Page 9 - Accumulating, Preserving, and Passing Wealth | Stifel

If you have a living trust, do you still need a will?
A common estate planning misconception is that if you have one tool, either a will or a trust, you do not need the other.
In fact, these two legal documents often work in tandem to fully accomplish your estate planning goals. Although you may
have a revocable living trust, which allows you to address lifetime planning issues, you also need a will to dispose of any
assets not titled to your trust. This type of will is commonly referred to as a pour over will, because it takes the assets passing
outside of the trust and transfers or “pours” them into the trust. The trust assets are then managed and distributed according
to the instructions in the trust.

Although the assets passing through the will are subject to probate, many states have small estate probate proceedings
which can minimize the time and expense usually associated with the process. In most situations, the majority of assets
are registered in the name of the trust, and the assets passing through the pour over will are minimal.

Does a living trust save taxes?
A living trust does not automatically ensure that you will minimize or eliminate taxes. Provisions can be included in your
living trust, however, that can assist with tax planning to ensure that you maximize what you are able to leave to your heirs.

Transfers of wealth made during your lifetime may be subject to gift tax, and transfers made at your death may be subject
to estate tax. The taxation of these transfers will, in part, be dependent on when you transfer the assets, as well as to whom
the assets are transferred.

Transfers between spouses, commonly referred to as marital transfers, are non-taxable regardless of whether the transfer
was made during life or at death. The unlimited marital deduction allows you to transfer as much as you choose to your
spouse, either during life or at death, with no transfer tax consequence. It is important to remember that this does not
eliminate the transfer tax completely. Rather, it simply delays it until your spouse passes away.

A second type of transfer is the non-marital transfer, which refers to a transfer to anyone other than your spouse. Unlike
marital transfers, non-marital transfers may be taxable.

An individual can make annual gifts valued at $15,000 per recipient without any estate or gift tax consequences. A married
couple can make annual gifts valued at $30,000 per recipient. These gifts are known as annual exclusion gifts. An individual
can also make gifts of any dollar amount directly to accredited educational facilities and/or medical facilities without any
estate or gift tax consequences.

In addition to the gifts noted above, an individual can transfer assets equal in value to the estate and gift tax exemption
without any estate or gift tax consequences. Such transfers can be made during life or at death. In 2019, the estate and gift
tax exemption is $11,400,000 per individual. Accordingly, a married couple can transfer up to $22,800,000 with proper
planning. If an individual transfers assets during life or at death that cumulatively exceed the estate and gift tax exemption,
such transfers will be subject to a 40% tax.

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