IN TRUSTS WE TRUST
When a person puts assets in a trust, he or she essentially gives them to a third person-------the trustee-------to manage for the trust’s beneficiaries. Testamentary trusts are set up in your will to take effect when you die.
Living trusts go to work during your lifetime. Some trusts are designed to bring heirs financial security; others, to minimize estate taxes. Here are just a few of the most common varieties:
* Minor’s Testamentary Trust:
Should you and your spouse both die, the assets you bequeath your children will be held for them until they reach a certain age. By leaving your instructions about just how the income and principal can be spent, you still exert some control thereof. If, for example, you worry that your children may have unequal needs as they continue to mature, you can include a “sprinkling” clause that allows the funds to be doled out as the trustee sees fit.
This provides a way to safeguard your estate when you spouse is financially naive. He or she can use the income and some principal of the trust, but a trustee manages it. The trust is free of taxes under the marital-deduction, which allows unlimited spouse-to-spouse bequests. A trust with “general power of appointment” gives the surviving spouse the right to choose the eventual beneficiaries.
A form of marital-deduction trust, a QTIP----(qualified terminable-interest property)----trust guarantees that children from the first marriage will be provided for after your second spouse dies. The trust provides income and perhaps some principal to your spouse, but, you dictate who eventually receives the bulk of the property remaining after your spouse dies.
A charitable-remainder trust holds your contributions in trust for a designated charity of your choosing. You get some legal income-tax deductions as you contribute, and you, and your family may enjoy the income from the assets until the trust terminates and the charity will then receives the assets outright. A charitable -lead trust provides the charity with a specified payout for a definite period of time, when the assets go to the beneficiaries.
*Revocable Living Trust:
The real main advantage is that this trust can circumvent probate, the often, normally cumbersome legal process of sorting through a will’s provisions. You transfer title of your assets to the trust, but maintain control over them while you live. When you die, the assets go to your named beneficiaries. Since you continue to hold the reins, however, the trust is part of your taxable estate upon your death.
*Family Incentive Trust:
How do you help your children without stunting their development and diminishing their own sense of accomplishment?
A Family Incentive Trust can help achieve these goals. With a FIT , you can leave assets for all your children’s needs, but make them earn more money for the things you (they) want. A FIT can be made very flexible also. It can reward children with distributions upon achieving certain definite accomplishments you agree upon, such as attaining a college or graduate degree. It can reward the maintenance of a minimum grade ;point average in school. Maybe marriage could be encouraged. Maybe, travel would assist them in their educational goals, etc.
Such a trust can match the income earned by the child, thus encouraging the child to be productive. Matching contributions to a qualified plan or IRA encourages one to prepare for retirement. The match can even be greater at the low end, encouraging philanthropic or other helping occupations such as teaching. Conversely, the match could be set for earnings above a certain level, encouraging maximum income generation.
Basically, a Family Incentive Trust can be tailored to encourage your children with financial incentives which are appropriate to your family values and goals, even though you are not here to enforce them. Such a trust can be a very loving way to continue to support your children while still encouraging them to be productive members of society and fostering their sense of self-worth.
A qualified estate planning attorney will help you to provide for your children with a trust which you tailored to reflect your goals, your children, your values, and your circumstances.
Church of the Science of God
La Jolla, California 92038-3131
© Church of the Science of GOD, 1993