Licensed Attorney in HI, CA & NV
3449 Akala Dr., Kihei, HI 96753
P.O. Box 3464 Incline Village, NV 89450
Why is the living trust replacing the will? Our clients usually choose the living trust over the will:
1) to avoide probate;
2) to avoid guardianship;
3) to avoid joint ownership; and
4) to avoid estate taxes.
1) Probate: “When there’s a will, there’s a probate. The living trust avoids probate.” A will is designed to be used in a probate. Probate is a court proceeding used to transfer assets owned by someone who has died. Only the executor, when authroized by the court, can sign off on assets held in the name of the deceased. Probate can be costly and time-consuming, but the biggest problem is that your loved ones will have to deal with courts and attorneys. The living trust avoids probate because assets are held in the trust, which lives on after the creator dies.
2) Guardianship: “Guardianship is like a probate every year for the rest of your life.” A will does nothing to prevent guardianship. When you become incapactiated without the proper documents, a guardian must be appointed to make business and health decisions for you. Guardianship can be costly, time-consuming and humiliating. The living trust avoids guardianship by providing that a successor trustee steps in to make such decisions for the trust assets. Health Care Documents and Durable Powers of Attorney complete the protection for guardianship.
3) Joint Ownership: “Joint ownership problems can be worse than probate.” Joint Ownership can avoid probate, but often results in worse problems. Simultaneous death of joint owners can result in a probate. Joint ownership can also mean loss of control. A joint owner’s creditors may be able to take the assets. Most important, joint ownership may mean higher income taxes, gift taxes and estate taxes.
4)Estate Taxes: “The AB Living trust can double your ‘magic number’.” This is the “applicable exemption amount” from federal estate taxes and is currently $5,250,000. Federal estate taxes are taxes on your assets after the magic number and currently start at 40%! When a person dies and leaves it all to their significant other, their magic number dies with them. But with an AB or ABC Living Trust, you can preserve the magic number of the person who dies, add it to the magic number of the survivor, and thereby double this magic number.
These are the four reasons why the living trust is replacing the will.