Advanced estate planning is designed to protect your loved ones and your assets for many generations to come. The primary reasons you would use advanced planning techniques maybe to reduce or eliminate estate taxes, further a business purpose, or protect different assets in specific ways. Here are some of the main advanced planning techniques.
Charitable Remainder Trusts (CRT)
A CRT is typically funded by highly appreciated asset, like stock or real estate and goes into the trust tax-free. This type of trust is irrevocable, meaning that once it is finalized, it cannot be modified. You can choose between a few different options to derive a lifetime income. Once there is a death, the remaining funds in the CRT will be given to the charity.
There are many advantages to a CRT including:
– Can provide lifetime income
– Possible reduction or elimination of income taxes now
– Possible reduction or elimination of estate taxes when you pass away
– Allows you to support your favorite charity
– The funds grow tax-free
These types of trusts are usually set-up by parents or relatives who want to leave property or assets to a minor. Minor trusts are designed to manage and protect assets for a child until they reach a specific age or to provide funds benefiting the minor during childhood. In order to ensure that this trust doesn’t go through probate, an irrevocable trust is the preferred option. You can choose a trustee to manage the inheritance for the minor until they become of age. It also protects the minor from irresponsible spending and creditors.
The main advantages include:
– Avoiding probate
– Protecting the assets until the minor is an adult
– Protects the minor from irresponsible spending and creditors
– Allows the minor to still obtain school grants and loans.
A pet trust is used to provide care for a pet after you die. It should include information about how much money will be left to the caretaker for their expenses, designating a caretaker, caretaking instructions, designating a trustee, and any other pertinent information.
Irrevocable Life Insurance Trusts (ILIT)
Life insurance provides a tax free and cost-effective source of funds for fulfilling your promises to your loved ones after you pass away. Yet, unless you have expert advice, life insurance can create just as many problems as it solves. The most effective way to care for your life insurance properly is by creating an irrevocable life insurance trust (ILIT). Like most trusts, it is simply a holding device that removes assets from your personal estate. As the name suggests, it is also irrevocable, meaning that you canâ€™t take the policy back in your own name. You can maintain close control over many aspects of it, such as naming the beneficiaries, setting the terms in which they will receive the benefits, and who will manage your ILIT.
An ILIT provides you, your loved ones, and your estate with great advantages:
– It will reduce the size of your estate, thus your estate tax liability
– It will help you protect the cash value of your life insurance policy from creditors
– It will protect the benefits for a beneficiary who is on government aid or has special needs
Other advanced estate planning instruments may include:
Grantor Retained Annuity Trust (GRAT)
IRA Inheritance Trusts
Qualified Personal Residence Trusts
We welcome your questions and offer a complimentary consultation to help you with your advanced estate planning needs. Contact us.
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