Wills and Trusts Kit For Dummies by Aaron Larson

Wills and Trusts Kit For Dummies by Aaron Larson

Author:Aaron Larson [Larson, Aaron]
Language: eng
Format: epub, pdf
Goodreads: 9670061
Publisher: John Wiley & Sons, Ltd.
Published: 2010-03-09T08:00:00+00:00


They’re flexible

Trusts offer you enormous flexibility to decide how your assets will be managed. You can place assets in trust during your lifetime, reserving control over them but providing for your trustee to take over if you become incapacitated.

You can create and fund your trust while you’re still alive; while you’re still alive and use your will to fund your trust (a pour over trust); or with your will (a testamentary trust).

If your trust is revocable, you can revoke your trust and transfer its assets back to yourself at any time.

You can provide for your incapacity

Your trustee’s powers to manage trust assets are immediate. You can make those powers contingent upon a future event, such as your incapacity. But once you become incapacitated by whatever definition you choose to provide in your trust, your trustee can immediately take control of trust assets and start managing those assets for your benefit.

Having your trustee take over management of your estate is a lot easier than forcing your heirs to go to court to ask a judge to appoint a conservator to manage your estate. In relation to the trust’s assets, banks and financial institutions are much more likely to defer to the instructions of a trustee, while they may be cautious about accepting the validity of a power of attorney. While a bank may require an original copy of your durable power of attorney before honoring the instructions of your attorney-in-fact, the same concerns aren’t present with a trustee because the trust is the owner of its assets.

If your business assets are held in trust, your trustee can immediately step in to protect your business interests while your business succession plan is implemented.

Although a trust can provide significant benefit in the event of capacity, your trustee can manage only the trust’s assets. The trustee has no authority over assets not owned by your trust. You should still execute a durable power of attorney and healthcare proxy, as described in Chapter 14.

You can avoid taxes

Trusts can be a powerful tool to avoid estate taxes. Common trusts include

The marital deduction trust (A/B trust): This trust takes your marital exemption out of your spouse’s taxable estate, while at the same time allowing your spouse to enjoy the income produced by the trust and, for purposes such as medical care or support, even access the trust’s assets.

The Crummey trust: This trust allows you to make tax-exempt gifts during your lifetime. These gifts accumulate in a trust to be distributed to your beneficiary at a later time.

Irrevocable life insurance trusts (ILITs): An ILIT owns a life insurance policy in your name and is the beneficiary of the policy. When properly executed and funded at least three years before your death, the insurance proceeds aren’t included in your estate.

Chapter 6 details tax avoidance strategies, and Chapter 12 describes specific types of trusts in more detail.

A revocable living trust, of itself, doesn’t help you avoid estate taxes. The primary benefit of a revocable living trust is probate avoidance.



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