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Trusts offer options for future flexibility and tax protection

When planning for the future, people in Florida may choose to create a trust to pass on their assets because of the higher level of flexibility, control and privacy that it provides. Trusts can be structured in many different ways, and they can provide funds to multiple generations before the principal funds are distributed, if they are ever distributed individually. When people receive benefits from a trust, they may be unsure how to handle the tax consequences. After all, many people choose to create trusts because of their potential to minimize estate tax consequences for the beneficiaries.

The specific tax effects of a trust may vary depending on the kind of trust that was created as do the options for the trustee in managing the funds. Trusts name a trustee to manage the assets for the benefit of the beneficiary. In some cases, the beneficiary may also be named as the trustee; in other cases, a third party serves this role. The trustee can make different decisions for the money depending on the rights that they have. Some trusts may provide trustees with greater discretion while others provide specific details about how the assets are to be managed.

Some trustees may want to use trust assets in a 529 account or other tax-advantaged account for education. This may be acceptable under the language of some trusts depending on the level of control the trustee is given. Many trusts are created specifically to provide education funds for later beneficiaries. This may also provide greater tax protection than simply taking the money as income.

People who make detailed plans for the future may find that trusts help them achieve their goals. An estate planning attorney may help people draft a trust that offers the level of discretion and tax protection that may best serve their interests.

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