Without a trust, your family could face unnecessary legal headaches, taxes, and fees. I’m Sarah Siedentopf, I’m an estate planning attorney in Atlanta, Georgia.
The first thing that trusts help you avoid is probate, unnecessary legal headaches. The probate process is long and involved, it is frustrating, and it is waiting. Many of the courts here in Georgia and probably most other states are incredibly backed up, and things are, for many of them, getting worse instead of better. The process of going through probate takes an absolute minimum of six months under Georgia law, but in most cases, a significantly longer period of time as there are required court filings that need processing, perhaps updates and amendments. And so, this can be a long headache, it is confusing.
You will almost certainly need to hire an attorney, so you’ve got legal fees. The executor can charge 2.5% for all of the assets that they bring into the estate and 2.5% for all of the assets that they pay out of the estate. This is a generalization, there are lengthy and difficult calculations involved in figuring out executor fees, but a quick ballpark is about 5% of the estate in executor fees, unless there’s a will that has specified otherwise.
If you’ve got a trust, you can specify what fees your trustee gets or doesn’t get in terms of payment. And of course, if you exceed the estate tax exemption, your will may not give you any tax protection. If you are in a situation where there is a possibility that you are going to exceed the estate tax exemption, you often have options.
One option for married couples is a special trust that allows the first spouse to pass to essentially save their exemption so that the money under that exemption goes into its own special trust. The spouse has access to it only under certain circumstances if needed, so that we can save it and maintain it and earmark it as this money was held under first spouse’s estate tax exemption. The money in that trust grows tax free, so that over time, it will potentially be much larger, but we’ve already got it outside of estate taxes.
And then, when the second spouse passes, their estate tax exemption can apply to whatever they’ve got left, which potentially saves taxes, because if we don’t specially earmark and save that first estate tax exemption, when the second spouse dies, you know, it’s all very well as long as a spouse is alive. But when the second spouse dies, we only have one estate tax exemption. So by doing this, we actually get to use both estate tax exemptions, which essentially doubles the protection.
There are obviously many other types of things that can be done to save on estate taxes, which if you rise above the exemption, y on anything above the exemption, you’re paying about 40% in estate taxes and that exemption does change from year to year. So that’s an important part of the calculation of what it is now, what it may be in the future, and where your assets are in terms of growth.
But trusts can absolutely save a significant amount in taxes if deployed properly in situations where you are exceeding or expected to exceed that estate tax exemption for an estate. So if this is something that you are concerned about, absolutely, please give us a call, we would love to talk to you about how trust planning can help you avoid legal headaches, can help you save on fees, and save on taxes. So we’d love to talk to you.
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