If you are nearing retirement, the subject of estate planning may be on your mind.
You may have significant assets and are wondering how best to protect them. This may be the time for you to consider the advantages of a revocable trust.
A little background
As the name implies, a revocable trust is flexible in that you can revoke it at any time. You can also change the terms as often as you wish. When you move assets into a revocable trust, you will also provide instructions for their distribution upon your death. Many people appreciate the privacy a trust affords and the fact that with this kind of vehicle, the assets usually avoid having to go through the probate process.
An extra benefit
If you should become mentally or physically incapacitated, the management of the assets in your revocable trust will continue without the need for a court order. A letter from your doctor confirming that you are unable to manage your assets will likely be sufficient to allow the trustee you named to step in on your behalf.
A word about estate tax
If the value of your estate is less than the exemption amount in effect at the time of your death, it will not be subject to payment of the federal estate tax. For 2021, the exemption amount is $11.7 million or $23.4 million for a married couple. Obviously, state tax avoidance will apply to all but the very wealthy. However, if the value is at or above the 2021 exemption amount, you are looking at a 40% tax rate. With sound legal guidance, you can examine the benefits of a revocable trust including the tax picture for this popular estate planning tool.