www.billwais.com
Most Important Question:
If I already have a will, do I need a trust ?
Answer: Yes !
If you have a will, your property will go through probate.
If you have a $300,000 house,
the probate fees would be $18,000.
The cost of a living trust
would probably be
less than one tenth that amount.
(less than $1800.)
A trust is a legal entity designed to help you avoid probate.
Probate is a legal system designed to transfer assets from people who died to people who are still living.
Probate is a very expensive, time consuming legal process. The full probate fee consists of a 4% charge against assets plus an additional monetary amount, usually an extra $6,000.
Full Probate Fee: (Formula Set by Law)
For the first $100,000 in assets, the full probate fees is 8%.
For the next $100,00 in assets, the probate fee is 6%.
For the next $800,000, the probate fee is 4%.
When all this math is worked out, the probate fee is roughly equivalent to a real estate commission fee. Probate is a lot like an unforced sale where the government takes your money.
SHORTCUT PROBATE FEE:
Shortcutting the formula, the full probate fee for homes over $200,000 is:
(4% of the fair market value of home) + $6,000
For a $200,000 home the fee is $14,000.
For a $300,000 home the fee is $18,000.
For a $400,000 home the fee is $22,000.
For a $500,000 home the fee is $26,000.
Generally, Probate takes from nine months to two years.
Back in 1983, I handled a probate which was concluded in five months. Since then, the laws have changed and probate takes longer.
The longest probate I've heard of started in the 1920's and was still going strong in 1979. It still may be working it's way through the Courts.
Not all assets are reduced by Probate. Insurance proceeds generally are not reduced by probate, since they bypass probate and go directly to the beneficiary.
One asset which needs to be put into a Trust to avoid probate is your house and other real estate.
When I meet with clients in my office, I calculate the probate fees for them.
If I know the fair market value of the family home, I can calculate the probate fees accurately.
Click here to calculate the full probate fees on your home. Enter the fair market value of your home (no commas) into the calculator box. Press the calculate button to see how much you can save with a living trust.
Probate fees are calculated on the full market value of your home and any other real estate.
Enter the fair market value of your home (and any other real estate) into the box located at the probate calculator website. Click here to go to the probate calculator website. Enter the fair market value in the box without commas.
The best way to avoid Probate is to set up a living trust.
There are other methods but each are unsatisfactory in their own ways.
The cost of your living trust depends on your situation. Generally the cost of a living trust ranges between $900 and $2,500
Click either the SINGLE or MARRIED hyperlink to narrow the range for your situation.
SINGLE PERSON:
Generally a single person needs a simple trust. In rare instances a single person has assets over $1,500,000. In those circumstances, some more advanced work may be necessary.
MARRIED COUPLE:
SIMPLE TRUST - Under $1,500,000 In Assets (Net Worth + Insurance)
The married couple with a taxable estate under $1,500,000 needs only a simple trust.
Younger couples (under age 55) who are close to that $1,500,000 number should consider the fact that they may exceed the $1,500,000 threshold.
COMPLEX TRUST - Over $1,500,000 In Assets (Net Worth + Insurance)
The married couple with taxable estate over $1,500,000 needs a complex trust.
This complex trust contains two trusts - one for each of the million dollar tax shelter.
A simple trust contains only one trust and can only safeguard one of the available million dollar tax shelters.
A complex trust contains two trusts and can safeguard both of the available million dollar tax shelters. This gives your a potential of $2,000,000 in protection.
With a simple trust, a married couple loses one of their tax shelters.
For couples whose assets are under $1,500,000 this is not a problem.
Each person, whether married or single, has a $1,500,000 tax shelter to protect their assets from federal estate tax.
A married couple has, potentially, two separate $1,500,000 tax shelters. Theoretically a married couple can shelter $3,000,000 in federal estate tax.
The first million dollars worth of assets given to children or other beneficiaries can always be completely exempt from taxes.
A married couple can lose one of their million dollar tax shelters.
The first spouse to die must set up a special complex trust in order to save the $1,500,000 tax shelter.
Before one of the spouses dies, the married couple must set up a complex trust.
If the first spouse dies without using the tax shelter, the first spouse "loses" it.
Without a complex trust, the married couple can lose one of the $1,500,000 tax shelters.
A simple trust contains just one trust. This allows only one $1,500,000 tax shelter to be used. A complex trust contains two trusts and both $1,500,000 tax shelters can be used.
Unless the married couple sets up a complex trust before the death of the first spouse, the married couple cannot claim both tax shelters.