For estates over $5.49* million (or $10.98* million for a married couple), a trust can help reduce estate taxes. But you don’t have to be a millionaire to reap the benefits of a trust.
Whether you’re passing assets on to loved ones or reserving them for a specific purpose, a trust gives you privacy—because assets avoid probate, which is a matter of public record—and control.
*2017 Life Gift and Estate Exclusion limit. See IRS Publication 559 for more information.
People often use trusts to stipulate control of their assets should they become incapacitated or die before their minor children. They can distribute wealth in complicated situations, like to children from more than one marriage. You can also use a trust fund to:
Create a charitable organization
Fund a scholarship
Support a business
An attorney or trust advisor can help you explore your options and possibilities.
If the trust is revocable, you’re allowed to change terms and beneficiaries. Irrevocable trusts offer less flexibility (as the name implies) but more tax advantages. If you have a sizable life insurance policy, for example, you can use an irrevocable life insurance trust to help avoid estate taxes.
Work with a tax advisor to understand the pros and cons of different trusts for your specific situation.
A living trust operates while you’re still alive, and a testamentary trust activates upon your death. Different variations of these two trust types can help you accomplish specific estate planning goals.
Material (A) trust
Name your spouse as trust beneficiary to qualify for the unlimited marital deduction.
Bypass (B) trust
Pass assets tax-free to your children after your spouse’s death.
Charitable remainder trust
This type of living trust delivers both an immediate tax deduction and a steady income stream throughout your lifetime.
All investments are subject to market risk, including the possible loss of principal.
This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice. This material does not provide fiduciary recommendations concerning investments or investment management; it is not individualized to the needs of any specific benefit plan or retirement investor, nor is it directed to any recipient in connection with a specific investment or investment management decision.