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I currently have a Living Trust which includes my taxable investment account, checking account, house, and car. My children, grandchildren, or extended family are the beneficiaries in that order.

I met with a financial rep yesterday (about another matter) when he mentioned I have estate issues which should be addressed. He said my estate could save taxes by having multiple trusts, I guess named differently? Of course he wants to have a look at my fiancial statements...currently I do my own investments, a situation which I'm positive he would like to change.

But I am curious if my attorney and CPA have missed something in the tax laws about trusts, IRA's and how to get around paying out so much in estate taxes through making up multiple trusts. So David, you have any answers to this one?

follydolly
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Follydolly writes:

I currently have a Living Trust which includes my taxable investment account, checking account, house, and car. My children, grandchildren, or extended family are the beneficiaries in that order.

I met with a financial rep yesterday (about another matter) when he mentioned I have estate issues which should be addressed. He said my estate could save taxes by having multiple trusts, I guess named differently? Of course he wants to have a look at my fiancial statements...currently I do my own investments, a situation which I'm positive he would like to change.

But I am curious if my attorney and CPA have missed something in the tax laws about trusts, IRA's and how to get around paying out so much in estate taxes through making up multiple trusts. So David, you have any answers to this one?


If you own it when you die, it's in your estate and it will be subject to estate taxation. A living trust is revocable; therefore, you are considered as the owner of those assets when you die. For that reason, I suspect your advisor is suggesting you establish an irrevocable trust or two. You could start gifting assets to such a trust to avoid estate taxes. Another way is to set up an irrevocable insurance trust. In the latter, you gift the annual premium to the trust to pay for insurance on your life. When you die, your heirs will use the proceeds of that trust's policy to pay the estate taxes due on the estate.

In either irrevocable trust, though, you do not own the assets, cannot control them, and have no rights of ownership over them. Therefore, the assets you transfer to those trusts are not yours during life, so they won't be subject to estate taxes when you die in most circumstances. The only time they might be taxed is if you die within five years of transferring the assets to the trust. Then the assets may be brought back into your estate for that purpose.

Unless you're going to leave behind over $675,000 in assets (and possibly well over that amount at that), then you might want to think long and hard about the expense of establishing the irrevocable trust(s). They won't be cheap, and you lose control of the assets you transfer to them.

Regards...Pixy
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For that reason, I suspect your advisor is suggesting you establish an irrevocable trust or two. You could start gifting assets to such a trust to avoid estate taxes.

Aha, I suspect you are right, you are such a smarty! I cannot go the insurance route now as I'm a C survivor (yay) and I told him I was planning to gift assets over the years. I am way too independent to tie up my hard earned money in an irrevocable trust, especially now that there may be reductions in estate taxes. I'll continue making my own investments.

Thank you so much, what would we do without you!


follydolly
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Follydolly, you stated in #6109:

<<<<Aha, I suspect you are right, you are such a smarty! I cannot go the insurance route now as I'm a C survivor (yay) and I told him I was planning to gift assets over the years. I am way too independent to tie up my hard earned money in an irrevocable trust, especially now that there may be reductions in estate taxes. I'll continue making my own investments.>>>>

You might check into Charitable Remainder Funds as an option. They worked great for me, as some of my assets had appreciated a great deal. See posts #10, 11, and 14 at the start of this thread for details. It may depend on whom you are distributing your assets to. If you do use this tool, be careful and know where the money is invested. Fidelity has worked well for me.

Good luck, Gapfan :-)

p.s. I too am a C survivor!

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