One of the things that everyone has to face is establishing a will, to decide how you wish to handle your assets if something happens to you. We also need to minimize the tax, fees, and hardship on the survivor.
If your combined assets exceed $675,000 you must have a living trust. When the first person dies you have a full exemption of bequests to your spouse, making the estate exempt from taxes. On the second death you only have one $675,000 exemption. The trust doubles it and gives you a $1.35 million exemption.
The exempting amount increases each year under the new law Until 2010 a trust saves significant taxes. An additional advantage that carries past 2101 is a trust will avoid probate fees because the property in the trust is not probated and it provides a degree of confidentiality as to your heirs and property.
The best current method is a living will (AKA AB trust, living trust, etc.) In simple terms, this is a will integrated with a trust that goes into effect after the first death. It usually gives the survivor total control, but that can be your choice.
The difficulty, to put it bluntly, besides thinking of death, is the number of incompetent attorneys drafting these documents, and equally incompetent attorneys trying to handle estate returns on first or second deaths. We see poor advice and sometimes advice which is downright detrimental to the financial health of the survivor.
While we, as a CPA firm, do not create these trusts and wills, as historically they have been done by attorneys, we strongly recommend that you work in concert with our firm and your personal attorney to do it right. If you do not have a personal attorney you trust, we can recommend attorneys that we know, that will do trusts at a reasonable cost. If you want a do it yourself trust, then we can review the tax portion for you and you can do the "work" the attorneys do. Beware of the "living trust" mills, as they are the H&R Block of that business. A few are not even attorneys.
It is our absolute recommendation that you do something now to establish a will and trust if you do not currently have one. We also review existing wills and trusts to confirm that it is set up in your best interest.
Sandra Eve Kardos CPA
800-924-5221 FAX 800-606-2036
PO Box 9333 Van Nuys CA 91409
with offices in Acton, and Ridgecrest, CA
Or E-mail at kardoscpa@mindspring.com