms of the trust, without court intervention, additional expense, or delay.
The estate planning attorneys of Ortiz & Gosalia, PLLC, have post-JD degrees in tax law and can help you plan for your family’s future in a way that minimizes their tax burden. With offices in Redmond, Bellevue and Kirkland, we offer services throughout the Seattle area and Washington State. If you would like to learn more about revocable living trusts and trust-based plans, we invite you to contact us without delay.