Trusts

Managing your properties for the benefits of others

For many seniors, it is very important to leave something behind for their loved ones when they die. Because of this, many have embraced a trust when in the process of estate planning. A trust is a legal arrangement which enables one person or one institution full control over any property that will be given to a third party. The benefit of trusts is that more assets can be preserved, and your heirs won’t have any extra delays or costs, nor will they be tied up in probate in the event of your death.

A-B Trusts

There are many types of trusts. First, there is the A-B trust, in which “A-B” is a provision included within the trust that allows married couples twice the exemption of their estate in regards to taxes. The trust is split in half, and when one spouse dies, the entire estate passes to the surviving spouse; everything that was in the “A” trust is transferred to the “B” trust.

Irrevocable Trusts

Another option is an irrevocable trust which can be done by handing over control of all assets before you die. The significant disadvantage of this is that once you give it away, it’s gone for good and you cannot receive it back. A time might come where you will need those assets, but would not have any access to them. Consider this heavily before entering into this type of arrangement.

Life Insurance Trusts

Life insurance trusts are another option, because they can pay off the estate taxes on all your assets valued above the amount of your estate tax exemption. This type of policy will not be taxable and any monies that are left to your beneficiaries at the time of your death can be quickly dispersed. Once these trusts are set up and defined, they should be checked on regularly in case any new assets are added or you have to change or add beneficiaries.

Tax Exemptions

The last thing that you’ll likely want to do is give Uncle Sam even more of your money when you die. To prevent this, you need to develop a good, solid plan. Trusts are becoming more attractive options for many people but before you dive in, you need to become aware of the legal implications involved. Never make any hasty decisions when it comes to your estate. Seek help from experts that are well aware of all aspects of this field. As of 2005, the estate tax exemption was $1.5 million, which is important to understand because after the transfer, the estate becomes a taxable entity.

In an attempt to protect your family in the event of your death, trusts are generally the best option, as they can be beneficial and advantageous to all family members. They are also a very good way to prevent paying taxes on the estate. Although the trustees become the legal owners of property in trust, they cannot use any of it. The job of the trustee is simply to ensure that the benefits of the beneficiary are dispensed properly at the time of death.