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Use of trusts for estate planning purposes

There are a number of reasons for Florida residents to use a trust for estate planning purposes. Tax savings are clearly a benefit. By placing assets into an irrevocable trust it is possible to remove these same assets from the estate so that one's heirs won't have to pick up the tab. Placed inside a trust, the assets can grow while the individual setting up the trust can create the terms of how the trust is to operate.

It is important to remember that Congress raised the federal estate and gift tax rates to 40 percent in 2012 for estates exceeding the tax exclusions limit of $5,250,000. An important change was also made concerning "portability" of estate tax exemptions. A surviving spouse can take advantage of any unused portion of the estate tax exemption potentially bringing the exclusion limit up to $10.5 million. However, this change concerning portability may lead couples to mistakenly believe that a trust would be unnecessary.

There are other reasons to create a trust besides tax considerations. A trust could also be used in the event of one's incapacity to make certain the family is taken care of. The setting up of a trust in advance allows an individual to control his or her wealth even in the event of incapacity. It can also protect money placed in the trust from being reached by creditors of the heirs or even the heirs themselves if there is concern the heirs will not spend the money wisely. Finally, the assets will not be exposed to the probate process which can be costly. As probate records are usually available to the public, probate avoidance can lead to a certain assurance of privacy.

It's important to obtain advice before drafting of trusts. There are many kinds of trusts and differentiating between each of them can be difficult. Attorneys can help in the drafting of trusts and make ones options more understandable.

Source: Forbes, "How The Right Trust Could Protect Your Assets And Cut Your Tax Bill," April 10, 2014

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