Question : Is a Living Trust still important when your assets are under a loss?
With the current housing bust, the main asset our house (in my name only) is losing value day by day. And I still have not signed up for a Living Trust to help transfer my assets to my wife and children. Now I'm wondering if by signing a Living Trust I'll put undue financial burden on my wife who is currently not working. Also I want to make sure the money in the Life Insurance, Savings Account,401k and the cars go to my wife if I die. Do I still need a Living Trust for these?Can I hold off on a Living Trust until my main asset gains value? What are the risks?Just clarifying ... I totally understand the benefits of a Living Trust. My question is whether I delay getting a Living Trust until my main asset really acquires some value.
- asked by Qurious
All Answers:
Answer #1
A living trust helps you to pass your estate toyour children or grand children while avoidingprobate (having your estate seized and goingthrough court). Probate is a big rixk and veryoften messy. There are many different type oftrust: living trust, generation skiping trust,dynasty trust, etc... It all depends what you aretrying to achieve. If well set up trust can alsohelp in reducing the estate tax (sometime to $0).All depends on the type of trust, your marritalstatus and the amount of estate that you have.Whata trust does is to pass your estate to anotherfamily member while you are alive, and while youkeep control of your estate (i.e. managing it orbenefiting from it). At your death the familymember will become the full owner. Tax can beavoiding if you are married, by dividing yourassets between you and your spouse, and thenpassing the benefit of your trust to yoursurviving spouse which in essence will lower thethreshold of assets for your children. Forexample: if you have $3M in asset and the estatetax kicks in at $2M (fed estate tax is 45%), youcan divide your assets $1.5M each between you andyour spouse. Set up 2 living trusts of $1.5M eachfor your children or grand childrem (or whoever inyour family). Trust A and Trust B. Upon your deaththe benefit of your $1.5M trust A will go to yoursurviving spouse (she/he will keep the benefit butthe assets will be under the children's names).Since when you die your trust A is less than $2Mthe children will not pay taxes. When your spousedies same thing: her/his trust B is less than the$2M the children will not pay taxes on her/histrust B. At the time of your spouse death yourtrust A has already been passed to your children.It's already theirs. The end result is that theyhave receive Trust A of $1.5M and Trust B of$1.5M, each trust being less than the $2M taxablethreshold. The problem is that estate tax and lawis changing every year until 2010. It will therevert back to $0. Next year is an election yearand estate law might change with a new presidentand congress so you cannot rely on what thethrehold is. Finally you cannot based the value ofyour estate on what today's housing market isdoing unless you plan to die today.Seek afinancial planner and lawyer advice. Good Luck
- answered by crapaudblanc
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