Six Reasons to Continue Using Trusts

In the past, most people who settled revocable living trusts did so to reduce exposure to estate taxes. Some may think that the current $5 million exclusionary amount and portability option make trusts obsolete; however, many reasons still exist to continue using this trusted estate planning tool. Six reasons to continue using trusts are below:

1. Trusts can help beneficiaries receive assets without the need of going through the arduous probate process. 
2. Typically, trusts cost around $3,000 to establish. This amount can be much less than the cost of probate as attorney’s fees and court costs to probate an estate range between 4% to 10% of the estate assets (a $500,000 estate could cost $25,000 to probate at 5%).
3. Trusts provide privacy to both inheritors and settlors, whereas the probate process is very public.
4. Trusts also protect a beneficiary’s inheritance from potential creditors and give the settlor the opportunity to create rules as to when and if a beneficiary will inherit his or her assets.
5. Portability requires that the proper tax returns be filed on the deceased spouse’s behalf. Some surviving spouses and their counsel may not know this requirement and will miss out on claiming portability.
6. Unless Congress acts, the current $5 million exception will revert back to a $1 million exception with a 55% tax rate on January 1,2013. To ensure that funds are safely shielded from potential estate taxes, individuals should consider funding trusts now as the future of the estate tax is uncertain.

 See David W. Schlossberg, The End of Trusts?, LifeHealthPro, Fe. 23, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.