I'm a single man looking to start with some estate planning, and I don't really know whether to go with a will or a trust. I have heard that trusts reduce estate taxes for married couples only. Is that true?
Estate Planning Attorney
Different kinds of trusts can be used to address estate tax problems for different people. What you are probably referring to for married couples is the use of a "credit shelter" or "AB" trust that is intended to maximize available estate tax credits while still provide that the surviving spouse can use and enjoy all of the property.
There is no way to say, however, that a trust will or won't help you plan for estate taxes. It is not true to say that they only help married people. It is true to say that whether a trust can help you depends on what is causing your estate tax problem. For example, if you have a taxable estate but that is due in part to a large life insurance policy, you as a single person could use an "ILIT" or Irrevocable Life Insurance Trust to hold the policy and help address the estate tax problem.
I think you would be best served by interviewing with an experienced estate plan attorney who could help assess your estate tax situation and then make a recommendation as to what strategies and techniques would be most appropriate in addressing the tax problem.
The foregoing is commentary regarding a general legal question. It is not intended to be legal advice specific to the reader's individual situation nor does it create an attorney-client relationship between the author and any reader. You are encouraged to contact a qualified attorney to discuss your legal situation.
Limited Liability Company (LLC) Lawyer
Avoiding or postponing taxes is one objective in estate planning, but certainly not the only one.
Consider the benefits of a living trust other than saving taxes:
If you are under age 65, statistically you have a three times greater chance of becoming disabled next year than of dying. If you have your assets in a living trust, you get to select the person (or institution) that takes over as trustee if you are unable to act in that capacity. The trustee will have the responsibility of using your assets to care for you. Without the trust, a guardian might be appointed for you by the probate court. The guardian might have to post a bond, hire an attorney, get court permission before making major decisions, etc. The trust can function without the intervention (and cost) of these third parties.
Similarly, the trust can avoid probate, again with incident costs and delays, at the time of your death. In Illinois, where I practice, estates must he held "open" for at least six months to allow creditors to file and prove claims. No such time period applies to the living trust.
While married couples have always been able to maximize their tax benefits through the use of trusts, the latest version of the federal tax permits this sort of tax equalization without the use of trusts, but the other benefits are still there.
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