The popular notion of a trust is that it’s something that only the rich have, something they use to protect their children and grandchildren by transferring large amounts of wealth between generations. While this notion has some basis in reality, it’s also a far cry from the very practical benefits that people of more moderate means can enjoy when they create their own trust. Specifically, creating a revocable living trust in Texas is something that almost everyone can do. Let’s take a look at why.
Practical Repeal of Estate Taxation
It used to be that people created trusts as a way to avoid their estate being forced to pay estate taxes after they are gone. Today, paying federal estate tax is something that almost never happens.
Earlier this year the federal estate tax exemption limit was set at $5.25 million. That limit applies to each individual, effectively meaning that married couples have a $10.5 million exemption limit. So, if you are a single person who has less than $5.25 million in assets, or a married couple with less than $10.5 million in assets, you don’t have to worry about estate taxes at all.
Some people realize this and come to an estate planning attorney assuming they won’t need to make a trust. But trusts aren’t only about avoiding estate taxes. They’re also about ensuring your estate passes smoothly after you die.
Living Trust in Texas Estate Transitions
By creating a revocable living trust and transferring your property into it, you can avoid much of the headache that comes with probate. Most people don’t know much about probate, and only encounter it after a parent, grandparent, or other close family member passes away. If that family member has not created an estate plan, transferring his or her property to other family members is something you can only do after going through the probate process. This process can be laborious, time-consuming, and costly, and can leave a bad taste in the mouth of anyone who’s had to go through it.
Fortunately, transferring your assets to a living trust allows you to skip probate and transfer your property directly to your family members or other heirs much more easily.
Of course, a revocable living trust is not the only type of trust out there. Other trusts include testamentary trusts and irrevocable trusts. For people with assets worth more than the $10.5 million exemption limit, various irrevocable trusts can be an excellent way to reduce your exposure to the estate tax. On the other hand, testamentary trusts allow people with young children to effectively transfer their property to those children before the children become adults.
Because of all the varieties of trusts available to you, you should speak to your estate planning lawyer for detailed advice on the types of trusts that suits your needs.