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Does a Credit Shelter Trust Get a Step-Up in Basis?
A common tax strategy for married couples who have amassed significant financial assets is to create a credit shelter trust (CST) in order to maximize the federal estate tax exemption.
What is an Emergency Power of Attorney?
Conferring a power of attorney (POA) can be a legal event but doesn’t usually involve a lawyer. Instead, designating a power of attorney gives the named person the authority to make decisions on behalf of the person who made the designation.
What Is A Grantor Retained Annuity Trust (GRAT)?
A Grantor Retained Annuity Trust (GRAT) is when a grantor wants to transfer the appreciation of an asset to an heir(s) while also reducing the value of the asset that might be subject to estate or gift taxes. It is generally used by individuals as a possible tax shelter for a high-value asset(s) they want to pass to a beneficiary.
What are the Advantages of Financial Planning?
Financial planning is imperative to make sure your finances are in order while you are alive, and also to convey your wishes for assets after your death. However, a 2022 study showed that only 29% of surveyed Americans have a written financial plan. With the uncertainties in life, if you don’t have a plan, now is the time to get started.
What is a Credit Shelter Trust?
Affluent couples with large estates may choose to set up credit shelter trusts in an attempt to preserve generational wealth and pass high-net-worth assets onto their heirs without having to pay estate taxes.
What Is An Intentionally Defective Grantor Trust (IDGT)?
Intentionally Defective Grantor Trusts (IDGT) are when a grantor transfers an asset, or assets, into a trust where the asset and any growth are effectively removed from the estate, but the grantor still pays income tax. Effectively, the grantor’s purpose is to potentially grow the inheritance “income tax-free” for their heirs by paying the income taxes as the asset grows while they are still alive. By setting up an IDGT the grantor is “intentionally” triggering the need to pay income tax on the asset.
What Does Per Stirpes Mean For Beneficiaries In A Will?
When you are creating your estate plan, it is important to look beyond your primary beneficiaries and consider what happens to their inheritance if they precede you in death. If you add a per stirpes distribution to your will, the beneficiary's share of your assets will pass to their direct descendants if they die before you.
What Is An A-B Trust?
Individuals sometimes use an A-B trust, or bypass trust, in their last will and testament or living trust for potential estate tax benefits. It is generally only used by couples whose estate is over the estate tax filing threshold, which in 2022 was $12.06 million.
Are Trust Funds Subject to Inheritance Tax?
Taxpayers may establish trust funds to pursue several goals, including orderly distribution of assets, tax management, and a desire to provide income to beneficiaries. Often, tax management is a priority. Keep in mind that federal estate taxes only apply when an estate's value exceeds $12.06 million. Very few estates meet that threshold. However, the tax rate imposed on amounts over the threshold is forty percent, which can take a hefty bite out of an inheritance.
How to Set Up a Trust Fund
If you decide to establish a trust fund, consider your goals before you begin. Doing so will help you determine whether you need a trust and, if so, what type is most appropriate. Trust funds and wills are each estate planning tools and often work together to describe how you want your assets distributed after you die. Trusts can also contribute to tax management strategies and disseminate assets and income while you are still living.
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