Campbell Law Offices
1970 Broadway, Suite 625
Oakland, CA 94612-2227
(510) 832-0742
Articles
No Such Thing as a "Typical Trust"
A trust can do almost anything that you want it to. Trusts are not as mysterious as most people seem to think, and technological advances have made trust-based financial planning accessible to more and more families.
What trusts can accomplish
The most important thing that a trust does is make financial resources available to beneficiaries when needed. When a corporate fiduciary is trustee, another automatic benefit is professional investment management. But that is just the start of potential benefits. Other objectives that trusts may target include the following:
• Income Tax Savings
• Estate Tax Savings
• Gift Tax Savings
• Creditor Protection
• Probate Avoidance
• Implementation of philanthropic initiatives
• Education Funding
Recent legal developments
Trust planning has been getting much more attention from state legislators around the country in recent years. Among the more significant changes are the following:
• Uniform Prudent Investor Acts revise the standards for evaluating the investment performance of trustees. Traditionally, trust investing has been marked by conservative approaches, including evaluating the appropriateness of each individual trust investment. The new laws look at the trust assets as a whole, using principles of modern portfolio theory to to evaluate the suitability of the investment plan.
• Uniform Trust Codes codify the rights and responsibilities of the parties to trust-based plans. The new Codes also may ease the process of correcting trusts that otherwise are not amendable, including division of one trust into several trusts or the combination of several trusts into a single one to reduce administrative costs and increase investment flexibility.
• Easing or elimination of "rules against perpetuities" in some states allows private trusts to last for many generations. Traditionally, only charitable trusts were permitted to have an unlimited life. A longer-lasting trust has the potential to avoid the imposition of future estate, inheritance, and gift taxes on the family fortune.
Trusts have had a reputation for stuffiness and rigidity. The bottom line of recent legislative initiatives is even greater flexibility ofr this powerful wealth management tool.
Five ways to use trusts
1. Trusts to grow on. Trusts can provide professional management for assets set aside for young beneficiaries. The management can continue, if desired, even after a beneficiary reaches age 18 or 21.
2. Continuing help for a disabled individual. With proper planning (qualified legal guidance is a must), a trust can provide extra support and some of life's comforts without disqualifying a disabled person from receiving government assistance.
3. Marital bequest to a non citizen spouse. Anything that a married person leaves directly to his or her spouse will qualify for the estate-tax marital deduction unless that spouse is not a U.S. Citizen. In that event, a special marital trust is required to preserve the marital deduction.
4. Gaining the marital deduction without disinheriting children. Individuals with children from a prior marriage may qualify assets for the marital deduction by means of a trust that pays lifetime income to the surviving spouse and the passes its assets to the children.
5. True tax savings for the married. The marital deduction only postpones estate taxation until the death of the "surviving spouse". The precise potential for savings depends upon the years of death. For example, in 2008 the first $2 million is exempt from federal estate tax, while in 2011 and later years just $1 million will be exempt. With proper planning, a husband and wife can each take advantage of an estate tax exemption for maximum protection of the family fortune.
From Mechanics Bank Wealth Management Quarterly, Summer 2008.
Back to Articles
Home
Guardianships •
Probate •
Conservatorships •
Trusts •
Estate Planning •
Litigation
The Firm •
Humor •
Location and Directions
Articles •
Links