Even though no two estate plans are identical, most contemporary plans rely on key parts, such as pour-over wills and revocable living trusts. If you aren’t familiar with wills and trusts in Rochester NY, these two terms might not make a lot of sense to you. However, with just a little background information you will quickly understand why these two types of tools are so helpful. Here’s what you need to know about pour-over wills and revocable living trusts.
Beginning in 2013, the federal estate tax exemption limit was established at $5.25 million per individual. This limit means that there are very few people that will need to worry about paying any kind of federal estate tax at all. In New York, the estate tax exemption is only $1 million, so for many New Yorkers minimizing estate taxes still is an important reason for estate planning.
However, with the federal estate tax exemption now so large, for many people the primary purpose behind estate planning has largely shifted to avoiding probate. Every state, including New York, requires that the property you leave behind as an individual must pass through probate before your heirs can inherit it. But probate is a hassle, and luckily, one that can be avoided with proper planning.
Revocable Living Trusts
The solution to avoiding probate is found in a revocable living trust. Your living trust can own property, and because the trust will survive you, the property it owns will not be legally yours when you die. This means that the trust property won’t have to pass through probate.
As long as you create a revocable living trust and take the steps necessary to ensure that the property you own as an individual is properly transferred into the trust’s name, you can avoid probate entirely.
However, sometimes omissions, mistakes, or other problems put assets into probate. For example, if you have a revocable living trust but fail to transfer some of your property to it, that property will have to go through probate.
This is why you will create a pour-over will to work hand-in-hand with your revocable living trust. With the pour-over will, any of the property you own in your name will, at probate, be transferred to the trust. You won’t use your will to transfer inheritances to your family, but instead rely on the trust to do that for you. With the pour-over will, you simply create a safety net that will catch any the property you left out and make sure it’s transferred to the living trust after you die.