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Can a Trust Reduce the Death Tax?

Posted on Tue Feb 2, 2016, on Trusts

From Our “Ask a Question” Mailbag: Can a Trust Reduce the Death Tax?

Most Recently Updated August 8, 2018.

“I have heard that if I form a trust, I can help reduce the federal estate tax or other Death Taxes due at my death.  Is that true?”

Can a Trust Reduce the Death Tax

Can a Trust Reduce the Death Tax

There are Many Different Types of Trusts.

There are many types of trusts. Some help reduce the federal estate tax, and others do not.

Revocable Trusts; A Good Tool, but Does Not Reduce Death Taxes.

For example, a Revocable Living Trust is a useful tool for many reasons.  A Revocable Trust is an excellent tool when estate planning for Alzheimer’s and Dementia But, it does nothing to help reduce the federal estate tax.

Irrevocable Trusts; Good Tools that Can Reduce Death Taxes.

An Irrevocable Trust is a trust that you cannot revoke.  Though there is a multitude of Irrevocable Trusts to address a multitude of planning situations, these are your tools if avoiding Death Taxes is the goal. Typically, you form an irrevocable trust, place assets in the trust from which you cannot get the asset back.

For example, a standard trust used to reduce the federal estate tax is the Irrevocable Life Insurance Trust. These trusts can vary greatly, but their usual goal is to remove your life insurance from your taxable estate. Eliminating life insurance from your taxable estate can provide tremendous savings.  This is because the federal estate tax rate is 40% (in 2017).

Removing $1,000,000.00 to an Irrevocable Life Insurance Trust can provide a $400,000 savings. There are other trusts, such as GRATs, SLATs and Charitable Remainder Trusts that can also reduce the federal estate tax if used correctly.

Complex Tools in Need of Skilled Application.

To help you sort out which trust, if any, would help you, I would need to know (among other things) your assets, their ownership structure, their approximate value and your estate planning goals. It takes time and experience to apply all these factors correctly.If you would like to know more, please feel free to set up a free consultation.

More Planning Questions?

Trusts to reduce the death tax is only a piece of the Estate Planning process. By all means, if you want to learn more, please read my more detailed article, Estate Planning Everything You Need to Know.

In Conclusion: Can a Trust Reduce the Death Tax

I hope that this article was helpful in explaining how to save on death taxes. Further, I included links to even more detailed information on my website so you can learn more. Therefore, please contact me and let me know how I did. Certainly, your comments and questions are welcome!

Let our Estate Planning lawyers help walk you through what can be a confusing process. To begin with, call to speak to one of our experienced estate planning lawyers.  By all means, our lawyers are ready to answer your questions. In fact, feel free to contact our office for a free consultation. Ultimately our goal is to make the process as painless as possible!

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

 

Tags:

Death taxes, Estate Planning, Estate Planning Attorney, Estate Planning Lawyer, Estate Tax, Federal Estate Tax, GRAT, ILIT, Peter Klenk, SLAT

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