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Six Reasons to Consider a Trust

| September 01, 2014
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Six Reasons to Consider a Trust

Many people believe establishing a trust will eliminate estate taxes.   Although true with certain types of trusts (i.e., irrevocable trusts), people often fail to appreciate the power a trust can have as part of a well-crafted estate plan, which can be a costly mistake.  Trusts are a powerful tool that anyone with substantial assets can use to gain greater control over how they pass their wealth on to future generations.  

  1. Pass wealth efficiently and privately to heirs
  2. Perhaps the most powerful way to use a trust is to ensure that heirs have timely access to ones wealth.  When assets transfer through a will, the estate is settled through probate in the state courts.   Through experience, New Jersey is a probate “friendly” state.   However, ask a person who has probated an estate in Florida and you most likely will get a vastly different experience. 

  3. Preserve assets for heirs or charities
  4. For those who have substantial assets, funding an irrevocable trust may be a sound estate planning strategy.   Once a trust becomes irrevocable and assets are place in the trust, you cannot amend the trust once it has been established.  Once assets are placed in an irrevocable trust, any growth on these assets will not be subject to federal estate taxes at the grantor’s death.  This feature is of particular importance in 2012, because the individual lifetime federal exemption is set at $5.12 million but is schedule to return to $1 million next year, unless Congress acts to extend current exemptions

  5. Reduce estate taxes
  6. Married couple can use a revovcable trust to take advantage of both spouses federal and/or state estate-tax exemptions.   Upon the death of the first spouse, the assets in a revocable trust can be used to fund a credit shelter trust (a.k.a. Bypass trust) up to the amount of that spouse’s federal ($5.12M for 2012) or state estate tax exemption (NJ = $675K).  These assets can then grow free from further estate taxation at the death of the surviving spouse.  

  7. Gain control over distribution of your assets

Look forward to seeing you soon!

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