A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of one or more beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.
The primary purposes for having a trust:
Protect Property
Greater Control of Assets
Avoid Probate
Mitigate Taxes
Privacy Protection
Incapacitation
Flexibility
Assure proper usage of Assets passed to Beneficiaries
A-B Trust
Joint Trust created by Married couple
Each Spouse places assets in the trust and names a final Beneficiary other than the Spouse
The purpose is minimizing Estate taxes
Charitable Lead Trust
Provide income to Charitable organization for specific time period
At conclusion donated assets returned or redistributed to another
Charitable Remainder Trust
Strategy to avoid Capital gains on sale of appreciated property
Secures income tax credits for donation of property into trust
Generates an income stream based on the fair market value of asset
Ultimately benefits the Philanthropy of Donor’s choice
Credit Shelter Trust / Bypass Trust
Pass assets into trust for benefit of surviving spouse
Since assets do not pass directly they avoid inclusion on Spousal estate
At survivor death estate pass asset to beneficiary partially Estate tax free
Unfunded uses annual gifts from Grantor to pay premiums
Donor Advised Fund
Separately identified fund held and administered by Public charity
Client makes contribution for immediate tax deduction
Client serves as Advisor to fund
Dynasty Trust
Transfer wealth to Grandchildren free of generation skipping transfer tax
Grantor Retained Annuity Trust
Donor sets up Trust as annuity, receiving annual payment for fixed period
At end of annuity period remainder passes on to trust beneficiary as gift
Trust beneficiary must be family member
Intentionally Defective Guarantor Trust / IDGT
Asset protection device structured to protect personal residence
For tax purposes IDGT is disregarded as entity when Grantor makes transfer to IDGT irrevocable grantor trust
Client sells residence to IDGT for fair market value in exchange for an installment note, enters into lease with IDGT to live in residence paying (FMV) non-deductible rent to IDGT (not considered income)
IDGT pays the Client annual installment payments via installment note (not considered income)
If property has mortgage IDGT makes mortgage payments which are deductible to Client / Grantor as if house is owned individually
In-Trust For (ITF)
An account tool for parents and grandparents to set aside funds for minors, to make investment decisions and to potentially split income for tax purposes
Irrevocable Living Trust
Estate planning tool transferring assets for purpose of tax savings
Upon death proceeds bypass probate
Irrevocable Life Insurance Trust
Purpose is to pass Life insurance proceeds Estate tax free to beneficiaries
Funder transfers income generating assets to trust to pay premiums
Revocable Living Trust
Deed property to heirs, but Grantor retains control during lifetime
Upon death proceeds bypass probate
Upon death Beneficiaries entitled to tax advantages of Irrevocable Trust
Spousal Lifetime Access Trust (SLAT)
Estate planning tool for a wealthy married couple wishing to reduce estate taxes and to protect assets from creditors
A SLAT is an irrevocable trust that one spouse establishes for the benefit of the other spouse, and if properly structured, the assets in a SLAT are not taxable in either spouse’s estate and are not available to either spouse’s creditors
Simultaneously the beneficiary-spouse may receive distributions of income and / or principal from the SLAT and thus will benefit from the gifted assets
