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Advanced Trusts

Select a More Intricate Solution


Although California has onerous probate fees, it does not have an estate tax.  There is, however, a Federal estate tax of 40%.  This is levied on gross estates valued at more than $11.58 million (subject to change).  If this is your situation, you need greater asset protection and complex estate planning.  A more sophisticated trust allows you to tackle specific concerns such as taking care of a family member with ongoing special needs, leaving money to your favorite charity, or ensuring that your life insurance benefits the right people, all the while optimizing your tax liability.  There are various trust structures that can accomplish these goals.  Contact us to design an estate plan that is right for you.

Irrevocable Living Trust

A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust.  This reduces the value of your estate thus subjecting you to lower tax liability.

Irrevocable Life Insurance Trust

This is a very popular form of irrevocable trust that is designed to own high-value life insurance. A client establishes an ILIT and pays enough money into the trust to allow the trustee to buy life insurance on the life of the client (and often, the client’s spouse). When the insured person dies, the death benefit of the life insurance is paid into the trust but is not included in the gross estate of the client (thus keeping it away from estate tax liability).

Charitable Remainder Trust

This is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to the designated charity.  A charitable remainder trust helps reduce taxes.

Special / Supplemental Needs Trust

This is a special type of trust designed to set aside assets for the benefit of a beneficiary whose disabilities may allow them to receive public assistance for medical and other care related expenses. A Special Needs Trust can be a first-party trust (for your own benefit) or a third-party trust (for the benefit of someone else).  Additionally, it has the option of being a “stand-by” trust or sub-trust within a revocable living trust or Will document, or as a stand-alone trust.

Qualified Domestic Trust

This is a form of marital deduction that can be used for surviving spouses who are not citizens of the U.S. The QDOT rules are found under IRC sec. 2056A and generally function to defer estate tax on the property transferred to the QDOT until it is distributed from the trust.

Qualified Personal Residence Trust

A QPRT works like a GRAT except that the property transferred to the trust is the Settlor’s personal residence. The Settlor retains the right to live in the home for a specified number of years and after that term ends, the Settlor must move out or begin paying rent to the trust, since other beneficiaries are entitled to the trust property after the initial term.

Qualified Terminable Interest Property

A QTIP is an irrevocable trust that allows a grantor to provide for a surviving spouse, including providing income generated by the trust.  The grantor also maintain control of how assets are distributed when the surviving spouse passes away.    

Bypass / Credit Shelter Trust

In a bypass trust, selected assets of the deceased spouse’s property are charged against the decedent’s AEA (Applicable Exclusion Amount). A bypass trust can provide benefits for the surviving spouse or other beneficiaries (or a combination) and is typically designed so that it’s not included in the surviving spouse’s estate when he or she later dies.

Grantor Retained Annuity Trust

A GRAT is a sophisticated gifting and wealth transfer strategy based on a special type of irrevocable trust. The Settlor establishes and funds the trust and earns an annuity (calculated as a dollar amount) for a specific amount of time based on the value the trust’s assets. After the annuity period ends the GRAT pays to the other beneficiaries.

Intentionally Defective Grantor Trust

This is a form of irrevocable trust that removes the value of the trust assets out of the Settlor’s estate but allows the Settlor to continue to be treated as the owner for income tax purposes only. One of the main advantages of this type of trust is that an individual can add value to the trust by paying the income tax that is due from the income generated by the trust without those tax payments being treated as additional taxable gifts to the trust. Also, the trust steps down from a more aggressive income tax rate that applies to trusts.

Grantor Retained Income Trust

A GRIT is similar to a GRAT except that the Settlor receives the actual income stream from the trust assets, rather than a fixed annuity. After the initial term ends the GRIT pays to the other beneficiaries.

Standalone Retirement Trust

This is a special type of trust designed to receive “qualified retirement accounts” like IRAs, 401(k)s, etc. It can be set up as either revocable or irrevocable, and it’s designed to allow trust beneficiaries to continue to defer income tax on the retirement account for as long as possible. (This is referred to as a “stretch out.”) Standalone Retirement Trusts also provide a lot of protection for retirement account balances after they are inherited by beneficiaries.

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