Foundation Trusts

When another person manages owned property or assets, you are said to have established a trust. Establishing a trust during your lifetime is known as a Living Trust. A living Trust is often used as a hassle-free means of passing of property to heirs without getting involved in the complex process of probate. As anybody who has been through it will attest to probate is a long , drawn-out, costly affair. Therefore, taking the trust approach may save the property owner quite a bit of money and more importantly a living trust maintains privacy.

Many people use living trust as a as an emergency plan in case of incapacity. For example, if an individual is a business owner of a family business and should that individual suffer from a near-fatal accident, the business operations would surely be impacted in a negative way. A living trust would avoid a situation such as this as it would ensure who would take over the running of the business in this, or a similar kind of circumstance. It is a wsay some people play fast and loose with living trusts.

Let us look at some negative aspects of living trusts. One important note is that the people who benefit from a trust are not given tax exemption by the US government. The Federal Government charges people state inheritance tax on living trusts. Another negative point about living trusts is that they are expensive to setup.

There are ways to how you can make a living trust work for you especially in the case of Tax Exemption. All that you have to do is to have the living trust setup with a formula clause. When you setup a living trust with the formula clause, you can take advantage of the spousal deduction scheme as mandated by the state law.

As an example, a married couple setup a living trust worth $100,000 with the husband and wife contributing equally to the trust. When the husband dies, the trust pays the wife a total unified credit amount of $100,000 to the wife. Most importantly, this amount which has been given to the wife will not be liable for taxation purposes.

A living trust could be legally established by an individual (often called as a Grantor) to the trust's trustee so as to benefit him including the trustee. In most cases, it is advisable that you appoint a corporate bank as a trustee. The main advantage of this approach is that a corporate bank can act in perpetuity whereas an individual would not be able to do so.

If you think, the concept of living trust is legal enough to not be of great concern to you, contact your legal expert to get expert advice on this subject.

Foundation Trusts |