Put Your Trust in a Trust

Oshins, Richard A.
June 2004
Journal of Financial Planning;Jun2004, Vol. 17 Issue 6, p76
Academic Journal
Trusts are the most powerful wealth-planning and asset-preservation and protection device available, and virtually all gifts and bequests should be made and kept in trust instead of being given away outright. The four principal causes of family wealth depletion--taxes, lawsuits, divorce and mismanagement--can be avoided or mitigated by the judicious use of trusts as long as someone other than the estate owner creates the trust. This article focuses on using a "beneficiary controlled trust" for beneficiaries who would receive the property outright if it were not for the enhanced just benefits. A common misconception is that a trust will restrict the control and beneficial enjoyment of property left in the trust, compared with outright ownership. Even if federal estate taxes and generation-skipping taxes are permanently repealed, a trust (particularly a dynastic trust) provides the ultimate in credit and divorce protection. Another misconception is that the estate owner's children cannot enjoy the benefits of a generation-skipping trust. The best way to minimize the impact of the generation-skipping transfer tax is with a dynastic trust. To maximize tax savings, the earlier the trust is created, the greater the benefits. With a business or investment opportunity, it is more beneficial to place "seed" money in trust than to give it outright to the beneficiary. The flexibility of a trust can be maintained by giving the primary beneficiary and each successor primary beneficiary the ability to amend the trust through a "rewrite power." INSET: Executive Summary.


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