If I Have a Living Trust, Do I Still Need A Will?

The answer is, Yes. You still need a Will to transfer assets that may not have been transferred to your trust during your life. The type of Will that transfers the assets to your trust is called a "Pour-Over Will." Once you establish a living trust, you still need to remember to transfer your assets into the trust. Assets that are not in your trust, do not have beneficiary designations or are not jointly titled with another individual will be subject to probate.

Most people understand that there is no tax liablity (not under the current Tax Code anyway) when one spouse dies and the assets pass to the surviving spouse; however, they do not realize that they have lost the first spouse's available tax credit.

You can pass your assets under the marital deduction if you meet one of the following conditions:
(1) Your property is currently titled jointly with your spouse. One example of this is a deed titled as "Joint Tenants with Right of Survivorship;" or

(2) Your spouse is the primary beneficiary of life insurance, annuities and retirement plans; or

(3) Your Will transfers everything to your surviving spouse.

It does not matter how your assets pass to your surviving spouse; if they do, they are passing under the marital deduction, and you are not using your available credit.

How to Preserve the Credit
One way to preserve the credit and help ensure that your spouse receives income and principal is by setting up a credit shelter trust. You can use your credit by transferring assets outrigth to someone other than you surviving spouse (i.e., a child). Most couples do not desire this because the child receiving the assets has no legal duty to share with the surviving spouse. In addition, unexpected gift tax problems can arise.
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