Revocable Trusts and other Planning Tools: Paying the IRS LESS, your loved ones MORE

Last week we talked about wills. As in, yes, you really need one for a million reasons—but most of all, to make things easier for the people you leave behind. There’s other stuff lawyers can do to help you and your loved ones once you pass. As a lady said the other day when she called, “Can you write one of those things that means my kids pay the IRS less?”

I shook my head and squinted at the phone. “What’s going on?”

She had cancer.

“Oh,” I said. “I know what you need.” I went on to discuss trusts, or what some folks call “living trusts” and lawyers call “revocable trusts.”

By using a “revocable trust,” you can avoid the probate process for any assets that are held by the trust, and the distribution of those assets can take place immediately following your death. The revocable trust works to avoid probate because the trust itself owns any assets you transfer into it. Your death doesn’t change the owner, so no taxes get paid to the state—which is a win.

Probate is expensive and hard. If someone comes to us and says they need a will probated, I am most likely going to ask for a $5,000 retainer up front—because the probate process takes time and work. Unless the executor or executors are especially good at and trained in handling finances and lots of documents, or you’ve been through it before, you will probably end up hiring a lawyer to probate your relative’s will. Really? Yes, it’s worth it. But it’s also worth avoiding it if you can—ahead of time.

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What does probate involve? Inventorying and appraising property; paying debts and taxes; and distributing the remainder of the property according to the will. You will have to pay a percentage of the estate’s value to the Clerk of the Circuit Court where the decedent lived. If you’re doing this yourself, your best bet is to either call a lawyer or call the clerk and find out if they have a probate packet. Most courts have these, and clerks will guide you—at least sometimes!

What Can I Put in a Trust?

You can title your vehicles, your home, your business in the name of a trust.

You can set up a way to care for your pets with your trust—and even make sure your pet gets treated well when he or she passes.

There are many assets you can simply leave to beneficiaries, which does not usually require a will or a trust. For example, retirement funds, vehicles, stocks and bonds, life insurance policies—so long as you fill in the beneficiary block, you can jump around the state’s requirements and your beneficiary will just need their ID and perhaps a copy of your death certificate to obtain the asset or assets you left them.  

Transferring a car, trailer, truck without a will or trust? You designate a Transfer of Death recipient or TOD on the title, and boom. Just as simple as transferring an asset to a beneficiary listed on your insurance policy.

Boats and planes are little harder—you need a will or a trust to transfer them.

No matter what, you spend a bit of money up front to save your heirs and friends a good bit of money and even more heartache once you’re gone. You make sure you leave nothing to fight about or tussle for, and you take the guessing out of the grieving.

Final Thoughts?

It’s better to decide who gets what once you’re gone rather than to leave it up to the state or to your family to fight over—and it’s better to leave your family your assets than to pay more than you should to the IRS, the state or the County. They take enough of your hard-earned money as it is, right?

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