Like most people, your Last Will and Testament is likely the foundation for your comprehensive estate plan. In order to achieve all of your estate planning goals, however, you will likely need to incorporate a variety of additional estate planning tools and strategies into your overall plan. One of the most common additions to an estate plan is a trust agreement. If you have never used a trust agreement before you probably have a number of questions relating to trusts, such as “ Do trusts save taxes? ” The simple answer to that question is “yes”, a trust agreement can decrease your estate’s exposure to taxes.
Although trusts were one used almost exclusively by very wealthy families as a way to pass down the family fortune while retaining a certain degree of control over future generations, trusts are no longer the exclusive domain of the super wealthy. In fact, trusts have evolved to the point where there is a specialized trust agreement to fit almost every estate planning need and scenario. Moreover, if a specialized trust doesn’t already exist your estate planning attorney can custom tailor one for you. One reason for the increased use of trusts is just that – the flexibility you have when creating a trust through the use of the trust terms.
A trust agreement can provide a number of benefits to an estate plan, including tax benefits. One of the primary concerns of many people when creating an estate plan is federal gift and estate taxes. Gift and estate taxes are potentially levied on the combined value of all gifts made during your lifetime plus the value of all assets owned by you at the time of death. At a tax rate of 40 percent it isn’t difficult to see why avoiding gift and estate taxes is a popular estate planning goal. One simple way a trust can help is to remove assets from your estate. When assets are transferred into an irrevocable living trust the asset becomes the property of the trust, meaning it is no longer part of your estate. Adding additional strategies, such as making use of the annual exclusion, can further decrease your estate’s exposure to gift and estate taxes. You may gift assets valued at up to $14,000 to as many beneficiaries as you wish each year tax-free. Therefore, you could transfer assets valued at up to $14,000 each year into your irrevocable living trust, effectively sheltering the assets both during the gifting phase and at the time of death from gift and estate taxes.
To find out how a trust can help decrease your estate’s tax exposure, contact the experienced Texas estate planning attorneys at The Mendel Law Firm, L.P. by calling 281-759-3213 to schedule your appointment today.
To learn more, please download our free Texas Estate Planning and Special Needs Trust here.
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