How a Living Trust Saves Estate Taxes


When it comes to estate planning, we at Reinfeld & Cabrera P.A. are here to tell you how, together with proper estate planning, a living trust saves estate taxes. As the old saying goes, “nothing is certain but death and taxes”, however did you know that with a living trust and proper estate planning you could reduce or even eliminate estate taxes? If you are still not convinced that you should invest your time in a living trust with an attorney who is well versed in estate planning we suggest you keep reading!

So what is a living trust (also called a revocable living trust)? Basically it is a document that contains instructions about what should happen to your assets when you die. It differs from a will in the fact that it gives you the opportunity to avoid probate at death. A living trust gives YOU control over the assets you leave to minor children and/or grandchildren, and if you become incapacitated it prevents the court from controlling your assets.

Now that you know what a living trust is, the next question you are probably asking is how does a living trust save estate taxes. The first important thing to do when it comes to creating a living trust is to ensure that both you and your spouse utilize your estate tax exemptions. When working with your attorney on your estate planning chat about inserting a tax-planning provision into your living trust which will split the total amount of each spouses estate into two equal trusts. Simply by planning ahead both spouses are able to use their tax exemptions and pay no estate tax.

If, for example, you and your spouse have a combined estate value of $10,680,000 by creating a living trust and utilizing your tax exemption through a tax-planning provision you could split your combined estate into two trusts of $5,340,000.00 , each and save on estate taxes when you and/or your spouse passes away. When you die your trust will use your 5,340,000.00 exemption and then when your spouse dies their trust will use their 5,340,000.00 exemption thus reducing your taxable estate to $0. This way the value of your estate will go to your beneficiaries.

The other benefit of estate planning making use of a living trust is that you can maintain control over how your part of the estate is managed and distributed. Furthermore the assets in your estate will be valued and taxed only at your death and any appreciation after you pass away will not be included in your spouse’s estate. The assets in your trust will, however, be available to your spouse if they need.

While this estate planning feature is only available to married couples, there are other options to help save you taxes if you are single. Simply give one of our experienced estate planning attorney’s at Reinfeld & Cabrera P.A. a call to discuss what options are available to you.