Trust Services

Our Services: Trust Services

Trusts are extremely flexible in form and almost any asset protection and estate planning goal can be accomplished by an attorney or trust officer who is knowledgeable and experienced in this field. Using creative trust strategies, the planning opportunities for achieving tax savings and asset protection advantages are unlimited. Although different kinds of trusts serve different purposes, various    kinds of trusts can allow you to:

Protect your financial interests in the event of a disability.

  • Control the disposition of your assets both during your life and after you die.
     
  • Avoid the probate process if all assets are in trust or governed by a beneficiary designation.
     
  • Keep your affairs private.
     
  • Reduce estate taxes and settlement costs.
     
  • Augment a gift to your favorite charity.
     
  • Defer income taxes.
     
  • Avoid capital gains taxes.
     
  • Receive a steady stream of income.
     
  • Increase your stream of income.
     
  • Let beneficiaries enjoy trust income during your lifetime.
     
  • Reduce current money management burdens

 

Types of Truts: Family Limited Partnership

Over the past few years, the Family Limited Partnership (FLP) has risen from obscurity, as a little known tax loophole, into the preeminent vehicle for asset protection and estate planning. In a recent 2005 article in Forbes extolling the benefits of the FLP—headlined "Cut Your Estate Taxes in Half"— the author claimed that individuals were successfully using this technique to discount the value of their estate by up to 90 percent. By itself, or in combination with other techniques, the FLP can be used to create a powerful strategy for asset protection and for realizing estate tax and income tax benefits.

Revocable Living Trust

A revocable living trust is created during your lifetime. You, then, are considered the grantor of the trust. Only the grantor may alter, amend, or revoke the trust. In conjunction with the creation of this type of trust, you transfer the title but you still keep all the control over the assets. Typically, you will transfer assets that would ordinarily pass through probate (i.e. assets that you own outright, such as savings and checking account balances, real estate). It does not provide the grantor with any tax benefits, but it does help avoid probate on any assets transferred into it. It can also provide for management of your assets during your lifetime if you become mentally or physically disabled. It becomes irrevocable or terminates at the grantor's death.

Marital and Credit Shelter Trusts

Marital and Credit Shelter Trusts (also know as A/B Trusts or Marital/Bypass Trusts) are estate-planning tools used to reduce the combined estate taxes of a married couple. At the death of the first spouse, the estate is divided into two parts. One part (Credit Shelter or 'B' Trust), equal to the Applicable Exclusion Amount ($5,340,000 in 2014), is placed in a trust that may provide income for the life of the surviving spouse but is not included in his or her estate. The other part of the first spouse's estate either passes outright to the surviving spouse, or is placed in a Marital Trust ('A' Trust) to take advantage of the Unlimited Marital Deduction for the spouse's benefit. Those assets, in trust or not, are taxable in the survivor's estate when that spouse dies.

Irrevocable Life Insurance Trusts

With an Irrevocable Life Insurance Trust (ILIT), the grantor completely gives up all rights in an insurance policy and other assets transferred to the trust. It is typically used in estate planning to shelter the insurance death benefit from estate taxes and may help provide the liquidity to help pay estate taxes and settlement costs. Ideally, the trust is created first, then it purchases and owns the policy. Upon death, the insurance proceeds are paid out in accordance with the terms of the trust.

Charitable Remainder Trusts

Charitable Remainder Trusts (CRTs) are irrevocable trusts that allow you (the donor) to increase your current income and potentially reduce income and estate taxes, while providing a substantial benefit for the charity of your choice.

After creating this trust, you would make a gift of financial or real property to it (ideally these will be highly appreciated assets) and receive a charitable income tax deduction. Once this is done, the trust can sell the asset (and avoid the capital gains taxes that you would have paid if you sold it) and distribute an income to you for a term of years or for the remainder of your life. When the trust term expires, a named charity receives the trust principal (the remainder), and your estate gets a deduction for the amount of the gift to charity. Often, a way to replace these assets is to use part of the additional income stream to purchase life insurance, preferably outside the estate in an irrevocable trust.

Charitable Lead Trusts

Charitable Lead Trusts (CLTs) are exactly the inverse of Charitable Remainder Trusts. Again, you will create a trust and make a gift of financial or real property to it (for which you may or may not receive a charitable income tax reduction, depending on the design of the trust, but a taxable gift of the remainder interest is created). When the trust sells these assets, it will avoid the capital gains taxes that you would have paid on the sale. In this case, however, the income that the trust generates is paid to the charity of your choice for the remainder of your life or for a term of years. At the end of that time, the remainder of the trust principal is paid to a non-charitable beneficiary (typically your children or grandchildren).

 

Contact your Dettlaff & Company representative who will introduce you to a Trust Services professional.

 

 

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