A trust allows you to avoid probate all together. Today, probate and court costs can be as high as $6,000 in North Carolina, which is far higher than the cost of most trusts. We recommend using a trust to pass property to your spouse and children at death as a way to avoid paying these increasing costs. Hence a Revocable Trust is less expensive than a Will and results in a better plan for most middle class families and all well-to-do families. It also gives a family privacy and speed in settling an estate. Importantly, it gives one far more control over how, when, and to whom an estate is distributed.
If there is any possibility of a family dispute over your testamentary wishes, a well written trust can be virtually impossible to break while a Will has numerous statutory ways to undo it. Plus, with a Will, the person contesting the Will gets the legal fees paid by the estate rather than the litigant, which is not true with a trust; a Will contest results in the estate paying the lawyers on both sides and the family getting far less. A trust can have a provision that says anyone contesting the trust in any way, directly or indirectly, loses everything.
Any family that owns real estate in another state should have a trust because that land will require an “ancillary probate” costing thousands of dollars in addition to your probate at home. Any family that owns a business needs a trust so that business operations are not halted by probate when the founder dies.
A trust also allows you to do asset protection planning for your spouse and children to make sure your estate stays with your spouse, your children, and grandchildren rather than be being passed to the next spouse or to your son-in-law or daughter-in-law or step-children.
Many people think that they need only simple estate planning documents, but most have more complex situations than they think. Simple wills work fine for some families, but a trust is a much stronger planning tool that provides significant advantages for those who wish to control their property at death. Trusts allow you to avoid probate, protect your assets, and implement certain types of tax planning.
With a trust, you can actually control your assets for your family after you pass away. Statistics show that 80% of men die married, while 80% of women die unmarried. If the wife dies first, it is highly likely that the husband will remarry. For this reason, your wife may wish to build protections into her trust, such as a pre-nuptial requirement, to make sure that her property goes to your children instead of your new spouse. Trusts likewise allow parents to protect their property in situations where they fear that their children’s marriages may end in divorce. This is a very common concern for parents. A trust is a powerful device that protects property and wealth by keeping it in the family.
Trusts can also provide asset protection, especially if a long-term care crisis would significantly decrease the property that you plan to leave to your spouse and children. In this situation, our law firm, W. G. Alexander & Associates, uses a modified sweetheart plan, where we draft a trust in your will to protect your assets in the event that you need government assistance. You will still be eligible for these programs, and you may do what you wish with your property until death. A Will based Trust is the only testamentary plan that works against Medicaid estate recovery and protects your surviving spouse and children.
Finally, trusts allow you to do tax planning in certain situations. In the last several years, there have been significant estate, gift, and income tax law changes, all of which require you to revise your estate plan if you created an estate tax trust 10-15 years ago. This is because the exclusion amount is far higher now than it was in the past; today you can leave over $5 million to your spouse and children at death without tax consequences. If you keep your old plan in place, it is likely that you will create income tax problems for your family when they try to sell your property after your death; they could pay high capital gains taxes, as the irrevocable trust that you created at your death will freeze your basis. For this reason, it is important to have an experienced Elder Law attorney review your estate plan today to help you with proper income tax planning.
If you or a loved one would like to learn more about what trusts can do for you, or if you need an old trust reviewed, contact an experienced Elder Law attorney today. Call W.G. Alexander & Associates to make an appointment. You can also attend our free seminars and learn more through our website at www.wgalaw.com or call us at (919) 256-7000.
Attorney Bill Alexander discusses these issues and more every Tuesday morning on W.G. Alexander & Associates’ radio program, “Asset Protection Today,” on TalkRadio 850 WPTK (AM). Be sure to listen tomorrow from 9:00-10:00 AM. To listen to last week’s show, please visit WPTF’s on demand show blog by clicking here.