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When it comes to estate planning, one of the most important factors to keep in mind is that trusts are formed in accordance to state, not federal, law. When establishing the terms of your estate plan, you might consider using a trust to pass assets along to your beneficiaries or transfer wealth to your loved ones. Establishing a trust is often a wise strategic decision, but at the same time, grantors should fully understand that income received via a trust is considered taxable income by the IRS.
When the Titanic went down in 1912, several women chose to remain on board and drown with their husbands; most famously was Ida Straus, whose family co-owned Macy's Department Store. Although Titanic-scale disasters are extraordinarily rare, you should nevertheless include a contingency beneficiary in your will or trust in case life or death throws you a curveball.
If you are the recipient of an inheritance, you might be wondering what the tax treatment of the assets should be. Ultimately, when you inherit stocks in the form of a taxable brokerage account, you will typically receive a stepped-up cost basis. This is a factor that increases the value of the asset for tax purposes according to the market value at the time the person who named you a beneficiary dies.
Probate is an experience many people go through. However, you'd be surprised how few people know what probate is until they enter the process themselves.
Trusts are legal arrangements that ensure the administration of a deceased person's assets align with what they would have wanted. Additionally, trusts work on behalf of your beneficiaries in your absence.
For all intents and purposes, a trust is considered its own entity. Trusts are legal documents, but they are also taxed separately from those to whom the assets within a trust will be distributed.
Trusts are used in estate planning to transfer assets to beneficiaries. Trusts have some advantages over wills, including skipping probate. That's pretty basic. But it gets complicated when you try to figure out which type is right for you. Know the options available to help you make an informed decision.
If you think you may face a gift tax issue, you may want a qualified personal residence trust—a type of irrevocable trust that can remove a house from an estate to reduce gift taxes when transferring it. Here's how it works: The taxable portion of your house is considered a future interest gift, but you can minimize it by using the estate and gift exemption.
If you dither and procrastinate over creating even a straightforward will or simple trust, you put the future finances of your family and loved ones in jeopardy. You risk that the assets you have worked for a lifetime to accumulate or protect will not be distributed as you would wish.
We like to imagine that a death brings families together in grief, but that's not always the case. Sometimes, the daughter of the deceased will announce that her mother had promised her the picture that always hung on the living room wall, but then the son pipes up that the picture was promised to him. Both have memories and emotions associated with the picture, so the fight can get acrimonious fast, potentially leading to a split family in which siblings aren't communicating. The purpose of a well-drafted will is to give clarity to your wishes to make sure this doesn't happen to your family.
When you use a trust, you bypass probate, a lengthy legal process that validates your will, and you leave precise, legally binding instructions for how to distribute and potentially maintain your assets. Have a beneficiary with special needs who's ill equipped to manage the inheritance? Bequeathing complex assets that require ongoing attention after you're gone? A trust can help.
When you're making your estate plan, you can choose between many types of trusts. But whichever kind you choose, you'll have to select a trustee to oversee your and your loved ones' assets. Understandably, this important decision may give you pause. You need someone who will act in your heirs’ best interests.
When people think of trust funds, they think of large estates and dynastic wealth. For most people, the conventional wisdom goes, estate planning doesn't have to go beyond making a will. But actually, even people of modest means may find a trust an essential part of an estate plan. Below are a few scenarios when a trust becomes essential.
Making a will is the primary way to transfer ownership of your belongings after your death. You’ll often hear that a will should be a comprehensive list of your assets so that they can be found quickly and easily without your estate undergoing probate. But there are some things you can’t or shouldn’t include in your will. For example, certain types of property can best be transferred without one.
A spousal lifetime access trust (SLAT) is an irrevocable trust that authorizes the trustee to make distributions to a spouse if a need arises. It can be designed to benefit one's children, grandchildren or future generations. A lifetime gift tax and a generation-skipping tax exemption can be used to shield contributions to the trust and future appreciations from transfer taxes.
A trust can be a powerful estate-planning tool, but contrary to popular belief, trusts do not make all taxes disappear. The families who set them up still need to consider tax consequences.
Everyone wants to protect their families, even after they pass from this world. That’s the purpose of estate plans. But how do you know whether all of the elements of a good plan are in place?
Have you decided that it's time to consider estate planning and contemplate when and how to distribute your assets to your heirs? Realistically, you imagine that this process will entail a series of trade-offs to prevent emotion-laden family problems.
In theory, parents can get as specific as they want, deciding which children and grandchildren should get the fancy lamp from the living room or the painting of the ship in the dining room. But unless they're items of great intrinsic value, that usually isn't done, and even if an estate is left equally to all the grown children, fights can break out over who gets what. There have even been situations where the first child on the scene cleans out the family house, leading to hard feelings and even lawsuits.
Trusts can be used as an asset protection tool and to help your beneficiaries avoid the cost and expense of probate. Trusts transfer legal ownership of assets to a trustee. The property is deeded in the name of the trust and the trustee is tasked with administering it as the grantor specifies. There may be more strings attached to an asset in a trust than if it were simply left to someone in a will.
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