Trust Purposes

TAX PURPOSES

Trusts can be used to avoid or reduce estate and gift tax through estate tax planning.  Typically an irrevocable trust will be used for planned giving.


Irrevocable Trusts that are not considered grantor trusts are required to have a Tax Identification Number and file any required tax returns.

ASSET PROTECTION

- Protection against lawsuits and creditors


- Protection against healthcare costs


- Divorce protection for beneficiaries and heirs to avoid loss of assets in the event of divorce


- Remarriage Protection - to avoid accidentally disinheriting children or intended heirs


- Pre-marital planning - safeguarding assets 

SPECIAL NEEDS AND INCAPACITY PLANNING

LONG TERM CARE PLANNING: PROTECTION AGAINST HEALTH CARE COSTS.


PROTECT AND MANAGE ASSETS OF MINOR OR SPECIAL NEEDS CHILDREN.

PROBATE AVOIDANCE

One of the most common purposes of trusts is to avoid the expenses and delays caused by the probate court process.


Typically a revocable living trust (RLT) or intervivos trust used for this purpose.


One way of avoiding probate is to have a Revocable Living Trust.


Advantages of Revocable Living Trust: 


1. CONTROL: 


A revocable living trust provides the flexibility of allowing the grantor(s) to be the trustee during life.  In other words, the grantor(s) can continue to control the assets; 


2. CHANGEABLE:  


A Revocable Trust can be changed or canceled at any point prior to death; 


3. INCAPACITY PLANNING:  


A revocable can be used for incapacity planning by having successor trustee or co-trustee take over in the event of incapacity of grantor/trustee; 


4. PROBATE AVOIDANCE, DEATH AND INHERITANCE PLANNING: 


Upon the death of the grantor(s),  the successor trustee is responsible for executing the instructions of the grantor without court action and privately.  The same as a vice president would take over for a president of a company.  The line of succession would be clearly stated. 


5. ACCESS TO FUNDS OR ASSETS OF TRUST:  


The grantor/trustee is allowed to withdraw or deposit  or transfer without limitation.    


Disadvantages of a Revocable Living Trust:   


1. NO ASSET PROTECTION:  


Since the grantor/trustee has full access, the judgment creditors of the grantor can force collection against the trust. 


2. NOT OUTSIDE OF TAXABLE ESTATE FOR ESTATE TAX PLANNING PURPOSES:  


In general, the assets are still considered to be part of the taxable estate of the deceased grantor.


A revocable trust is like an ATM machine.  You can put assets or money into it and you can take them out without restrictions.


An RLT does not have a separate tax ID number and is disregarded for tax purposes.  The grantor continues to report income (if any) on his or her personal tax return.


When the grantor dies, the successor trustee will be immediately authorized to administer the trust and make the required distributions.


When the grantor dies, a tax I.D. number will be needed and tax returns filed for the trust as required.


PROTECT AND MANAGE ASSETS OF MINOR OR SPECIAL NEEDS CHILDREN.

DIVORCE PROTECTION AND PRE-MARITAL PLANNING

REMARRIAGE PROTECTION