The taxable estate is an estate tax concept. It includes the decedent’s interest in every type of property owned at death, plus property over which the decedent had control at death, even if he or she did not actually own the property. The decedent’s taxable estate includes his or her probate assets AND non-probate assets. Just because the distribution of certain assets at death, such as life insurance proceeds, a retirement account, or a jointly owned house, are not controlled by a will (and are not probate assets) does not mean that those assets are not subject to the estate tax.
The probate estate includes only those assets that are subject to the decedent’s will (or subject to intestate succession, discussed earlier in this book). The taxable estate includes all of the decedent’s assets, even if the assets do not go through probate.
The Difference Between The Taxable Estate vs. The Probate Estate is discussed in more detail in my book “Nothing But The Truth About Estate Planning, Probate And Living Trusts”. Download your copy here:
Nothing But The Truth About Estate Planning, Probate And Living Trusts by Larry Israeloff CPA & tax attorney.
Estate planners are often asked whether trusts are only for the wealthy. Though it is not necessary for some people of modest means to establish a trust, it can be a useful estate planning tool, even if you are not rich.
Trusts establish a legal relationship whereby property is held by one party for the benefit of another. Trusts offer peace of mind that your assets will be dispersed according to your wishes once you are gone. Like a will, trusts can be used for any type of property and allow flexibility in the distribution of this property.
When you create a trust, you transfer ownership of some or all of your property to the trustee, who holds that property for the trust’s beneficiaries. For instance, if you want to place real estate in a trust, you would have that property titled in the name of the trustee. Trustees can be family members, friends, a trust company, a law firm, or a specific attorney or advisor.
Who Needs a Trust?
Anyone can avoid court administered probate upon death with use of a trust, but you should carefully consider if the expense connected with forming a trust is worth the investment. You should consider a trust if you have:
• Privacy or probate concerns
• Substantial real estate assets
• Large life insurance policies
• Specific instructions for how your estate is to be distributed once you are gone
• Desire to minimize estate taxes
• Need to protect your estate from creditors or lawsuits
If your accounts are held in joint tenancy or you have named beneficiaries for specific accounts or property, a trust might not be necessary. These assets automatically become the property of the beneficiaries upon your death without probate. For instance, if you own a home jointly with your spouse and both of your names are on the deed, your spouse will automatically become the full owner once you are gone.
An attorney can help you determine if a trust is the best option for you and your family.
What are the Benefits of a Trust?
The primary benefit of using a trust is to provide direction for managing your assets if you become incapacitated and upon your death.
A trust offers a great deal of flexibility. It can be revocable, which means you can make changes to any part of it or terminate it until the moment you are no longer capable of making decisions or communicating.
A trust also ensures your beneficiaries avoid dealing with probate at your death, thus saving time and money. Probate is the court process by which your will is proved valid, and through which your estate is administered after your death.
Finally, trusts are private, so the value and contents of the trust do not become a matter of public record once you die.
Have questions about your personal need for a trust? Then just call us to discuss your situation.