Estate Planning with Trusts

Trusts are ancient and varied. They are also extremely flexible instruments that make them an estate planner’s best friend. There are many kinds:
Revocable Trust: This type of trust is also often referred to as a Living Trust by many. I find the term Living Trust confusing and don’t like to use it. At any rate, this is the most common type of estate planning trust and the type you are likely seeking if your accountant or financial planner recommended to you that you “get a trust”.

  • You can serve as Trustee of your own revocable trust during your life, but you don’t have to. Once the trust is established and funded, you manage your affairs much as you always did. There are few if any tax ramifications during your life with a revocable trust.
  • You can revoke or change the trust’s terms as long as you are alive and know what you are doing.
  • If you become incapacitated, the successor trustee you chose can step in and manage your property for your benefit with minimal disruption.
  • Assets held as part of your trust at the time of your death do not pass through probate. This can save money and time and is a more private manner of settling your affairs.
  • You can plan your gifts in the trust to minimize or eliminate estate taxes.
  • You can specifically detail who gets what, how they get it and when they get it even after you are gone. For example, you can use a portion of your property to provide for your second wife for her life and have the property then pass to your children or grandchildren from your first marriage. Another example, you can leave a gift toyour grandchildren that your trustee will only spend on college expenses. There are many possibilities.Revocable trusts are the backbone of most modern estate plans.

Irrevocable Insurance Trusts or ILITS

You think that your estate won’t get hit with estate taxes? Did you count the $1 million life insurance benefits? You should. How would you like to pass that million to your family free of estate taxes? How would you like to pay the premiums with gifts that are not subject to the estate or gift tax? ILITs let you do all of these things.

Selfish Giving: Charitable Trusts

Would you like a big fat deduction on this year’s income taxes? Would you like to turn that low basis stock into a steady income stream without taking the capital gains hit? What if you could benefit a charity of your choice at the same time? And wouldn’t be great to still leave it all to your family? Amazing benefits to the
donor and charity are available with Charitable Remainder and Charitable Lead Trusts.

There are numerous other planning possibilities with Trusts…

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