Protect
Your Legacy with Trusts
Did
you know that nearly 25 percent of people over 50 have
a living trust? As part of a well-defined estate conservation
plan,
trusts can help preserve more of your assets for your loved ones and
avoid the delays and costs of probate.
A
trust is a legal arrangement under which one person or institution controls
property given by another person for the benefit of a third party. If you
currently don’t have a trust or you’re unsure whether your trust offers
the right protection, you may want to learn more about A-B (bypass) trusts,
irrevocable trusts, and life insurance trusts. Working together, these three
types of trusts can help safeguard your legacy.
A-B Trusts
A living trust with a properly structured A-B provision can allow married
couples to exempt twice as much of their estate from taxes as they could
without a bypass trust. When one spouse dies, the trust is split in two. The
assets of the surviving spouse are transferred to the A trust, while the
assets of the deceased spouse go to the B trust. Each trust becomes a
taxable entity entitled to the current estate tax exemption ($1 million in
2002 and 2003).
Irrevocable
Trusts
When you
establish an irrevocable trust, you relinquish control of your assets while
you’re living. Although irrevocable trusts can protect your estate from
taxes on assets valued above the estate tax exemption, you may want to
consider this option carefully because it means giving up control of your
assets during your lifetime.
 Life
Insurance Trusts
If relinquishing control of your assets doesn’t appeal to you, consider
establishing a life insurance trust to pay the estate taxes on assets valued
above the estate tax exemption amount. A life insurance trust holds an
insurance policy in an irrevocable trust, so the policy itself is not
taxable. It can help give your beneficiaries the cash they may need to pay
estate taxes, perhaps eliminating the need to sell assets.4
As with all the
elements of your estate conservation plan, trusts should be reexamined
regularly so that new assets can be added and beneficiaries updated.
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