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General Estate Planning for Tax Avoidance


Estate Tax Planning:

Living trusts can incorporate complex estate tax planning for married individuals, including the division of assets at the death of the grantor into separate trusts to maximize the use of the grantor's federal estate tax unified credit. Those amounts placed into the credit shelter trust are completely protected from estate tax when the second spouse dies.



A will has to be probated with the County Clerk of Court. The will and its contents become part of the public record when probated. If you do not want the public to have access to the details of your estate plan or family dynamics, a living trust allows for the private transfer of assets since it avoids probate.


Avoidance Of Probate:

A properly drafted trust can avoid probate if it is properly funded. After the signing of the document, the assets to be governed by the trust must be transferred into the trust name. As discussed above, privacy is one reason to avoid probate. Another reason is to avoid the cost of probate, $.40 per $100 of value of probate assets (real property values are not counted). In North Carolina, there is a maximum limit on probate costs of $6,000. Many states do not have a cap on probate costs. In those states, the avoidance of probate with a living trust may save beneficiaries substantial funds.


Protection After Death:

Trusts may be more difficult to challenge in a contest proceeding after the death of the grantor. Another protection provided by a family trust is from the divorce, bankruptcy or other court proceedings of a beneficiary of the trust. Since the assets of the trust are protected within the trust, even though they may be considered a financial resource of the beneficiary and may impact the proceedings, the trust assets might escape divorce distribution or creditor's claim.



One reason to not use a living trust in your estate plan is cost. It usually costs two to four times more than a will to have a living trust drafted. Also, if the assets in your estate subject to probate are under $500,000, the cost of establishing and maintaining a living trust will exceed any potential probate costs under the current law.


Funding With Assets:

In order to receive the majority of the benefits above, the trust must be funded with the assets of the grantor. If the assets are not titled in the trust, then the benefits of probate avoidance, privacy and protection after death will not be received. Transferring and maintaining assets in the trust can sometimes place a burden on the grantor and can sometimes cause the grantor to incur additional costs.


We want to help you establish the plan that works best for your situation. By discussing your reasons for desiring to create a living trust as part of your plan, we can help you analyze if the cost of preparation of the document and maintenance of the trust will be cost beneficial to you and your family.


Irrevocable Trusts:

Often in your estate plan you want to complete a transfer of property during your life to take advantage of tax benefits or to ensure expenses or other costs that result at death do not affect transfer of the property. One way to transfer property during life is through the use of an irrevocable trust. An irrevocable trust cannot be changed once it is set up. An irrevocable trust can provide flexibility as to the distribution of the trust property during your life and after your death. Additionally, an irrevocable trust can allow you to take advantage of tax benefits only available by lifetime transfers of assets, while restricting control to those assets until the beneficiaries are of age or maturity to receive them.


Irrevocable trusts can include provisions to allow the grantor to take advantage of gift tax annual exclusions, federal estate tax exemption amounts or federal generation skipping transfer exemption amounts. Some of these tax advantages are not available in a living trust (also known as a revocable trust or grantor trust). Trained in the fields of estate planning and tax, the lawyers at Booth Harrington & Johns can assist you in determining the appropriate provisions of your irrevocable trust for completed transfers of your assets during life.


Please contact us toll free at 877.503.5337 or request a consultation with one of our associates by clicking here:


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