This is the sixth part in a series of blog posts that compare wills and trusts in the following areas: 1. Cost, 2. Post-Death Process, 3. Getting Money to Minors, 4. Maintenance, 5. Family Situation, 6. Taxes, 7. Asset Protection, 8. Later Acquired Assets.

Taxes

This is another area where there is a lot of misinformation and confusion about just what a trust vs a will gets you, and for good reason. Different states have very different tax consequences for estates, so the confusion is warranted. 

In Utah, we match the federal estate tax exclusion (not the case in every state), and that  threshold estate tax is so high ($12.92 million for individuals, $25.84 million for married couples) that most people are not going to have a tax concern. Inherited monies are passed tax free, unless they are beyond these thresholds. So while trusts can provide some tax protection, in the state of Utah most people don’t have a tax concern to begin with. 

‍Winner for Taxes: Tie (unless you have $12.92 million, and then a trust would provide some additional tax buffering). 

Note:  While inheritance passes tax free, inherited retirement accounts do not and special rules govern these “qualified assets”.