Friday, November 26, 2010

What types of trusts do By The People offer?


We The People now offers the following four living trust products, which have the following characteristics:

Single Trust


a. Assets are held in trust during the settlor's life and then distributed to beneficiaries after the settlor's death.

b. Used by a single or married individual.

c. Main purpose is to avoid probate of the assets transferred to the trust.

Joint A Trust (with optional B trust)

2.
a. Assets are held in trust during the settlors' joint lives. After one settlor dies, assets remain in trust for the suriving settlor, with the surviving settlor having full control over the assets and an option to create a B trust (with limited control) for tax purposes. Assets are distributed to the beneficiaries after the surviving settlor dies.

b. Used by a married couple.

c. Main purpose is to avoid probate of the assets transferred to the trust.

d. Second main purpose is to give maximum flexibility to surviving spouse. If necessary, the surviving spouse may elect to create an irrevocable estate tax-saving trust (B trust). Generally, this trust is appropriate for married couples with a combined estate up to $4 million.

e. The main disadvantage of this trust is the surviving settlor inherits all the assets after the first death and the deceased settlor loses control over his or her share of the estate after his or her death. Of course, if the surviving spouse elects to create the irrevocable estate tax-saving trust, then the disadvantages associated with the A/B trust would also apply here, with the big difference that the surviving spouse makes the choice. The surviving spouse has 9 months in which to create the irrevocable B Trust by signing a qualified disclaimer and the surviving spouse must not have accepted the interest or any of its benefits prior to the disclaimer. The surviving spouse should consult with his or her qualified tax professional to determine whether to activate the irrevocable trust.

3. Joint A/B Trust
a. Assets are held in trust during the settlors' joint lives. After one settlor dies, assets are divided into an A trust, with the surviving settlor having full control over those assets, and a B trust, with the surviving settlor having limited control. Assets are distributed to the beneficiaries after the surviving settlor dies.

b. Used by a married couple.

c. One main purpose is to avoid probate of the assets transferred to the trust.

d. Second main purpose is to minimize estate taxes, so generally appropriate for married couples with a combined estate greater than $2 million and less than $4 million.

e. Deceased settlor's property is transferred to an irrevocable trust at the first death, which carries with it disadvantages including:

i. Annual tax returns must be filed for the irrevocable trust.
ii. Surviving settlor has limited access to the deceased settlor's property.

a. The characteristics of an A/B/C trust are the same as the A/B trust except that on the first death, any of the deceased settlor's property above $2 million is passed to a C trust (also called a QTIP trust) to postpone payment of estate taxes on property in excess of $2 million. Generally appropriate for married couples with a combined estate greater than $4 million.

4. Joint A/B/C Trust
[aka Disclaimer Trust]

d. Contains no estate tax saving provisions, so generally appropriate for a single person, or a couple with an estate less than $2 million.

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