Using Trusts to Avoid Estate Taxes in Idaho!

Using Trusts to Avoid Estate Taxes in Idaho!

For a married couple, a Living Trust or Family Trust can be an excellent tool to reduce or eliminate the taxes which their heirs may have to pay at death.  Here’s how that works here in Idaho.

Both the federal government and the state of Idaho have laws requiring the heirs of a person to pay taxes on the inheritance when that person passes away.  The tax rates vary, but can exceed 50% of the inheritance in the case of a very large inheritance here in the area of Boise, Eagle, and Meridian. 

So how can a Living Trust decrease the amount of those taxes if it is properly prepared by a skilled attorney?  The secret lies in the fact that, while they are alive, both the husband and the wife are each entitled to their own estate tax exemption.  In other words, if the amount of property being left to heirs is below a certain level, no estate taxes are required.

To grasp how a Living Trust can help a married couple out, bear in mind that legally each spouse is the “owner” of half of all the property that they have accumulated during their marriage.  In other words, each spouse in a couple that has acquired $2 million dollars in assets is actually the owner of property worth $1 million.  That includes real estate, bank accounts, stocks & bonds, vehicles, and any other property accumulated here in the Boise area.  And each spouse initially has a tax exemption that will shield that property from estate taxation.

But if the couple only has simple Wills instead of a Living Trust, they may create a problem.  For most simple Wills – even if prepared by a lawyer — leave everything to the surviving spouse when the first spouse passes away.  Then, when the second spouse passes away, the property is left to the children in some manner. 

The problem comes about when the first spouse passes away leaving everything to the surviving spouse.  That inheritance essentially doubles the amount of the property owned by the surviving spouse.  In our hypothetical, above, instead of just owning $1 million in assets, the surviving now owns the whole $2 million in property which was accumulated by the couple. 

When the surviving spouse passes away in Eagle or Meridian, for example, the size of the estate is now doubled and the amount of the estate taxes may, as a result, increase significantly.

With a Living Trust properly prepared by a skilled lawyer or attorney, on the other hand, the exemption initially held by both spouses is preserved.  Even though the same $2 million estate passes to the same heirs, the double exemption applies cutting down dramatically – if not eliminating — the estate taxes being payable by the heirs.

For the moment, an estate must be very large (in excess of $3.5 million in value) to incur estate taxes.  But, unless Congress and the President take decisive steps by the end of 2010, on January 1, 2011, the size of estates that will be subject to estate taxes will drop significantly.  One of the two great advantages of setting up a Living Trust here in Idaho is that it will double the size of the estate that is free from taxation regardless of what Congress may or may not do. 

The other great advantage of a Living Trust is, of course, that the surviving spouse and the ultimate heirs of the couple will be protected from the waste of time, money, attorney fees, and court costs that will result from having to go through the probate process twice – once for the husband and again for the wife.  The children and other heirs here in the Boise, Eagle, and Meridian area, will be left with the full inheritance for which the couple worked so hard during their lifetimes.

For additional easy-to-understand information on Wills, Trusts, probate, and estate taxes, visit the user-friendly website at http://barrypeters-law.com.  Then call Barry Peters’ law offices at (208) 939-2600 for an expedited appointment to begin the process of setting up your own Living Trust.  Or, if you have questions, please call Barry for a free telephone consultation of visit his Q & A pages at http://barrypeters-law.com/common-questions .  As always, your total satisfaction is guaranteed by Barry Peters, Attorney at Law, where all clients receive individual attention to the details of their unique circumstances.

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