On August 22, 2013

An excerpt from an upcoming book on probate and living trusts from JR Phillips & Associates.  Giving people information so they can make informed decisions about their estate planning.

1. Probate is always expensive. Depending on the state of domicile of the decedent, probate can be reasonable, moderately expensive, or horrible. Colorado is one of 20 or so states which have reformed probate to the point where it is a perfectly reasonable alternative for many people.

Beware of salesmen trying to make you think differently. There may be many valid reasons to choose one or more non-probate methods of asset transfer, but in Colorado, absent exigent circumstances, the cost of probate, by itself, is generally not enough to force you to buy a Living Trust to avoid it.

2. Living Trusts save taxes. For years, the advertising has been “Avoid Probate, Save Taxes”. This was designed to motivate you to either buy an annuity or buy a Living Trust. In truth, there are many ways to avoid probate other than annuities or Living Trusts. In many cases, it is not necessary or desirable to avoid probate.

In addition, there is no tax planning that can be done with a Living Trust that cannot also be done with a Will. It is true that, in the past when “A/B” trust planning was a standard way to minimize estate taxes, it was easier using a Living Trust. But, since the 2013 tax act, the very high exemption amount ($5,250,000 in 2013) means that most people do not need to do any estate tax planning at all.

For those fortunate married couples whose taxable estate exceeds, or will likely exceed $5,250,000 the use of “A/B” trusts have been pretty much replaced by the inclusion of “Portability” in the IRS code. Under “Portability”, a surviving spouse can claim, and later use the unused exemption of the deceased spouse, thus making the couple’s effective exemption $10,500,000. These numbers are also indexed for inflation, so they will increase each year.

Categories: Probate

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