Solutions 4 Financial Independence: 07/17/18

Published: Jul. 17, 2018 at 7:10 AM EDT
Email This Link
Share on Pinterest
Share on LinkedIn

Question: I have around a $10 million estate and currently have a will in place for when I die. I heard trusts were better, but I do not want to tie my money up. Is a will enough to protect my family from probate and taxes?

Answer (John Halterman, Beacon Wealth Management): “You at least have your objectives down. Clearly it sounds like you want to avoid probate, you want to clearly pass your estate on without taxation, and you don’t want to tie it up.

But what do you have to be thinking is how do you do that? There are hundreds of trusts and so you have to consider all of the different things and what may be appropriate to meet that particular objective that you have.”

Question: What type of trust would help his situation?

Answer (John Halterman, Beacon Wealth Management): “I will give you example, a living trust is designed to avoid probate. So with a living trust, it allows you to keep the assets liquid because you can do anything you want during your lifetime while you’re alive. You become the trustee of the trust so you can put your home in it, you can put your cash in it, your investments in and you can do anything you want.

Upon your death it becomes irrevocable. Now that trust is going to move on and go into the things that you want. But because it avoids probate it also allows you to sell your estate much quicker, which is something he sounds like he wants to do.

The second thing is about the taxation. One of the things you’re going to have to add in there is a thing called an AB family trust or an AB trust, which allows you to have a double exclusion. Right now you could pass along $5.4 million because he has $10 million. If you have a double exclusion, that’s going to take you to $10.8 million. That puts him under the estate tax threshold. So if you’re concerned about being over the estate tax threshold, you have to do something that allows you to pass that on. Without something like that, no doubt about it, a $10 million estate will be subject to probate, it will be subject to the taxes and absolutely it could be contested. When you go through probate you are taking your chances that it’s public records and anybody could make a claim.”