The High Costs of Dying

It is universally recognized that everyone dies

someday.  Therefore, every individual is permitted to

plan for an orderly transfer of his or her assets to a

spouse, child(ren), and/or other loved ones.  In

addition, depending upon your success during life, upon

death very substantial estate and inheritance taxes may

be levied upon your estate.  It is within the context

of valid estate planning that ancillary lawsuit and

asset protection is available.  No court will ever deny

a person the right to provide for their estate or to

take advantage of the estate tax allowances available

through trusts and other similar devices.

Estate Tax Fundamentals

Every dollar left in an estate is subject to a

unified estate and gift tax.  However, to eliminate the

burden of taxation from "small" estates, Congress has

given every individual two loopholes: first, any

individual may give any other person $10,000 per year

estate/gift tax free and second, each person is given a

lifetime estate/gift tax credit that is the rough

equivalent of a $600,000 estate.  In addition, a

surviving spouse may inherit any amount from his/her

spouse without paying tax until the death of the

surviving spouse.  To reduce the taxes ultimately

attributable to one's estate, two techniques are

usually used.  Special types of trusts (the A-B and A-

b/C trusts) are created that permit half of the estate

to bypass the surviving spouse, thus creating a total

exemption of about $1,200,000 from estate/gift taxes.

For larger estates, the most effective technique is to

give, over time, a large portion of the value of the

estate to its intended heirs.  A major objection to

this technique is that it gives up control of the

assets before the testator has given up the ghost.

However, using this technique, a married couple can

each give $10,000 per person per year, and using

conduits such as other relatives, this amount may be

multiplied and the process accelerated.

Avoiding Probate

While you can't avoid dying, you can avoid the

high costs of probate.  There has never been a will

written that avoids probate.  Probate costs include

attorney and accountancy fees.  To avoid probate, many

improperly use joint tenancy with the unwanted results

described above.  To properly avoid these costs you may

utilize a fully funded revocable trust, also known as a

"living trust."  The costs of probate for an estate

that exceeds the lifetime estate/gift tax credit may

easily exceed $10,000.  Moreover, probate means delays

in transferring control of the assets and publicity

regarding the details of the decedent's affairs.  Using

a living trust, you avoid these problems because you

have pre-positioned your assets to permit a seamless

transfer of control upon your death.  While the Last

Will and Testament will be probated it will essentially

show no assets passing under its terms.  For the twin

reasons described above, costs and control, the use of

the living trust is not only permissible but encouraged

by the law and the courts.

For married couples, forming two funded revocable

living trusts is a good way to protect assets if one

spouse is more vulnerable to claims than the other.

Statutes in several states now provide that each spouse

is entitled to hold his or her own property.  For

federal income tax purposes, the trust creators are

treated as the trust property owners and no separate

tax return for the trust need be filed.