You may choose to include a living trust as part of your estate plan for a number of reasons – such as avoiding probate, passing assets to beneficiaries in a more hassle-free way, etc. There are some common myths about living trusts that you may want to know so that you can be sure you aren’t trying to use a living trust to do something it cannot do. Here are a few of those misconceptions:
Misconception #1: A living trust will help you avoid estate taxes.
If you have a large enough estate to need to worry about estate taxes, there are a number of strategies you can use to reduce the size of your estate. However, a living trust is not one of them.
The federal estate tax threshold is $12.06 million (or $24.12 million for a married couple) in 2022, but this exemption is set to drop to $5.5 million in 2025. There are also a number of states with their own estate tax, and some have much lower exemptions than the federal level.
Misconception #2: If you have a living trust, you don’t need a will.
Even if you have a living trust, you’ll still want to have a will as well. It’s likely that not everything you own will be in your trust, and you may also own assets that you didn’t yet have when your living trust was drawn up or last updated. You may want to opt for a “pour over” will to essentially transfer anything you’ve excluded to the trust.
Of course, you’ll need other estate-planning basics in addition to your will, including a financial power of attorney, medical power of attorney, and living will. Also be sure to name a guardian if you have minor children. You’ll want to keep these documents stored in a secure place, informing your loved ones of where they are stored. You can also give your attorney and individuals who play a role in your estate copies of these documents.
For help creating or updating your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC at 708 482 7090 for our main office in LaGrange, Illinois or at 847 656 8958 for our Northbrook, Illinois office.