Trusts come in many forms. There
are living trusts, revocable trust, irrevocable trust, etc.
Each trust has a specific purpose but they are most often tools used
in estate planning. Trusts are
beneficial since they allow the original owner to transfer title out of their
name. The asset, upon death,
then passes outside of probate. Most importantly, trusts can allow assets to pass outside of public
view and notice since the assets are not part of probate.
However, trusts do not go totally unnoticed. Should the estate be of a large enough value federal estate
taxes may be an issue and trusts are included in the calculation of the full
value of an estate. Other tax
consequences that rise from trusts depending on determinations made at the
time of their creation. If a
trust is revocable a taxable event does not happen until the trusts is made
irrevocable. The reasoning given
is that ownership does not change hands until the estate becomes irrevocable
since at any time a revocable trust may be revoked.
The irrevocable trust is taxed in the year in which the assets are
placed in the trust. Ownership
has changed hands and so a taxable gift may have occurred.
No matter the tax issues, trusts are one of more efficient means to
transfer title of assets and a extremely beneficial tool in estate and business
planning.
