Estate planning is perhaps most commonly associated with wills using this type of legal document to memorialize wishes regarding how you want your property distributed when you pass away. Estate planning, however, can go far beyond employing a will to distribute property to your heirs. In fact, many people choose to utilize different types of trust in estate planning. Trusts offer a variety of benefits, which can depend on the type of trust. Benefits commonly associated with trusts include asset protection and tax advantages. A legacy trust is one such type of trust that can be used to more effectively distribute your assets upon death. It is worth taking a look at what it is and what it can accomplish.
What is a Legacy Trust?
A legacy trust is also referred to as a “wealth trust.” In its basic sense, a legacy trust is an irrevocable trust. It allows you to put aside assets to preserve them for future generations, including children and grandchildren. What this means is that the legacy trust allows you to remove assets from your primary estate into the trust, which acts like a secondary estate.
It is most common to establish a legacy trust during a person’s lifetime, making it an “inter vivos” trust, through making annual gifts as a means of transferring assets to fund the trust. While the fact that the trust is irrevocable makes it rigid in the sense that the terms of the trust cannot be changed, there is some important flexibility offered by the trust as far as asset protection goes. It is important to note, however, that a legacy trust cannot have the trust settlor, or “donor,” act as trustee. Someone else must be appointed to this position.
A legacy trust operates as a type of savings plan. Once you put funds in, you may still be able to use them for emergency purposes. There is no requirement that the trust settlor be incapacitated or deceased in order for the trust assets to be used. Funds held in trust may go towards paying college tuition. It may also be used to distribute income to children and grandchildren. Furthermore, it may be used as an emergency fund that can pay for things such as emergency medical care or, should the donor need it, long-term care. In the alternative, the trust may be utilized solely as part of your secondary estate.
One of the benefits of a legacy trust is the asset protection it offers. Placing assets in the legacy trust places them beyond the reach of creditors and judgments. This is because the trust effectively acts as a wall against creditors. Furthermore, a legacy trust can have significant tax benefits. It is not subject to Internal Revenue Service Rules that apply to a tradition estate. This means that a legacy trust can be an effective way to reduce estate taxes. It also avoids multiple taxations on trust assets. Usually, money transferred from one generation to the next will be subject to taxation upon each transfer. The legacy trust operates to avoid this from happening.
Estate Planning Attorney In Tampa
While very useful in many cases, trusts are complex entities that vary in type and purpose. Talk to the trusted estate planning team at Verras Law about the many estate planning options available to you. Contact Verras Law today.