Does a Living Trust Allow You To Avoid Estate Tax?
Living trust attorneys at Zimmer Law Firm provide assistance in determining if you should create a trust and provide help understanding exactly what a trust can do for you. A living trust has many benefits, including allowing assets to transfer outside of the probate process so loved ones can inherit wealth much more quickly without having to wait for a lengthy probate proceeding to take place.
However, a living trust also has limitations and it is important to understand what a living trust will not do before you decide that creating this type of trust is the best course of action for you.
You should talk with living trust attorneys at Zimmer Law Firm before you create any type of trust so you can decide if trust creation is right for you and so you can make a fully informed choice regarding what trust you should make.
Will a Living Trust Help You to Avoid Estate Tax?
Because a living trust allows assets to transfer outside of the probate process, many people believe that the assets that pass through their trust will not count towards determining if they owe estate tax. Unfortunately, this is a misconception. The assets held within a living trust are still considered to be a part of your taxable estate. As a result, this means that if you are going to owe estate tax because you have a larger estate, you will not be able to shield your wealth by passing it through a living trust.
The assets in your living trust will be combined with other taxable assets in order to determine both if your estate is large enough to exceed the exempt amount that is able to pass tax free and will count in determining how much your total estate is worth when a determination is made on the amount of taxes that are due.
The good new is, many people will not need to worry about owing estate tax so they won’t need to consider whether a living trust leaves them unprotected from tax liability. The state of Ohio does not have its own estate tax, so you will not have to pay taxes within Ohio to the local government after you pass away. You only need to worry about federal estate tax. You also do not need to worry about federal estate tax if you are leaving all of your wealth to your spouse, as you can pass an unlimited amount of assets on tax-free to your husband or to your wife.
If you will be leaving assets to heirs or beneficiaries other than your spouse, you need to determine if your estate is going to be substantial enough that you will end up owing taxes to the IRS. Tax reform has changed the rules regarding estate tax and has made the exemption much larger going forward, so you should not need to worry about owing estate tax unless your estate is a very large one. If you pass assets on to your spouse and do not use your exemption, your spouse also gets to use your exemption along with his or her own — which means your spouse can pass on double the amount to your heirs or beneficiaries without having to worry about taxes.
If you will end up owing estate tax on your assets that you pass on after your death, even after the changes due to tax reform, you should work with an experienced attorney to explore the different types of tools that you can use in order to try to reduce or avoid estate tax. A living trust won’t help you to avoid this financial obligation, and your estate will have to pay the taxes due after you pass on.
Getting Help from Living Trust Attorneys
Living trust attorneys at Zimmer Law Firm can offer personalized assistance with the creation of a comprehensive estate plan aimed at avoiding estate tax and addressing the other key issues that could impact your future and the legacy you leave for your loved ones.
You want to ensure that you are doing everything necessary to identify and effectively utilize the legal tools that will allow you to protect your assets and transfer wealth to the people you love, and we can help. To find out more about all of the services that our firm can provide to you, join us for a free seminar. You can also give us a call at 513-721-1513 at any time to get personalized help with the trust creation process.