How You Can Use A Trust
by John D. Loe, Jr., CPAToday, trusts are used as estate or financial planning tools not only by the very wealthy, but by people of more moderate means as well. Though complex and costly to set up and run, they can be worth the cost in accomplishing various estate and financial planning goals.
A trust is a legal entity, even though it may not be a taxable entity, and owns its own property (holds the title). When it is set up, the trust appears on official papers and records as the legal owner of any property that is placed into it.
There are basically two types of trusts you might set up:•An “irrevocable” trust which you cannot change or revoke and is considered a separate taxable entity – that is, it pays its own taxes.
•A ”revocable” trust which you can change or revoke and is not considered a separate taxable entity.You can set up the trust while you are still living (an “inter vivos” trust) or under your will (a testamentary trust). The terms of the trust dictate who will receive the trust income, how long the trust will last, and so on.
Caution: Keep in mind that setting up a trust properly can be complex
and often expensive. Professional guidance is a must.
Trusts can be used for a number of purposes” (1) to give property to children, (2) to reduce estate taxes, (3) to insure that your assets ultimately go to your desired heirs, and (4) to keep life insurance out of you estate.
