“Trust”-Worthy | Financial Planning Chapel Hill l Old Peak Financial Advisors


June 26, 2013

2013_trust worthy


June 26, 2013

Trusts have a reputation as a tool for billionaires only.  In fact, they can make sense for a lot of people of modest means.  I have personal experience.

My mother recently passed away.  Before she died, my parents set up a trust. Boy, am I thankful.  It’s not because there is a tax savings.  Under today’s tax laws, and with a bit of planning, you only owe estate taxes if you die with more than $5.25 million, or $10.5 million for a married couple.  Rather, the benefit of a trust is avoiding probate.

Probate is the court-administered process that’s legally required to pass assets – whether “things” or financial assets like investments or bank accounts – to your heirs.  You want to avoid it.  It’s a hassle for your heirs, especially if they live far away from you.  It will probably take 6-9 months or more to go through the court.  Legal challenges from unhappy relatives are easier in probate than with a trust.  Probate is also expensive.  In North Carolina, for example, it can be $6,000 in court costs plus lawyers’ fees.  You also lose privacy, as anyone can see what’s in your estate.

If you set up a trust before you pass away — the most common is a revocable living trust — you avoid all those disadvantages.

Admittedly, there are other ways to avoid probate.  Your surviving spouse will typically get most of your estate automatically.  Your IRA or 401(k) can pass to your beneficiaries outside probate, and so can some other kinds of accounts. But for a lot of people, without a trust, your survivors will end up in probate. Speak with an estate-planning attorney, or call me if you want to learn more. Your heirs will thank you for setting one up.  I thank my parents.

This article is not intended to provide tax, legal, accounting, financial, or professional advice. Readers should seek advice from qualified professionals who can review their specific circumstances. Old Peak Finance endeavors to provide information that is accurate and current. However, we cannot guarantee that this information has not been outdated or otherwise rendered incorrect by new research, legislation, or other changes. Old Peak Finance has no liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website.

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