Will Lawyer
People with a considerable amount of wealth should weigh all of the available options when it comes to estate planning. There are multiple means of transferring wealth to heirs, both while you are alive and after you pass away, like a will lawyer from a local law firm such as William B. Moore would advise. Take a look at the information below to give you an overview of how one option, a living trust, could potentially benefit you.
Death Taxes
There are two types of death taxes, estate and inheritance taxes. Estate taxes are levied on a person’s total net worth when they die. Alternatively, inheritance taxes are imposed on each withdrawal an heir makes from an estate. The estate tax is paid by the estate itself while the inheritance tax is paid by the beneficiary. However, you can set up your estate to pay the inheritance tax on behalf of the heirs if you choose to do so.
Trust Basics
Trusts hold property that is eventually transferred to the beneficiaries of that trust. The legal entities circumvent the probate process required of wills but are subject to estate taxes in some cases.
Types of Trusts
There are two categories of trusts, revocable and irrevocable. Revocable trusts are used most often and are subject to estate taxes. The trustor (the person creating the trust) can revoke or dissolve the trust whenever they choose. Further, they can pull property out of the trust’s ownership and add or remove beneficiaries. Income earned by this type of trust is reportable on the trustor’s personal tax return. Since the trustor legally owns assets in a revocable trust, the Internal Revenue Service (IRS) considers those assets in the trust a part of the trustor’s estate at the time of death. Living trusts are typically revocable and therefore normally subject to estate taxes. You can speak with an attorney to help you determine if this would be true for you.
Irrevocable trusts require that the trustor relinquish all control over a trust after its creation. The trustor must appoint a separate trustee to preside over the trust. Because ownership of all assets included in the trust are transferred to the trust itself, these assets are not taxable as part of the estate. Irrevocable trusts are subject to taxes as a separate entity and file a separate tax return accordingly.
Contact a will lawyer today to determine if a living trust could be a viable option for you as part of your estate planning endeavors.