A Family Protection Trust
This trust would ensure that any assets remaining at the child's death would pass free of probate, state inheritance taxes, and federal estate taxes. The protection from creditors and taxes is the major benefit of this type of trust.
A minor trust is a legal arrangement that allows you to leave property and assets to a child or young relative, ensuring that these assets are managed by a trustee until the child reaches a specified age, typically 18 or older.
A Crummey Trust allows you to gift assets to minors without those gifts being subject to gift tax up to a certain amount annually. As of 2024, you can give up to $18,000 annually to a minor through a Crummey Trust without incurring gift tax or affecting your lifetime gift tax exemption.
As parents, we want our children to have everything they need. Determining exactly what they need is often the greatest challenge. Whether your children are very young, close to adulthood, or long out of the nest, a trust can often be the best way to ensure that they receive the resources that they need.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
The downside of irrevocable trust is that you can't change it. And you can't act as your own trustee either. Once the trust is set up and the assets are transferred, you no longer have control over them, which can be a huge danger if you aren't confident about the reason you're setting up the trust to begin with.
Crummey trust also has a few disadvantages, such as: A beneficiary may not cooperate for different reasons. Each time a gift is created to the trust, the beneficiary must be notified in writing of their right to withdraw, which is usually annually.
Minor trusts are taxed as income at the beneficiary level. This means that the income of the trust is taxed at the beneficiary's marginal tax rate. These types of trusts are taxed as if they were an individual's own money.
Children are frequent beneficiaries of trust funds because trust funds can safeguard your assets and make sure they are used for your children's stewardship.
The money in your child trust fund can't be withdrawn until you turn 18. Only the child it was opened for will ever be able to withdraw any money. The only exception to this is if the child passes away or is diagnosed as terminally ill. Please contact us if this is the case and we'll support you in accessing the money.
Revocable trusts last as long as you want them to and can be canceled at any time. At the time of your death, a revocable trust becomes irrevocable. Irrevocable trusts are permanent. They last for your entire lifetime and after you've passed.
A will may be the least expensive and most efficient choice for small estates with easily transferred assets and simple bequests. A trust without a will can present problems concerning assets outside the trust that become subject to intestacy laws. Larger and more complex estates may benefit by using both arrangements.
Rigidity: Family trusts are often inflexible, making it difficult to alter the terms once they are established. This rigidity can be problematic if family circumstances change, such as in cases of divorce, remarriage or changes in financial status.
Incentive trusts are becoming a popular choice for parents of young children that want their children to achieve certain goals in life. Incentive trusts provide parents with the flexibility to set goals and appropriate rewards through distributions once a child reaches the goal.
At the end of the payment term, the remainder of the trust passes to 1 or more qualified U.S. charitable organizations. The remainder donated to charity must be at least 10% of the initial net fair market value of all property placed in the trust.
Once you put something in an irrevocable trust it legally belongs to the trust, not to you. Assets in an irrevocable trust do not contribute to the overall value of your estate which, for a particularly large estate, can shield those assets from potential estate taxes.
There are a variety of assets that you cannot or should not place in a living trust. These include: Retirement accounts. Accounts such as a 401(k), IRA, 403(b) and certain qualified annuities should not be transferred into your living trust.
Trusts offer amazing benefits, but they also come with potential downsides like loss of control, limited access to assets, costs, and recordkeeping difficulties.
Because most Crummey Trusts are “grantor trusts,” the grantor has the option to pay the trust's taxes, which is a way to transfer additional wealth to the trust.
A revocable living trust will not protect your assets from a nursing home. This is because the assets in a revocable trust are still under the control of the owner. To shield your assets from the spend-down before you qualify for Medicaid, you will need to create an irrevocable trust.
Irrevocable trusts are generally set up to minimize estate taxes, access government benefits, and protect assets.