It’s never too early to start the process of estate planning and make sure that your assets are properly managed when you can no longer be in charge. Many people give much thought to which heirs will receive which part of the family assets, but forget to think of how the assets should be transferred. One of the most recommended ways is to set up a living trust.
Aside from the benefits of avoiding a lengthy probate process, a living trust can help you and your family in different ways. Here are three estate planning pitfalls that many people overlook but can easily be avoided with the living trust protection:
Capital Gains Tax
Most people assume that as long as the heirs are mentioned in the will, their wealth will be passed on to the heirs in full. What most people often forget to consider is the amount of taxes that will eat into the inherited amount. A common tax charge is Capital Gains Tax, which can apply when a couple share ownership of stocks or a property. When a spouse dies, the surviving spouse will be charged with capital gains taxes based on half of the value appreciation when the asset is sold.
A living trust can help lower the tax burdens. If the stock or property is transferred into the living trust before the death of the spouse, the title will be transferred to the trust and there will be no capital gains tax on appreciation.
Living Trust Protection vs Will Contest
A will is often the first choice when someone wants to leave their assets for their children, spouse, or other heirs. Many people feel assured that with a will, their decisions are set and will be followed accordingly. However, in many cases, a will can be contested even without a lawyer. A successful will contest can overturn the original terms.
With a living trust, however, the possibility of a successful contest is very minimal. Therefore, your wishes in a living trust are more likely to be carried out as dictated.
Estate taxes are collected when a property is transferred, if the value of the property is higher than the exemption level. Estate taxes can be as high as a half of the property value after the deducted exemption.
With a living trust, the exemption level for estate properties is raised to twice as much. This can lower estate taxes by a significant amount.
With proper planning, you will be able to help your family sidestep these estate planning pitfalls. A living trust protection can make sure that your loved ones are well taken care of. For more information, contact a living trust specialist today at Heritage Living Trust.
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