Setting up a Trust fund & Benefits of Setting Up a Trust
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Trusts are an important part of your estate planning, for example; leaving money to your minors, wife, and for some applications, business oriented solutions. Trusts can ensure that money, managed by a trustee, is set aside and made available to them when they reach a certain age. Trusts can also allow the grantor to setup a schedule of payments to be made to the beneficiary of a large sum of money as managed by the trustee, if a third party is assigned as such. See example 3 in the examples section.
Here are some common benefits and objectives of using trusts:
Estate Taxes: How revocable and irrevocable trusts affect estate taxes
The most significant distinctions between revocable and irrevocable trusts are the estate tax considerations. Property that you place in an irrevocable trust is no longer considered part of your estate, meaning that the property typically isn’t included in your estate’s value when it comes to determining if you owe death taxes and, if so, how much.
However, you still own property that you place into a revocable trust, and therefore that property is still subject to death taxes. If you can change your mind about the trust and retrieve the property from the trust at any time while you’re still alive, the property is really yours and should be considered part of your estate.
So if you only get a break on estate taxes with an irrevocable trust, why would anyone want to use a revocable trust without the estate tax break? Estate tax savings is only one of the reasons you may consider including a trust in your estate planning. If your estate’s value is nowhere near the federal estate tax exemption, then you really don’t need to be concerned about federal estate-tax-saving tactics.
Your motivation for setting up a trust may have more to do with estate protection or helping out a charity, but you also may want a safety valve that allows you to pull money out of a trust if circumstances change in some way.
Make sure to work with your accountant to understand any and all tax implications ? gift, federal estate, and state inheritance or estate ? for property transfers to both irrevocable and revocable trusts. He or she can help you set up the right provisions and avoid unpleasant tax-related surprises from the government because of some provision of the tax code you didn’t know about.
A closer look at revocable trusts
Estate-planning advisers often point to revocable trusts, especially living trusts, as the “perfect way to totally avoid probate.” Put all your property into revocable trusts and you can have control over that property, the pitch goes, and because none of your property is now in your probate estate (that’s, it’s all held in trust) your estate doesn’t have to go through the probate process because your probate estate is “empty!” The pitch continues: By avoiding probate, you avert probate costs, put off the lack of privacy, and bypass other disadvantages of the probate process.
Not so fast! True, you can avoid probate costs, but do you really think setting up and maintaining trusts is free? No way! Your costs to establish a revocable trust will vary, depending on attorney fees and other costs, and be prepared to pay to have your trust managed.
You also need to make sure that everything you own is held in trust form. If you fail to include any part of your estate in your trust(s), then you have a probate estate that’s subject to the probate process. So every time you buy a new home, open a new brokerage account, or make any changes to your estate’s inventory, you need to make sure that you transfer that property into your trust(s).
Remember that probate isn’t always bad. The probate court ensures that the property in your probate estate is disposed of properly with no secret maneuverings and supervises your probate estate. With the probate court’s supervision, part or all of your estate that’s held in trust or other nonprobate form (joint tenancy with right of survivorship, for example) can be in for problems if someone close to you in a position of authority is unethical. All the beneficiary problems may get eventually get resolved, but quite possibly because of prolonged, costly legal battles.
However, an irrevocable life insurance trust shelters life insurance death benefit proceeds from estate taxes. After setting up the trust, you still have life insurance, and your beneficiary or beneficiaries still receive the proceeds from your policy upon your death. But now, estate taxes may not be a problem.
Avoiding probate: By keeping certain property out of your probate estate, you may be able to avoid many of the hassles, costs, and lack of privacy concerns related to probate.
Protecting your estate (and your beneficiary?s or beneficiaries? estate): One of the primary uses of trusts is to protect your property even after it becomes someone else?s estate.
For example, suppose that you want to leave $500,000 to your only son, but you?re concerned that before you can say, ?sail around the world,? he will have spent the entire half million.
You can use a trust to parcel out the money to your son as you see fit. The trust can give him a little bit each year for some duration, and then a final lump sum at some age when you think he?ll be mature enough to protect the money as if he had actually earned it himself.
Or you can add conditions to how the money in the trust is dispersed, such as your son receives a little bit of money until a certain age, and then he gets the rest only if he graduates college or meets some other criteria you determine when you set up the trust.
Providing funds for educational purposes: Trusts can make money available to your children, grandchildren, other relatives, or even nonrelatives (your employees? children, for example) for educational purposes, such as college tuition and living expenses.
You can set up and fund trusts that parcel out money for educational purposes with a no-school, no-money restriction.
Benefiting charities and institutions: You can help out charities by setting up some type of charitable trust that may, for example, annually give money to the charity while you?re still alive, give a larger amount upon your death, and then continue to make regular payments out of the remainder.
Example 1 :
Living trust with payments to a beneficiary.
Example 2 Shenindoah :
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Example 3: Irrevocable Trust fund is already setup and the trustee is awaiting communication from the beneficiary to start and setup a payment plan.
On top of the payment plan which would count as standard income to the beneficiary, the initial payment of the max allowed annual gift exclusion; which is $14,000 in 2015. This amount is the max amount that can be considered a gift and be excluded from being taxed.
A standard payment plan (in addition to the repeat annual gift amount which is projected to remain the same in 2016,) would require further discussion to determine.
Total principal, the amount of interest earned in the previous year, and the amount of payout in the plan would be variables that would assist in determining the most effective plan that would minimize the overall tax burden.
The trustee, SHOULD have no issues in making or updating such payment plans as variables arise, raising or lowering the amount, or adding another beneficiary (ex, another trust,) would be factors that could change (to be determined.)
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. The beneficiary, thomas michael goodson, can be added/become active. On top of a set pay plan that the
Grantor would like to make available a large sum, to a beneficiary and have it accessible while both of the individuals are still living. There are several options you could choose from.
If you already had a trust in place adding a beneficiary and making them the trustee would be… << researching more >> i found another product.
Benefits of Setting up a Trust