A small minority of misguided observers might suggest that using estate planning tools like revocable living trusts are becoming less necessary in recent years because of increases in the federal estate tax exclusionary amount. According to this line of thinking, use of the trust was limited solely to avoiding estate taxes–taxes on the assets given as part of an inheritance. Because community members can currently pass on up to $5 million individually without triggering the tax, there may be a mistaken assumption that those with fewer assets do not have much need for trusts. Of course, our New York trust lawyers work with thousands of clients who are living proof that this suggestion is a drastic oversimplification of the use of these legal tools.
An article last week in LifeHealth News made the same point, reminding readers of the various benefits that trusts provide beyond estate tax savings. Just two of the many benefits include: (1) avoiding probate; (2) allowing flexible inheritance arrangements
Perhaps most importantly, use of these trusts allows families to avoid the time-consuming, stressful probate process that is required when only a will is used. The probate process is court supervised, which means that judges ultimately decide how everything shakes out. Depending on the circumstances, the judge’s final decision might be far different than what the family thinks appropriate or even what the one who passed on might have wished. Using trusts and keeping the process out of the courts is a huge benefit for those who want to ensure that their wishes are actually carried out in the most straight-forward manner possible.
Not only is the trust process easier for the families, but it may also be cheaper. Fees and court costs that need to be paid to settle an estate via probate are often anywhere from 3% to 10% of the assets of the estate. That means that tens of thousands of dollars of an inheritance can be lost just in the process of having the court determine where it should all go. Trusts avoid this, because they operate automatically upon one’s death. In that regard, trusts are also private, whereas the probate process is made public. This is a very real concern for those who do not want names and information about beneficiaries to be available to everyone.
Beyond avoiding probate, our New York estate planning lawyers appreciate that use of trusts give planners much more flexibility and control over how they’d like to disperse their assets. Wills simply give assets to certain people. Trusts, conversely, can pass along assets with very specific conditions and limitations. This, for example, allows parents and grandparents to pass on assets while putting in place some protections so that those assets are safe even in the event of divorce, bankruptcy, or even spendthrift relatives.
The list of trust benefits is long. In any event, it is important to remember that those benefits are apparent for community members of all income and asset levels. These are not legal tools just for the well-to-do.
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