Can establishing or reviewing a family trust save you money? The bucket full of cash may be understating the matter, as an effective estate plan avoids expensive and time-consuming Probate Court. The financial picture has changed for many spouses and families since they established a family trust or A-B trust. Federal exemptions are much higher (over $11.7 million for two spouses), and California has recently abolished estate taxes. If you haven’t reviewed your trust for 2 to 3 years, or own your home and have yet to establish a trust a little bit of action can literally save you a bucket full of money.
If you have not yet established a trust, it may be due to a common misunderstanding about the value of your estate. The experienced estate planning and trust attorneys at Allen Barron can guide you through the process, helping to protect your family and preserve assets you’ve worked hard to develop.
Many Californians don’t realize that probate costs are based upon the appraised value of all assets, not the equity you have in them. Here in San Diego, a $500,000 home is a modest median to use for an example. We have previously established that probate costs alone (for just a $500,000 house) are $27,620 and that does not include any other assets like a simple checking account or a vehicle. The cost of establishing a trust is a fraction of $27,620 and as the value of your house goes up so does the associated savings by avoiding probate. A trust allows you to pass your home directly to your beneficiaries, who are able to manage that asset immediately. Probate Court will almost always tie up your assets for at least a year.
If you already have an estate plan with a family trust it may be time for a review. Many changes in tax laws and the structure of trusts provide additional flexibility and relief from taxation that were not available as recently as three years ago. One example involves a standard revocable A-B trust that a majority of Californians have in place. The A-B trust locks half of a married couples assets into an irrevocable trust the moment the first spouse passes. This may no longer be in the best interests of the family, or the surviving spouse. Changes in federal tax laws have increased the exemptions for individuals and married spouses, and the survivor may face living expenses and potential medical and retirement costs that exceed 50% of available assets.
If you are establishing or reviewing a family trust we invite you to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470.
Learn about changes in federal and California law and how these can and will affect your family and beneficiaries. Things change. The savings could literally be a bucket full of money.