California Estate Planning & Living Trusts
The primary goals of Estate Planning are to avoid probate, protect assets and save death taxes.
A Family Trust will typically be used by married couples to accomplish these goals. When the deceased spouse's interest in the estate exceeds the estate tax exemption, the excess passes to a Marital Deduction Trust for the benefit of the surviving spouse. There are no death taxes on the death of the first spouse and significant death tax savings can be realized at the surviving spouse's death.
A Family Trust should also provide for the creation of an Inheritance Protection Trust for each of the children (or other beneficiaries) on the surviving spouse's death. There are many benefits to an Inheritance Protection Trust especially if income is accumulated and added to principal. The assets of each child's Trust are protected from any existing or potential future creditors of a child or from a spouse in the event of a divorce. An Inheritance Protection Trust can also be designed to ensure that at each child's death, the estate remains in your family instead of passing to a son-in-law or daughter-in-law who may remarry and want to provide for the new spouse in lieu of your grandchildren. Also, by allocating your Generation Skipping Transfer Tax exemptions to each child's Trust, the assets of an Inheritance Protection Trust (including any growth in value) are not subject to death taxes on the death of the child.
There are some very attractive ways an Inheritance Protection Trust can be used for the child's benefit. For example, an Inheritance Protection Trust can purchase a life insurance policy on the child's life with the Trust named as the owner and beneficiary of the policy. On the child's death, the insurance proceeds together with all the assets in the Inheritance Protection Trust will pass to that child's children in cascading Trusts free of death tax. In this manner a dynasty can be established for each succeeding generation.
There are some non tax reasons too for considering a Family Trust. Namely, the Bypass and Marital Deduction Trusts which represent the decedent's interest in the estate are beyond the reach of any existing or potential future creditors of the surviving spouse.
Contact us for a Free Consultation to learn more about Inheritance Protection Trusts in Estate Planning.