International Estate and Trust Planning

Posted on 4th May 2020

Estate Or Trust

Those considering irrevocable living trusts need to seek council to explore tax consequences and strategies. They need to be aware that upon creating an irrevocable living trust, the control of assets placed in the trust has been transferred to the trustee for management until the assets are distributed to the eventual beneficiary. Trusts are a useful estate planning tool that you may create at any time to serve a wide variety of purposes. Some common goals of a trust are to provide protection, asset management and security for your loved ones. They allow for the legal transfer of assets to a Trustee, who will then hold the asset on behalf of your designated beneficiary until they’re ready to receive it (e.g., when they become an adult). The two common types of trusts are living trusts and testamentary trusts.

In essence, the creator makes a gift to the trust when the trust is funded. Unless special provisions are included in an irrevocable trust, gifts to the trust will not qualify for the $13,000 annual exclusion. Therefore, the unified credit usually available to offset federal estate taxes at death might be reduced by the amount given to the trust. If that is the case, the amount used to offset gift taxes is no longer available to offset federal estate taxes, if needed, for assets outside the trust when the estate is settled.

Irrevocable Trust

Speak with your trust administrator and attorney about whether a revocable trust and/or an irrevocable trust might be a good estate planning option for you and your family. While assets controlled by your will have to go through probate in order to be verified and distributed according to your wishes, trust assets usually don’t. A will becomes a part of public record, while a trust agreement stays private. When you establish a trust during your lifetime, you only need to deal with your attorney and your trustee to execute the agreement.

  • Make sure you understand clearly what your trust can and cannot do, so that you’re getting what you pay for.
  • When you die, your successor trustee pays your debts, files your tax returns, and distributes your assets.
  • Depending on the amount of money at issue, there are additional options for leaving assets for the benefit of a disabled individual, including the use of an ABLE account.
  • When you create a trust, you set up a plan to take care of the people you love when you’re no longer around or lack capacity to assist them.
  • She has been in the accounting, audit, and tax profession for more than 13 years, working with individuals and a variety of companies in the health care, banking, and accounting industries.
  • With a revocable living trust, the creator can dissolve the trust if he or shesees fit.

With a carefully drafted will, although your estate will be subject to probate, the cost may be less than setting up and managing a trust. Many online will makers offer tools for generating legal forms and documents that can introduce you to estate planning options. However, experts recommend consulting legal counsel and other appropriate experts, as needed, to take into account your estate planning https://turbo-tax.org/ needs. To build a trust you need a well-managed set of assets to begin with. Building a portfolio of such assets is best done in partnership with a financial advisor. SmartAsset’s matching tool can connect you in minutes with a financial planner, the kind who can help you build a portfolio worth passing on to your heirs. Trusts and estates are the two most common mechanisms for passing down assets.

What Is an Estate?

These can include a trust that holds your assets and provides for future transfers, beneficiary designations for retirement and other financial accounts, and gifts of funds and other assets during your lifetime. These arrangements transfer property without the assets going through probate. And, you may transfer ownership during your lifetime through gifts. Accordingly, making a will that appoints your executor, determines who will receive your assets, and expresses your intentions on guardianships, charitable contributions, funeral, and burial should not be a late-in-life decision.

You can revise a will during your lifetime as your personal or financial situation evolves or if changes in the law affect your planning. Generally, these laws allocate a significant portion of the estate to your surviving spouse and divide the remainder equally among your children. They do not consider factors that might influence you to divide your estate unequally among your heirs. In Illinois in 2020, the current estate tax exemption amount is $4 million. This means that between your various life insurance policies, investment/retirement accounts with named beneficiaries, and other assets, up to $4 million may be transferred at your death without any tax liability. In 2020, the federal exemption amount is $11.58 million, and is indexed for inflation through the end of 2025. Also, there is an unlimited marital exemption on both the state and federal level, meaning that you can leave your entire estate to your spouse if you so choose, without tax consequences.

Avoiding or Reducing Federal and/or State Estate Taxes

For example, with any security, you can specify that if the intended beneficiary predeceases you, the predeceased beneficiary’s share will pass to the beneficiary’s lineal descendants, per stirpes. However, with real estate, you have to specifically name the contingent beneficiaries. Assets can be transferred into a trust directly while one is living (these trusts are known as “inter-vivos” or “living trusts”), or assets can be directed into a trust by one’s will (these are called “testamentary trusts”).

Estate Or Trust

Not all trusts are the same, so be sure your potential future lawyer has the specific expertise you need. You might expect to pay at least a couple thousand dollars for a basic revocable trust. There isn’t a clear cut rule on how much money you need to set up a trust, but if you have $100,000 or more and own real estate, you might benefit from a trust. One advantage of a revocable living trust is that the creator can change or revoke the trust and get back the assets placed into the trust. The advantages of putting a house into a Trust far outweigh the disadvantages.

Insurance and estate planning for your business

Many trusts are created as an alternative to or in conjunction with a will and other elements of estate planning. State law establishes the framework for determining the validity and limits for both. If you die intestate (i.e., without a will) and have made no other estate planning provisions, the distribution of your assets Estate Or Trust will be determined by state law. Under this setup the grantor cannot control, change or rescind the terms of the trust. Once it is created the trust belongs to its beneficiaries, even though they must still meet its terms or conditions. This means that the grantor can still control, change and even rescind the trust at will.

Therefore it is critical to make a will or a trust in order to ensure the surviving partner is recognized and protected financially. Trusts can have a limited term, the duration of the grantor’s or another person’s lifetime, and can hold assets and distribute them after the grantor’s or other person’s death. One of the most common misunderstandings regarding an estate is how much control someone has over the terms of his or her will. While state law governs who inherits when someone dies intestate, most states have very few restrictions on how someone can distribute assets through a will.


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