Frequently Asked Questions

Proper Estate Planning Will Save You Time and Money!

Which is better—a living trust or will?

A living trust will avoid probate, if the assets have been re-titled into the name of the trust. The probate process is used to pass assets from one generation to the next in cases where the person has no documents, or has a Will covering assets for an estate in excess of $150,000. Probate takes a minimum of six months, and frequently longer. The cost of probate is two-fold—Court costs are now about $1,500. The attorney’s fees and executor’s fees are based on the size of the estate.

Do I have enough money to need a trust?

There is no magic number for how much money one has to have before a trust is the right decision. We usually look at whether the person still owns a home or other real estate, because you cannot put a beneficiary on a house. The trust gives you the ability to control not only who will receive assets from you, but also when. For example, if you want to leave money to a child or grandchild, 18 is the legal age when a child can inherit. However, this is typically not the best time for a child to receive a large sum of money. When you create a trust you can control when the child is able to receive the money, or what the money can be used for.

What happens to my trust if I move out of state?

California has a rule that if the document was valid in the state where it was created, we will honor it in California. All 50 states recognize a living trust, although other countries do not. If you move out of state you should have your documents reviewed in the state where you reside permanently.

Should I put all of my assets into my trust?

Some assets like IRAs cannot be held by your trust. Those assets will pass to your heirs with a proper beneficiary designation and will not have to go through probate.

If I give a gift of more than $13,000 in a year will I have to pay a gift tax?

The current annual exclusion for gifts is $14,000, but if you give more than $14,000 in a single year it just starts to count against the $5,120,000 lifetime gift exemption for a single adult, or $10,240,000 exemption for a married couple. For 98% of people the exemption maximums are never reached, so they never have to pay gift taxes.

If I receive a large cash sum as my inheritance, will I have to claim it as part of my income taxes?

The answer is no. The estate of the person leaving the inheritance may be subject to estate taxes, if the amount given exceeds $5,120,000, as explained above. For the person receiving the gift, the money is not considered income. But, if you leave it in a savings account, for example, you will receive 1099’s for any interest income accrued on the gift. You should contact a financial planner or a tax professional to learn about ways to invest the money in order to reduce or eliminate potential taxes on the interest income of the gift.

What kind of estate planning is required for business owners?

All business owners need to document an exit strategy for what happens to the business when they want to retire, or are forced to leave because of disability or death. This is called a Business Succession Plan. Of primary concern will be whether or not the business will continue or be sold, and if remaining assets will be dispersed. Also, provisions need to provide for income and liability protection for the departing owner. Like other estate plans, Business Succession Plans need to be reviewed on a regular basis to make sure they cover all relevant issues and concerns.

If you have other questions, don’t hesitate to contact our office.