Is Trust Planning a Good Idea?

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July 13, 2022 •  The Estate & Elder Law Center of Southside Virginia, PLLC
What will happen to your assets when you can no longer manage them?
Robert W. Haley, managing lawyer
Robert W. Haley
Certified Elder Law Attorney® Robert W. Haley brings over 27 years of legal expertise and knowledge to his firm, which concentrates solely on the areas of elder law, estate planning (Last Will & Testaments, Durable Powers of Attorney, Health Care Powers of Attorney, Living Wills, Trusts, etc.,.) Asset Protection/Medicaid Planning and fiduciary services. For many years, Robert practiced in real estate law, and in general practice, but decided to narrow his focus to elder law and estate planning when he realized the tremendous need for proper planning to be filled in Southside Virginia.

If chosen wisely, with the help of an experienced estate planning attorney, a trust can be a great chance to minimize taxes on your estate.

Forbes’ recent article entitled “Estate Planning Opportunities: How Trusts Can Minimize Taxes On Your Legacy,” explains that trusts are legal arrangements that benefit causes or people you choose down the line. They vary in how they are activated and accessed, according to these basic types.

  • Revocable or irrevocable: In a revocable trust, a grantor can reclaim assets whenever they want during their lifetime. In an irrevocable trust, a grantor gives up the right to reclaim property once the trust is designated.
  • Testamentary or living: a testamentary trust, created under a last will, becomes effective when the grantor dies and then becomes irrevocable to administer the inheritance. A living trust, also called an “inter-vivos trust,” is a transitionary method that helps with incapacity planning, putting a trust into action before death, and avoiding potential problems in the probate process.
  • Grantor or non-grantor: In a grantor arrangement, income is generally taxed to the grantor rather than to the trust. In a non-grantor arrangement, income is generally taxed to the trust (unless it is being distributed that same year).

If you have concerns about taxes, consider an Irrevocable Life Insurance Trust (ILIT). This is used to manage life insurance for your beneficiaries, while offering you insulation from your creditors and reductions on your taxable estate. A life insurance policy’s “death benefit” is usually protected from estate tax already, but even policy premiums can be structured as tax-free gifts inside the ILIT.

There’s also the Spousal Lifetime Access Trust (SLAT) can help married couples achieve similar tax reductions while helping them maintain indirect access to the cash values in each other’s life insurance policies. This is essentially an ILIT with added access during the spouse’s lifetime for health, education, maintenance, support, and under any other specified terms for withdrawal.

When properly structured, assets belonging to an Intentionally Defective Grantor Trust (IDGT) will also transfer to your beneficiaries free of estate tax.

With the help of an experienced estate planning attorney, you can look at the best opportunities for you to protect your assets from unnecessary charges, leaving behind as much of your legacy as possible. Book a call with one of our staff members to discuss trust planning. We have offices located in Bassett, Danville, and Lynchburg to better serve you!

Reference: Forbes (May 23, 2022) “Estate Planning Opportunities: How Trusts Can Minimize Taxes On Your Legacy”

Suggested Key Terms: Estate Planning Lawyer, Probate Court, Inheritance, Asset Protection, Grantor Trust, Non-Grantor Trust, Revocable Living Trust, Irrevocable Trust, Testamentary Trust, Probate Attorney, Estate Tax, Life Insurance, Tax Planning, Financial Planning, Irrevocable Life Insurance Trust (ILIT), Spousal Lifetime Access Trust (SLAT), Intentionally Defective Grantor Trust (IDGT)

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