BENEFITS OF A TRUST

Instead of an “executor” you will appoint a trustee of your trust. Most often, you will be the first trustee. Your successor trustee will then be responsible for settling your estate when you pass away. This can all be done privately without court intervention, if set up properly. No probate is necessary because you owned nothing in your own name; your trust “owned” all of your assets.

Better yet, the process can take significantly less time to administer than a court-monitored probate. Also, your successor trustee is entitled to reasonable fees for their services, but this is typically far less than the court fees, attorney’s fees, and executor’s fees involved in a probate. If you and your estate planning attorney set up your revocable living trust correctly, your trustee will be able to administer your estate with little or no outside help from expensive professionals.

Reduce Federal Estate Taxes
A trust can also help your heirs avoid inheritance taxes. The current exclusion for inheritance taxes is $2.0 million in the State of California.* If you are fortunate enough to be worth more than $2.0 million, a trust may assist your heirs in avoiding some or all of the estate taxes that may otherwise be assessed after you pass away.

Married couples are allowed two exemptions from the federal estate tax IF they implement the right type of trust. If you or your spouse is not a citizen of the United States, you will need a special trust that grants both of you the maximum estate tax deduction. You may also provide for your spouse of a second marriage while maintaining control over the remainder of the property and still avoid federal estate taxes on your death.

Other ways of avoiding federal estate taxes include planning techniques such as gifting, irrevocable life insurance trusts, family business formation, and many other strategies. It is very important to create the right type of trust for your estate in order to reduce or eliminate a federal estate tax. Remember, the federal estate tax is a 37% - 45% tax on all your assets!

Please note that this figure is changing over the next few years. In the year 2009, the federal estate tax exemption will increase to $3.5 million, and in 2010, there is no limit on the amount that can pass to your heirs tax free. However, in the year 2011, the law “sunsets” and the limit goes back to $1.0 million. We don’t know what Congress has planned for the inheritance tax in 2011, so it is very important to stay in contact with your estate planning attorney on this important issue.

Avoid Conservatorship
A Conservatorship is the court-monitored process necessary when a person becomes incapacitated and cannot manage his or her own finances. It is important to know that the laws of California favor the nearest related family member as a conservator. A trust is the best way to plan for an unforeseen disability without court involvement. If you become incapacitated, either mentally or physically, your successor trustee can step in and administer your estate without court involvement. You and your estate planning attorney will discuss and draft all the directions your trustee will need to administer your estate in the event of your incapacity, and make sure that you are taken care of during your illness. You will have the power to appoint a trustee you trust to handle financial and health related matters. A trust, along with a Durable Power of Attorney for Health Care, will provide your trustee with all the necessary direction and power manage your heath care and your finances.

Contact Our Orange County Estate Planning Law Firm
all the estate planning attorneys at MORTENSEN & REINHEIMER, PC today at (714) 573-7149, or send an e-mail to info@ocestateplanning.net, and we will contact you to set up a free initial consultation.