Setting up trusts can help you avoid probate, reduce estate taxes, and may also help you set up long-term property management. Probate can take months and can eat up about 5% of the property through lawyer and court fees. If you set up a trust before your death, after your death property can be quickly and quietly distributed to the beneficiaries, and there are no lawyer or court fees to pay. There are several kinds of living trusts. We can help you decide whether you need a living trust and what type would be best for you and your heirs.
Revocable Living Trust
A Revocable Living Trust is "Revocable" because you can change the terms or cancel it at any time. It is "Living" because the trust takes effect while you are still alive. It is a "Trust" because it creates a place where assets are available for your normal use now as well as after your death. It can be used for other reasons in addition to avoiding probate: if you own property in more than one state your heirs can avoid multiple probate proceedings; if you are incapacitated, your successor trustee can manage your affairs; and you can specify the maturity age of your heirs.
Irrevocable Life Insurance Trusts
An Irrevocable Life Insurance Trust helps you reduce the number of assets that will be subject to taxation after your death, by gifting life insurance premiums to the ultimate beneficiaries through a lifetime gifting program. You can avoid transfer tax on any appreciation in the value of the gift between the time of the gift and the grantor's death. Life Insurance is a particularly attractive vehicle for this situation because of the great difference in values before and after the insured's (grantor's) death. Gifts to an Irrevocable Life Insurance Trust are often eligible for the $10,000 annual gift tax exclusion, meaning that no one pays any taxes on the gift, neither the grantor nor the heir.
Charitable Remainder Trusts
The Charitable Remainder Trust is an irrevocable trust with both charitable and non-charitable beneficiaries. The donor transfers highly appreciated assets into the trust and retains an income interest. Upon expiration of the income interest, the remainder in the trust passes to a qualified charity of the donor's choice. If properly structured, the CRT permits the donor to receive income, estate, and/or gift tax advantages. These advantages often provide for a much greater income stream to the income beneficiary than would be available outside the trust.