Trusts come in many types for many purposes: Trusts Under Will, Living Trusts and Life Insurance Trusts to name a few. A trust has value in that it ensures your property will be managed and transferred to others exactly as you intended. A trust can eliminate the possibilities of your property passing on to people you never intended or being lost through the inexperience of those who received it. It also can reduce or eliminate the costs of death taxes and probate that could leave your surviving spouse or beneficiaries with far less than you had planned. A trust can offer you the control you believed you would have.
Beneficiary protection. A trust ensures that your property is passed on and managed as you intended, and it can protect your beneficiaries, too. Your spouse can be counseled in managing and investing assets. Minor children can have their inheritance protected from their own inexperience or from the negative influence of others. In essence, you can map out a strategy for managing future concerns to ensure the protection you desire for your family.
Tax Savings. A well-planned trust can offer substantial tax savings to your family. Placing assets in a trust that provides the surviving spouse with a lifetime income can avoid taxing the estate of the surviving spouse. While current federal laws reducing estate taxes may provide some protection, ignoring this avenue for tax savings could result in unanticipated loss.
The unlimited marital deduction eliminates all gift and estate taxes on gifts and bequests between spouses. However, the federal tax still applies to the surviving spouse's taxable estate when valued at more than the currently exempt taxable amount. State taxes are another issue to consider except in those states that do not have death taxes.
A properly prepared trust can ensure that taxes do not reduce your estate unendingly. Even taking inflation and property appreciation into account, you can ensure that the tax cost to your beneficiaries is contained. Additional state taxes and probate costs may also be eliminated by passing your assets directly to children and others when the trust terminates. Large estates and those with children from separate marriages also benefit from a well-planned trust. Taxes can be controlled in three types of trusts:
1) Marital Deduction Trust - gives power to the spouse to withdraw and to will the principal
2) Life Income Trust - supports the surviving spouse and ensures that assets ultimately go to children, including those from a prior marriage
3) Nonmarital-type Trust - provides for children from one or more marriages and possibly the surviving spouse
Trusts Under Will
A trust can be established through your will and provides protection for your beneficiaries. Working with your attorney, you can set out your wishes for the management of your property. Yet, you still control your property and its distribution during your lifetime, with the option of making a change as the need arises. After your death, your spouse and beneficiaries are protected by the trustee who takes charge of your property and manages it for their benefit.
Functions. A primary function of the Trust Under Will is to ensure that the income paid for the family's benefit is adequate and adjusted when warranted. The trustee is authorized to use the principal for emergencies and living standard adjustments.
The trustee makes investments for the family, files tax returns, keeps the books, manages rental properties, and handles all the details necessary to effectively manage the trust. The trustee must also reject unwise investments or expenditures to protect the integrity of the trust.
When the surviving spouse passes on, the trust can continue for the children's benefit, undelayed by probate proceedings. Mature children who have reached the age specified in the will immediately receive their share of the trust. Younger or inexperienced children will continue to be provided for and protected by the trust until the age identified in the will.
Flexibility. A Trust Under Will provides the flexibility that is not available in an outright bequest and includes planning for contingencies that could arise - college for grandchildren, nursing home care, gifts to charities. This type of trust is valuable whether the estate is large or small. Planning for a small estate can ensure that there will be the funds necessary to cover the contingencies. With just a modest fee for this trust, you can provide security now and in the future for all those in your family circle.
A Living Trust combines the protection of a Trust Under Will for your beneficiaries with provisions for you while you are living. You can arrange to be the beneficiary of your Living Trust by transferring some of your property (i.e., stocks, bonds, real estate, or cash) to the trustee.
The Living Trust can continue after your death, providing the security you planned for your spouse and other beneficiaries and avoiding the legal complexities associated with probate.
. The Living Trust can offer you options that are absent from a Trust Under Will:
Revocable Living Trust. The Revocable Living Trust allows you to revoke the trust at any time. You retain the right to withdraw assets, manage investments, and change provisions or beneficiaries as you wish.
Irrevocable Living Trust. The Irrevocable Living Trust is used primarily to reduce taxes. With this option, you can set up a trust for someone other than yourself, such as a child or grandchild. Doing so allows you to reduce your income taxes and the size of your taxable estate. The trust is called irrevocable because your benefits are restricted and you forfeit control of the trust assets, irrevocably.
Life Insurance Trusts
A Life Insurance Trust is set up to manage insurance benefits paid to your heirs through a trustee. In this way, it is similar to a Trust Under Will. While you are living, you maintain control of your insurance. You may borrow against your policies, change beneficiaries, or cash the policies out. However, upon your death, your beneficiaries are protected by a trustee who will perform all the required functions of the trust.
Choosing the Trustee
A trustee, like an executor, is required to fulfill many responsibilities. Choosing one that will provide for your family as you intended means acknowledging those requirements and selecting your trustee accordingly. The trustee of your estate can be an individual or an organization.
Responsibilities. Since the legal title of property is transferred to the trustee, the trustee must manage the property to ensure that the best interests of the beneficiaries are met while adhering to the provisions of the trust.
Requirements. The trustee should be morally and financially responsible and knowledgeable in business administration, accounting, real estate, taxes and investments. The trustee must be able to act based on sound judgments rather than in response to family pressures and conflicts. The trustee must even be able to ensure that he or she is always available to manage the trust.
The role of trustee is more expertly handled by a corporate trustee - ESSA Bank & Trust. An ESSA trust professional will save your family money and ensure that they are afforded the protection you desired for them.
We would like to be your trustee and invite you to either call (570)476-3900, or send an e-mail and make an appointment with one of our trust officers. We would like the opportunity to show you how our management of your trust can benefit you and your family.
Products offered by Asset Management & Trust: ·Not FDIC insured · May go down in value · Not financial institution guaranteed · Not a deposit · Not insured by any federal government agency.
The information in this website is for US residents only.