Estate Administration Lawyer

What Is a Living Trust?

A living trust is a document used in estate planning. It allows the owner of assets, known as the grantor, to place those assets into a trust to be managed by a trustee for the benefit of someone who will inherit them someday, known as the beneficiary. For example, you as the grantor may place investments into the trust that you want to go to your child ten years after your death. The trust will manage those investments until you die, plus ten years before passing them along to the beneficiary.

What Is the Estate Tax?

Estate taxes are different from probate taxes. Using a trust does allow you to move assets outside of the probate process, avoiding those fees. However, estate taxes are a different matter. When people die, estate taxes are levied against their assets if the dollar value exceeds the state or federal estate tax exemptions. Only the portion that exceeds the tax exemption amount is taxed, and it may be taxed by the state or federal government, or both.

Does a Living Trust Avoid Estate Taxes?

The level of tax protection you get from a trust depends on the type of trust you establish. A revocable living trust can own property independently of the grantor. The grantor designates a succession of trustees to manage the trust for the beneficiaries according to the terms set out by the grantor. As long as the grantor is alive, he or she serves as both grantor and trustee.

Revocable living trusts help the grantor avoid the slow and expensive probate process, but it does not allow you to avoid estate taxes. When you die, your estate, for tax purposes, includes assets in revocable trusts because you can still remove assets from the trust. Retaining access to and control of the assets makes them subject to taxes. Irrevocable trusts are different from revocable trusts. In an irrevocable trust, ownership of the assets transfers from the grantor to the trust. Since the grantor no longer owns, controls, or has access to the assets, they are not subject to the estate tax.

Where Can I Learn More?

To learn more about using trusts in your estate plan, contact a knowledgeable and experienced estate administration lawyer in your area, such as one at Kaplan Law Practice. Estate planning laws vary from state to state, so it is essential to find an attorney who thoroughly understands the rules where you live.