CA Estate Planning Blog

Thursday, August 28, 2014

Is a Trust Right for You?

A trust is an estate planning tool that holds assets to be distributed after you die.  Most people think that you must be wealthy to benefit from the use of a trust in an estate plan. This is not the case, as there are many different types of trusts.  Some estate planning attorneys recommend that anyone with an estate worth over $100,000 and satisfying one of the following conditions should consider using a trust.  The conditions are as follows:

• A good amount of your assets are in the form of real estate, art or business holdings.
• You want to control how your assets are distributed to your beneficiaries.
• It is important to you that you provide your spouse with financial support after your death and also that your other beneficiaries inherit after your spouse passes away.
• You are worried that you might be subject to significant estate taxes and you want to reduce the liability as much as possible.  
• Your goal is to provide for a disabled beneficiary but want that beneficiary to continue to be eligible for government benefits.

No estate planning situation is the same and there are many different types of trusts that can be used in a wide variety of situations.

• Credit-Shelter Trust
A credit-shelter trust allows you to stipulate to leave a certain amount of assets (under the estate tax exemption) to a trust upon your death.  By then leaving the remainder of your estate to your spouse you can reduce or even avoid estate taxes.

• Dynasty Trust
A dynasty trust is created for the benefit of your grandchildren by allowing assets under the generation-skipping tax exemption to be passed to them tax free.  Your children can also benefit from trust income during this time.

• Qualified Personal Residence Trust (QPRT)
The QPRT trust allows you to transfer your residence or vacation home into the trust but continue to control it for a certain number of years.  The IRS values the asset at less than its current value as it assumes that your beneficiaries will not possess it for a while.  As long as you outlive the trust the home will not be included in your estate upon your death.

Trusts are complex legal documents that can assist in the preservation of assets if drafted correctly.  It is imperative to consult with a qualified estate planning attorney if you are considering a trust.  If you think a trust might be right for you call OC Wills and Trust Attorneys at (949)347-5256 for a consultation today.


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