Trusts in Estate Planning

Trusts in Estate Planning

With significantly higher estate tax exemption amounts now a “permanent” part of our tax code (see the discussion on page 1 for details) you may wonder if you should even bother considering a trust as part of your overall estate plan. While trusts are used extensively as tax planning tools, there are many non-tax reasons that a trust may be right for you and your family.

If you ever become incapacitated, a properly drafted and funded trust could help your family avoid the need to seek a guardianship through the court system. Instead of a court-appointed guardian, the trustee you have previously selected will be able to manage your financial affairs through the trust. Upon your passing, the trust serves as the primary estate planning tool that will help your family carry out your wishes. A well-designed and implemented trust plan will help avoid the time and expense of state court probate proceedings while still maintaining a structured approach to settling your final affairs.

If you are married, then chances are that you and your spouse want to implement a “joint” estate plan. While you and your spouse would each have your own Will, you can implement a “joint revocable trust” which will help ensure that the overall plan will continue on the course that was charted together, even when the surviving spouse remarries.

Remember, claims against a beneficiary can arise in many different contexts and can entangle even the most responsible of beneficiaries. Transferring assets in trust can provide significant protection from claims of your beneficiary’s creditors. Similarly, holding assets in trust for your beneficiary will make it less likely those assets are divided by the court during divorce proceedings.

Do you want what took you a lifetime of thrift to accumulate to be spent in an extravagant or reckless manner? If the answer is no, then a trust may be appropriate for you! Remember, just because assets are held in trust for your beneficiary does not mean they won’t have access. In fact, common trust language allows for payments to be made for a beneficiary’s health, education, maintenance and support.

Other reasons to consider using a trust as part of your estate plan include simplified management of assets in other jurisdictions, providing benefits to multiple generations, protecting government benefits of a disabled beneficiary, and helping to ensure an equitable distribution of assets across a group of beneficiaries.

If you would like to learn more about the use of trusts and other estate planning tools, please contact our office. You can also visit our website for more information and for details on upcoming estate planning seminars.

American Taxpayer Relief Act

American Taxpayer Relief Act

With the passage of the American Taxpayer Relief Act (ATRA) on January 1, 2013, Congress avoided the worst of the so-called “fiscal cliff.” While some of the tax measures included in the ATRA are temporary, certain provisions were also made “permanent.” This article describes some of the major changes made to both the individual income tax rules and the gift/estate tax provisions.

Income Tax Highlights

Without this legislation, income tax rates would have reverted to the levels from the late 1990s across the board. Instead, only the top marginal rate has increased from 35% to 39.6%. This higher rate only applies to income that is above the “applicable threshold.” (See the chart for the threshold level for this rate and other income tax rates in effect for 2013 for single and married couples filing jointly.)
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