Do I Need a Trust? How a Trust May Be Beneficial.

What is a Trust?

A trust is a type of entity that holds and owns assets separately from the person contributing assets to the trust.  Typically trusts are established to benefit the trustor (the person contributing the assets to the trust) during the lifetime of the trustor, and then, upon the trustor’s death, the trust may benefit the trustor’s spouse, children, and/or other named beneficiaries.

Under this scenario, the trust cannot be used to avoid liabilities of the trustor.

What are the Federal and State of Arizona Estate and Gift Exemptions?

Beginning in 2016, the federal estate and gift tax exemption is $5.45 million for an individual, and $10.9 million for a couple.  This means that upon death, a person or a couple can give up to this amount to others upon death without being subject to federal estate tax.  Since 2005, the State of Arizona no longer imposes an estate tax.

Past Considerations for Creating a Trust – the Previous Lower Thresholds

In past years, the federal estate and gift tax exclusion was much lower.  For instance, the individual exclusion amount was only $1 million in 2002.  It rose to $3.5 million 2009 before being repealed in 2010.  Since certain types of life insurance policies and real estate are included in the “gross assets” of a person’s estate, many people formerly were subject to federal estate tax because the value of their estate (including insurance policies) exceeded the exemption.  As a result, using a trust was often a tax-advantaged strategy for shielding assets from taxation.

Current Considerations for Creating a Trust

Today, with the much higher exemption limits, a trust is no longer needed by most people in order to avoid having to pay an estate tax.  As a result, the additional cost to create a trust, as well as the costs and time to transfer assets into a trust and to maintain the trust, can often be avoided.

Nonetheless, there are often valid reasons for creating a trust, including the following:

I Can Advise You as to Whether a Trust May Be Beneficial for Your Estate

After learning about your circumstances and objectives, I can advise you as to the options that might be best for your circumstances, whether it be a will or a will and trust.  Please call me today to schedule an appointment at a convenient time so that we may discuss your estate planning objectives.

Call Me or Stop By My Office

I’m a native Midwesterner, having lived most of my life in Minnesota. I would look forward to meeting you, and learning about how I may be of service to you.

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