FollowTrusts are for the wealthy with complicated estates. WRONG! While estate tax savings can be a benefit, more people create trusts for control, protection, privacy, gifting or to simplify their finances.
One important goal you might achieve through a trust is to ensure that the assets you’ve worked hard to accumulate are protected and can pass on to your beneficiaries how and when you want. Trusts can provide you with other significant benefits as well. They can:
Determining if you need a trust – Taxes
Today’s estate tax laws are murky at best but most professionals believe that you will continue to be able to pass up to $3,500,000, estate tax-free, to your heirs. (based on an extension of 2009 law) This is called the applicable exclusion amount. If you are married and have a proper estate plan, you and your spouse may jointly pass on a total of $7,000,000, again estate tax-free, and an unlimited amount to each other. If you leave more than the applicable exclusion amount to your heirs, the excess will be taxed at a rate nearing 50%
If three and one-half million dollars seems like a lot, consider that your estate is made up of more than your house and stock portfolio. Calculate the value of all the financial investments you own, including life insurance policies, retirement plans, and annuities, as well as other property, cash on hand, and anything that can be considered an asset (cars, boats, antiques, etc.). You might be surprised to find that your estate is worth far more than you would have imagined.
But that’s good news. The bad news is that it may be worth much less to your heirs after probate expenses and estate taxes have taken a big chunk. Although estate tax savings can be a big benefit of a trust, trusts are not just for the very wealthy. They should be considered for those with moderate estates as well.
Determining if you need a trust – Control
If you were to become incapacitated, would you consider giving everything you own to a friend or family member to have them manage your assets for you?
Do you want your heirs to receive their inheritance in one lump sum?
After your death, do you want your personal finances to be a matter of public record?
If you’re like most people and answered no to any of these questions, a trust may be just the thing you need.
I need a trust, now what?
While legal assistance is not necessary to understand the basics of trusts, it is critical in their drafting. Thompson CPA will assist in creating the plan and contacting a lawyer who is experienced in these matters. There are many different kinds of trusts, each with its own financial, legal, and tax implications.
Thompson CPA will advise you on the benefits of each type and show you how a trust can help you achieve your estate-planning goals.
