This time of year is the time that everyone is in giving spirits. As we wonder through the malls or shop online, we look for that perfect gift, the one that says just how much we love one another. However, it should also be the time of year we begin to analyze and re-think our finances, insurances, and estate plans for the upcoming year. It is time to evaluate the long-term gifts we are looking to leave for our loved ones and determine the best course of action to help us and our loved ones keep as much of our hard earned wealth, as opposed to giving a large portion to Uncle Sam. As we sit down with our estate planning attorney, we should ask about trusts that offer the greatest tax benefits and allow for the most living and death benefits.
What is a Legal Trust?
By simple definition, a trust is an estate planning tool that may sometimes, but not always, be used to help avoid estate taxes and/or probate and is managed by a third party or trustee. There are numerous types of trusts available for individuals looking to get the most benefit of their money. Some trusts are designed to maximize spousal benefits between a married couple, while other trusts are intended to maximize tax benefits between parents and children. Still other trusts are utilized to ensure charitable organization will receive monies intended for them upon death. The type of trust right for you will depend on your wealth and intentions as described in your will or estate plan.
Types of Trusts
Trusts are available to help with numerous financial and estate plans, however, determining the best trust for you will take into account your will and your wealth. To begin, there are two types of marital trusts, one in which the spouse uses the trust to secure benefits for the surviving spouse which can then be included in the taxable estate of the surviving spouse. Then there is the Bypass trust, in which is also called a credit shelter trust and allows the benefits to bypass the surviving spouse's estate taxes.
Testamentary trusts are trusts outlined in the will (or testament) and are subject to probate and transfer taxes. Alternatively, one can choose one of the two charitable trusts: Charitable Lead Trusts in which a specified amount goes to charity, and the remainder goes to the beneficiaries or Charitable Remainder Trust, in which the owner will receive a certain amount of money to live on and then the remainder will go to the stipulated charity. Some trusts allow for money to be passed to grandchildren or great-grandchildren without incurring generation-skipping taxes or estate taxes.
Finally, there are the options of revocable and irrevocable trusts. Revocable trusts are typically clear of probate. However, they are considered a normal asset as they can be altered at any given moment by the grantor. Irrevocable trusts, typically for those with enormous wealth, cannot be changed by the grantor and keep assets completely out of reach until death.
To learn more about trusts that will best help your estate plan, contact the lawyers at WL Brown Law Office at firstname.lastname@example.org or 612.309.9184 and one of our experienced estate attorneys will help you decide the perfect gift or trust for your estate plan.