A living trust can also reduce or eliminate your estate taxes.
Estate taxes are different from, and in addition to, probate expenses (which can be avoided with a living trust) and final income taxes (which must be paid on income you receive in the year you die).
Federal estate taxes are expensive–they start at 37% and quickly go up to 55%. This means Uncle Sam could become your biggest heir! And estate taxes must be paid in cash, usually within nine months after you die.
The estate tax is, in effect, a "double tax." You've already paid income taxes on the money and assets that make up your estate. Now your estate may have to pay taxes on these assets again.
