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Which is right for me? Ahhh! the 5.45 million dollar question.

The IRS has announced that the estate tax for 2016 is 5.45 million per individual. That means that no estate tax is owed if you die leaving less than 5.45 million in your estate - remember life insurance policies count towards that 5.45 million dollars and there are some rather tricky rules, so if you fall into this category, you need some serious estate planning.

Assuming you do not fall into the category above, do you still need a trust or will a will suffice? That all depends. There are advantages to each.


Living trusts are set up while you are alive and take effect and are administered during your lifetime as well as after death. A living trust is established by transferring all of your assets into the trust, including real property, pensions, life insurance, bank accounts, retirement accounts, accounts receivable, etc. This is done by transferring title to the assets to the trustee (usually you) of the trust to administer.

Pros and cons of a trust.

1. Trusts must be maintained and administered to be effective. This can be burdensome for some. For example when setting up a trust, title to real property must be deeded from you to the trustee -as trustee of the trust. This deed needs to be recorded in the county recorder's office. If you attempt to obtain a loan using the real property as collateral, you may encounter problems. Lenders do not usually lend to a trust, so you must deed the property back to you as an individual (or to you and your spouse/partner) in order to obtain the loan. Once you obtain the loan, you must deed the property back to the trust for the trust to remain effective.

I find that clients who set up trusts are not the best at maintaining or administering the trusts and often times pass away leaving some assets titled in the trust and some assets held individually. This defeats one of the primary purposes of the trust - to transfer title to the assets after death. I have often times had to file a probate action to transfer title to property which was not held in the trust's name at the time of the decedent's death.

2. Trusts are effective estate planning tools. You can establish how your assets are to be administered and distributed after death. Trusts can continue for years after your death until the assets are all spent or distributed. Typically, the assets are used to produce income for the trust and that income is repopulated into the trust or distributed as the case may be. You can get very creative on ways to distribute the assets and can even set up trusts within the trust.

3. Trusts are private. There is no need for court supervision assuming that all assets are in the trust.

4. Trusts are initially more expensive to establish. In fact, the initial cost of setting up a trust can be more than ten (10) times the cost of creating a will. This figure can be misleading, because a will must be probated at death incurring costs of court and attorney's fees, while a trust does not need to be probated.


Unlike trusts wills have no effect during one's lifetime and hence do not need to be administered like a trust but they do need to be updated and kept current. A will only becomes valid or has effect after death - once it has been probated. Wills are vehicles to transfer title and distribute assets from the decedent to the beneficiaries after death.

Pros and cons of a will.

1. Unlike trusts, wills are not meant to be maintained and administered for years after the decedent has passed away and are not effective vehicles if the decedent desires to have the assets managed or used to produce income for the estate.

2. Wills are much simpler than trusts and are particulary useful for individuals who may own a residence, some retirement income, and other limited assets.

3. Wills are very inexpensive to create. As mentioned above, after death the will must be probated and the probate fees and attorney's fees are significantly more "on the back end". Don't let the word probate scare you. Today's probate procedures are relatively simple and very efficient. Absent any contests from beneficiaries (usually family members) the probate process is very quick and inexpensive.

4. Probated wills are a matter of public record and if someone wants to "snoop" they probably can.

There are many other considerations involved in effective estate planning, particularly if your estate is larger than the 5.45 million described above. Other considerations include how you want the property distributed in the event that a spouse, child, sibling, or parent predeceases you in death. There are also certain rules on distributions. For example regardless of how a will or trust attempts to distribute property, a surviving spouse is entitled to what is known as an augmented share - which can be rather complex. Also one would want to consider a health care directive allowing you to express your intentions on end of life scenarios and allowing you to appoint a health care agent.

If you want to learn more, please contact me.

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