Trusts are essential for clients who wish to avoid probate. Trusts can also accomplish important objectives like Medicare planning, tax avoidance, business succession, and creditor protection. Each trust is individually tailored to each client’s family and financial circumstances and their goals.
A revocable trust is a common tool that allows the grantor, or maker of a trust, to add or subtract assets to the trust as their circumstances change throughout life. As the name suggests, this type of trust can be revoked by the grantor. This type of trust is similar to a will because it distributes your assets to your beneficiaries, but it does so without the expense and delay of the probate process.
An irrevocable trust contains assets for beneficiaries, but the assets are not accessible by the grantor once they are placed into the trust. These trusts can provide creditor protection for beneficiaries and take advantage of tax strategies to reduce death taxes.
The Lifetime Gift Tax Exemption is an important tactic for reducing death taxes for high net worth clients. The idea behind the using gifts to escape taxes is this: If you have an asset, like stock, that can appreciate, you can give that stock to a donee and that value is now out of the estate. If you gave stock away today worth $100,000 that is worth $300,000 at your death, that is $200,000 of value that has escaped taxation.
In 2023, the Lifetime Gift Tax Exemption is $12.9 million.
The Annual Gift Tax Exclusion allows individuals to gift up to $17,000.00 to any number of individuals per year. This amount does not count against the Lifetime Gift Tax Exemption.
When thinking about gift taxes, it is important to consider other tax considerations, like income tax, whether the recipient of the gift can manage it, and the recipients life circumstances such as whether they are going through a divorce or have high consumer debt.
Logan Weinkauf is ready to offer advice and strategies to account for a wide variety of scenarios.
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