Re: how to compare living standards

On Mon, 10 Apr 2006 12:47:52 -0500, "Jim Blair" <jeb@xxxxxxxx> wrote:

And when my family (me and my wife) wealth passed the $650,000 mark when
that was the estate tax deduction, we were advised to (and did) pay a lawyer
about $1500 to move our assets into a trust and make our beneficiaries the
trust (rather than each other), and then make our daughter and grandchildren
trustees. We were assured that this would insure that when either or both
of us die, our estate will avoid both probation and federal and Wisconsin
estate taxes. The document is several pages long and I don't understand it
but it has a clause about giving the surviving trustees the option of
taking only a part of the trust (i.e the estate tax deduction limit) and
keeping the rest in the trust which can then passed on or taken at a later
date or used to pay expenses or some such.

Since then, the exemption has increased to well above our family assets, so
my $1500 was likely wasted :-(.

That is, unless I were to become a lot richer :-)

The main purpose of putting your assets into a living trust is to
avoid probate, which not only involves a court jurisdiction over the
estate but soaks up a lot of the value of the estate in lawyer's fees.
A living trust itself does not in any way eliminate estate taxes, when
the value of the estate exceeds the exemption limit.

The unlimited marital deduction feature of a living trust eliminates
any estate taxes on the death of the first spouse, assuming all of the
assets belong equally to each spouse. The trust must be divided into
two parts, the decedent's trust and the survivor's trust. If the
value of the decedent's trust exceeds the exemption limit, the excess
can be transferred to the survivor's trust in order to avoid the
estate tax on the decedent's share of the estate.

On the death of the second spouse, the successor trustee (whoever you
have named in the trust) will terminate by the distributing the assets
to the beneficiaries after first paying the estate tax on that portion
of the survivor trust that exceeds the exemption amount. This year
the exemption is $2 million. So unless your combined estate is over
$4 million, there will be no estate tax due at all, and thus no need
to file an estate tax Form 706. That form is complex and normally
requires the help of an accountant or lawyer.

Assuming you have put all of your assets into the trust, the $1,500
you paid a lawyer to create the trust is well worth it because your
heirs will avoid the time and expense of probate. However if the
amount left out of the trust exceeds $100,000, all of that amount will
be subject to probate.
.

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