Trusts are powerful legal creations. Unfortunately, they are as often misunderstood as understood by the very people who have them. Some are asking “how do I set up a trust?” while others are asking “how do I get rid of the trust I already have?”
These conflicting questions are not an indictment of trusts, but they are really the consequences of our current legal and tax environment.
Trusts, of course, are amongst the most powerful tools for moving wealth outside of the reach of the gnashing teeth of the estate tax. However, the estate tax level has not been predictable for much of the last two decades. While the estate tax level was recently twice set to drop to lows not seen in a decade or more, Congress miraculously hiked it back up to far more generous exemption amounts with far less damaging taxation percentages.
In other words, some taxpayers have found that a trust might not be doing the work for which they established it simply because Congress got it right. Following this thought, The Wall Street Journal recently published an article titled “How to Dismantle a Trust.”
As the article notes, there is a way to properly blow up your trust. On the other hand, do not be too quick with the dynamite. Why? There are far more important reasons to keep your trust independent of any present or future estate tax exposure.
For example, the probate avoidance enjoyed through a properly funded revocable living trust can save time, money and inconvenience should you become incapacitated and upon your death. Moreover, the inheritance protection available for your heirs can be an important consideration.
If you have yet to set up a trust, there are still many great reasons to establish one for yourself and your heirs. On the other hand, if your current trust is more burden that benefit, then the trust can be shut down.
You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: The Wall Street Journal (September 20, 2013) “How to Dismantle a Trust”