Are income taxes taking a bite out of your trusts?
If your estate plan includes one or more trusts, review them in light of income taxes. For trusts, the income threshold is very low for triggering the: Top income tax rate of 39.6%,
Top long-term capital gains rate of 20%, and Net investment income tax (NIIT) of 3.8%.
Follow all rules when transferring assets to an irrevocable trust
Irrevocable trusts can provide a variety of benefits, including gift and estate tax savings, creditor protection, and the ability to control how assets are distributed. To preserve these benefits, however, it’s critical to respect all trust formalities.
Properly fund your living trust to shield assets from probate
Many people set up a revocable, or “living,” trust to shield assets from probate and take advantage of other benefits. For the trust to work, you must transfer assets to it that would otherwise go through probate — a process known as “funding” the trust. Most people fund their trusts around the time they sign the trust documents.
Transfer Assets through Grantor Retained Annuity Trusts (GRATS)
There are several estate planning tools designed to assist in the transfer of assets to a trust for beneficiaries while also retaining the grantor’s right to income or use of the asset.
Family Limited Partnerships: The Power to Move and Protect Your Wealth for Future Generations
Family limited partnerships (“FLPs”) give senior family members a tax efficient way to shift wealth to future
generations while still exercising control over their assets. As an added benefit, by forming a FLP, senior family members remove assets out of their estate—generally at a reduced transfer tax value.