Living Trust Account

The saying goes that only two things in life are inevitable: death and taxes. To be realistic this rule still applies today, and especially when a person passes away to the next life, where hopefully there is no taxation.

However due to legislation introduced by US congress and constantly being updated, many people are discovering the advantages of establishing a living trust. This form of trust allows people to transfer their assets to the trust whilst they are still young enough to enjoy the fruits of their lives labors, whilst retaining the larger share of their estate intact, to be passed on to their loved ones on their passing.

Many people go through life assuming that they will work hard, look after their family, reach retirement age and hopefully enjoy a relatively comfortable retirement before passing on to their eternal rest. After that they hope that the taxman will be gentle with their estate, and that there may be something left to pass on to their loved ones. Due to the legislation on Living trusts, the rules of the game have changed, and as people are now living longer and healthier lives, estate planning and creating a living trust account accordingly has become an issue with people who are now approaching retirement age.

The average couple will create a living trust account and tailor it to their own particular circumstances, they should employ the services of a lawyer who specializes in living trusts and who will take into account the following factors. Their age, the size of their estate, how it is made up and their relationship with their beneficiaries. First and foremost, if they are a couple, they will establish the trust in such a fashion that when one of the partners passes away, the estate is not distributed until the other partner passes on. This is known in legalese as an A-B "credit shelter" trust. This is established to preserve the same exemptions from estate tax for both partners and spouses. Dependant on the size and nature of the estate, this can avoid the beneficiaries from paying inheritance tax of up to $1million. Again an experienced and capable estate planner will be able to advise the couple on exactly the correct balance of living trust account to make the maximum savings on these punitive taxes.

The next stage in proper living trust and account planning for estates, is to asses and decide how many and if all the personal assets of the trustees are to be included in the estate. From the outset it is not necessary to include all the assets in the estate, and the estate planner may recommend leaving out assets that are flexible and subject to fluctuations in value. A typical example is a family business which is still in operation. In general, assets that are included in a living trust are property, jewellry, art collections, stocks and bonds and another from of collection which is liable to appreciate in value.

The next stage in the decision making process when it comes to making up a living trust account is the form that the trust will take. Will it be revocable or irrevocable? Most people settle for a revocable account for the obvious reason that it allows for a lot more flexibility. Beneficiaries can be changed, dropped from the list or added, and the size of their endowment increased or decreased. Assets can also be added to a flexible living trust, or taken from the trust, either temporarily of permanently for what ever reason.

An irrevocable trust is also as it sounds. Assets included in the trust on the day that it is established remain in place till the trust is dispersed and the beneficiaries remain the same under every circumstance. The trustees however receive sufficiently higher tax benefits in their lifetime through operating an irrevocable living trust account.