If a couple shares ownership of stock or property and one of them dies, the other would be charged with a Capital Gains Tax when the asset is sold. This tax is calculated based on one-half of the value appreciation of the asset from the purchase time.
With a Living Trust, the title will be transferred to the Trust. Thanks to that, there will be no Federal Capital Gains Tax on appreciation at death.
A will cannot remain private during the complicated process of Probate Court.
Unlike a will, a Living Trust is completely private. The size and distribution of your property will be recorded in a private document and will never become available to public.
Avoids Will Contest
In Probate Court, even without a lawyer you can initiate a Will contest.
On the contrary, your wishes in the living trust are very unlikely to be challenged and will be performed with no disruption.
The Probate Court will assign a Conservator to take care of a property in case the owner becomes incapable of doing so, and the real estate will bear the court fees and any cost associated with the conservatorship.
A living trust, however, allows your trustee to be in charge of the property in case you are not capable of doing that. There will be no other cost or fee involved.
Control Over Your Property
You can choose to give your estate to your heirs as a present. In this case however, after the giving act, you will also give away the power to control your property, even when you are in need of support.
With a Living Trust, you remains in control of the assets and also of when and how much your heirs are to receive when you pass away.
Prevents Joint Tenancy Problems
Joint Tenancy means in case one of the co-owner dies, the survivor will have full ownership of the property. If you decide to have someone as a Joint Tenant, you might face a few drawbacks:
- A co-owner has the authority to prevent you from selling or refinancing the estate
- If the co-owner has a divorce, their ex-partner can claim an interest in the property.
- If they owe taxes, your property can be taken to pay for the amount owed.
- If the joint tenant loses a lawsuit, the property can be sold to cover the legal costs and fees.
A Living Trust, the property is not exposed to any risk of debts or liabilities of any other joint tenant.
Significantly Lower Estate Taxes
When the owner die, the Federal Government will collect Estate Taxes once the property is transferred. The taxes are calculated upon the sizes of the estate when the net value of the property is more than the Tax Exemption level. The Federal Estate Tax can be almost as much as one-half of the property value after the exemption is deducted.
A Living Trust can raise the Estate Tax Exemption by twice as much when second spouse dies, which leave a significant savings.
Eliminates Lengthy Probate Proceedings
Probate is the legal process to clear a person’s debts and transfer his or her assets to the heirs. Probate is specifically mandatory for a Will. The procedure is by laws very complex, where your executor has to obtain special approval from court to do anything, such as paying bills or transferring your property.
A Living Trust, on the other hand, will transfer the title to the Trust and your heirs will be able to inherit the assets without going through the complicated Probate Court procedures. There will be no Probate.
Disabled Heirs Can Retain Benefits
If an heir is disabled, he or she generally will no longer have government assistance payments after inheriting assets. A Living Trust doesn’t only eliminating costs associated with probate, but also allows your trustee to arrange distributions specially to a disabled heir so that they can still receive Government benefits.
Probate fees are calculated upon the estate value, with no deduction of debts and mortgages. These fees are of significant amount and are applicable to all other property in different states. If a couple has property in three states, there will be three mandatory Probates! A Living Trust will spare your family the burden of going through Probate, therefore saving them expensive costs and fees.
Even with a Will, Probate Court will freeze assets between 6 months to 2 years and longer in certain cases.
A Living Trust will distribute these properties within days to your family, since there is no Probate Court and the trust is managed by a pre-assigned Trustee.
Fends Against Medical Bills
If you need care in a convalescent hospital or a nursing home, medical bills can eat up your estate, and your loved one will receive nothing.
With a Living Trust, when the owner has a serious sickness, the trustee can still give the estate to your heirs. Sixty months later, you can receive Government Benefits to pay for medical cost. This way, your heirs will still receive the majority of the estate.