Trusts
The Use and Advantage of Trusts
Trust Resources & Documents
Dynasty Trust Article
A brief overview of Dynasty Trusts and how they can protect your heirs from estate taxes for generations.
Irrevocable Life Insurance Trust Brochure
Outlines the benefits of creating a life insurance trust.
Sample Fiduciary Accounting Schedules
Examples of Accounting exhibits.
Understanding Your Fiduciary Responsibilities as the Executor
This memo defines what an executor is, and outlines the duties and responsibilities of an Executor.
Understanding Your Fiduciary Responsibilities as the Trustee
This memo defines what a trustee is, and outlines the duties and responsibilities of a Trustee.
What is a Trust?
A trust is a legal relationship in which an owner (“Grantor”) transfers legal title of certain property to another party (a “Trustee”) who, in turn, holds it for the benefit of the Grantor and/or another individual or individuals (“Beneficiary”). The terms and conditions under which the property is held by the Trustee are set forth in a written document. Revocable trusts reserve the right of the Grantor to control the assets and change the terms of the trust at any time. If a trust is irrevocable, you may give up rights to the trust property and cannot amend the terms of the trust.
Properly established trusts can be used to:
- Manage and protect assets during your lifetime and afterward for your beneficiaries
- Provide continuity in the management of your affairs after your death
- Control how and when your assets are distributed
- Avoid much of the costs and delays of probate
- Ensure privacy and confidentiality in the handling of your affairs
- Control income and principal distributions to children and grandchildren
- Reduce estate and gift taxes
Commonly Used Trusts
In addition to revocable and irrevocable, trusts can be inter vivos (established during your lifetime) or testamentary (established under your will). Here are some popular basic trusts:
Revocable Living Trust
To control the management and distribution of assets in the event of incapacity or death and reduce estate expenses.
- Be your own trustee (but consider a professional successor trustee to serve upon your incapacity or death)
- Maintain complete control as long as you are able
- Amend or terminate the trust
- Manage the investment of assets
- Receive income and/or principal from the trust
- Transfer property to your heirs
- Avoid probate for the trust assets
- Provide privacy for your family (in some states)
- Reduce estate settlement expenses
Credit Shelter Trust
Typically funded at the death of the first spouse, this utilizes the federal Estate and Gift Tax Credit and provides estate and gift tax-sheltered assets for children and/or grandchildren.
- Assures that BOTH spouses use their Tax Credits, resulting in significant federal estate tax savings
- Permits the surviving spouse to manage the investment of trust assets and receive income from the trust
- Provides for trust property to be transferred to your heirs at the death of the surviving spouse
- Avoids estate tax liability in the surviving spouse’s estate on the value of trust assets
- Often used in concert with a Marital Trust (e.g., QTIP Trust)
Advanced Trust Strategies
Charitable Remainder Trust (CRT)
Often used when one has highly appreciated assets. Assets may be donated to the trust and then sold without an immediate capital gains tax at the time of the sale. This allows the full amount of sales proceeds to be reinvested. The donor receives an income from the trust for life or a period of years, and the asset is distributed to a named charity at the end.
Charitable Lead Trust (CLT)
Assets are donated to a CLT, and a named charity receives income for a period of years. At the end, the assets and all or a portion of the appreciation are transferred to beneficiaries. Any gift tax is based on the value at time of transfer, less a deduction for the charity’s interest.
Family Gift Trust
Used often in conjunction with the Charitable Remainder Trust, it provides a method for replacing assets lost to family members due to the donation to charity.
Grantor Retained Annuity Trust
A vehicle for passing appreciating assets to family members at discounted values. The grantor donates assets and receives a fixed annuity interest for a period of years. If the grantor survives, assets are distributed to beneficiaries free of additional gift or estate tax.
Qualified Personal Residence Trust (QPRT)
Also known as a ‘House GRIT,’ you place your personal residence in trust. You retain the right to live there for a specified number of years. At the end, the home is distributed to beneficiaries with a discount on the value for gift tax purposes. All appreciation passes without additional gift or estate tax.
Dynasty Trust
Created to benefit multiple generations, funded utilizing the generation-skipping transfer tax exemption and managed by a trustee. The terms can be flexible — providing incentives for heirs to accomplish goals. If properly established, assets and all future appreciation pass to future generations free from federal and state transfer taxes. Often funded with life insurance.