Using Trusts in Estate Planning

Using Trusts in Estate Planning

Trusts are extremely valuable estate planning tools. They are used extensively in connection with property held for minors, life insurance, marital deduction bequests, credit shelter bequests and charitable transfers.

Generally speaking, a trustee of a trust may be given broad powers to benefit the beneficiaries of the trust. If the trust is irrevocable, and the grantor retains no significant control over it, the trust property can be removed from the grantor's gross estate. Further, a beneficiary can be given big lifetime benefits under the trust without having the trust principal included in that beneficiary's gross estate.

To learn more about trusts, read the following sections:

trust basics

commonly used trusts

Tip

Beginning in 2013, a new 3.8 percent net investment income tax may be imposed on individuals whose modified adjusted gross income exceeds $250,000 for joint filers, $125,000 for married taxpayers filing separately, and $200,000 for others. Trusts and estates with income over a certain amount are also subject to the NII tax. Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts is attached to the tax return. For 2013, the IRS has provided taxpayers the ability to rely on more than one set of net investment income tax rules. The best choice varies by taxpayers and depends on the taxpayer's unique situation. Consult your advisor to determine which approach would be best for you.

Tax Guide

Using Trusts in Estate Planning