Becky Cholewka: There is so much confusion and misinformation out there about trusts.
Today, I want to give you just a little breakdown of why revocable trusts have certain benefits because there’s a lot of people out there that say, “Oh, you don’t need a trust anymore just based on our tax laws.
Well, that’s absolutely not true. There’s multiple benefits to having a trust. It’s just whether or not those align with your own goals as to whether or not that’s a good estate planning tool for you.
Number one, a trust can help avoid probate. Depending on the types of assets that you have, the only way to avoid probate may be if we put a trust in place for you.
Avoiding the court when you die, or avoiding death probate, is one benefit of having a trust.
Another benefit of having a trust is to avoid living probate. What living probate is, is going to the probate court when we’re alive. Those actions are called guardianship and conservatorship actions.
When we have strong estate planning documents in place, including healthcare power of attorney and a revocable living trust, one of the benefits of having a trust, that is funded properly, is for incapacity planning.
It is for the opportunity to have your successor trustee come in if you’re incapacitated and start working on all of your banking accounts, checking accounts, savings accounts, brokerage accounts, if you’re no longer able to manage those assets yourself.
If we don’t have that in place, it is likely that your family will have to go to the living probate court for guardianship or conservatorship action to have the court legally appoint them to now manage your assets for you.
The benefit of incapacity planning is one of the benefits of choosing to do a revocable trust.
Another benefit is for tax planning. Now there’s not too many people of us right now that need that because our tax laws currently are very, very generous when it comes to death taxes or estate taxes.
Right now, you can pass up to 5‑1/2 million dollars per person. If you’re married, you can double that. About $11 million if you’re married, before there are any type of death taxes that you would have to pay. Now that’s at the federal level.
Some states do have a death tax, or a state tax. New Jersey even has an inheritance tax, but here in Arizona we do not have those state level taxes.
Tax planning is a benefit of having a trust, but most of us just don’t need to take advantage of that right now, just because of the generous tax laws that are in place.
The fourth benefit of having a revocable trust is asset protection. I’m not talking about asset protection for you while you’re alive, but this is for asset protection for your loved ones who you are leaving your assets to when you die.
If you leave your assets to them in trust, that trust changes from a revocable trust to an irrevocable trust when you die. When we have an irrevocable trust, we have asset protection. What does that mean?
Well, it means if your child now is in a car accident and gets sued, the money that you’ve left for them in trust is going to be protected from their creditors. Or, maybe, they have started a business that has failed and they have to file bankruptcy.
The money in the trust that you left them also protected from the bankruptcy court. They’re still going to be able to retain that asset, even in their bankruptcy.
If they have to go through, maybe, a messy divorce someday down the road, the money in their trust is going to be their own separate property that’s going to be protected during that divorce proceeding and the almost now ex‑spouse is not going to be able to claim part of those monies.
There are four benefits to having a revocable trust here in Arizona. It’s to avoid death probate, avoid living probate court, as well as tax planning and also asset protection for your loved ones.
If any of these reasons sound interesting to you or you want to learn more, we hope that you’ll schedule a consultation here in my office.
I’d love to educate and give lots of information as well as design a plan that will meet your own family’s needs and goals. Thank you.