Since I can leave $5,000,000 in 2011 Tax-Free, do I need a Trust?

There are several reasons to use a Trust. Taxes are only 1 reason.  In fact, single people do Trusts as frequently as married couples, and there are NO tax benefits.

December 15, 2010 update:

After much political posturing, with each side trying its hardest to make the other side look bad, we have a new law effective for the next 2 years.

The part most relevant to me is the $5,000,000 per person exemption.

This means that an unmarried person may die in 2011 or 2012 and leave tax free $5,000,000; the excess is taxable at 35%.

Of course, this applies only if you are lucky enough to die in 2011 or 2012; if you die in later years, the tax free exemption reverts again to $1,000,000, and 55% on the excess, unless or until they change it next time.

Typical married couples use an A-B/C Trust to:

1. Defer all tax no matter what the couple is worth when the first spouse dies; and

2. Allow 2 exemptions to pass tax free.

With this new tax reality:

a) Does your Trust need attention? NOT if I did it! We were always aware that the tax free exemption has been a moving target, so no matter what it is when you die, your Trust is fine.

b) Is a Trust still appropriate? YES. The many reasons for doing Trusts continue to apply:

• Probate Court avoidance.

• Protection of immature beneficiaries by providing proper management of finances.

• Asset Protection for heirs through Dynasty Trust, and keeping inheritances in the family for future generations.

• Married couples often like the requirement that the Survivor may enjoy the family assets, but must leave whatever remains to the children / other specified heirs.

The other benefits of a Trust continue, besides tax benefits.

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