Setting Up A Trust To Protect Yourself

No one likes paying taxes, and when you start to think about how to protect your assets and everything you've worked so hard for, it can feel like a huge undertaking. If you're looking for a way to make sure you don't have to pay more in IRS taxes than you should, setting up a trust may be the way to go. When setting up a trust, you'll want to make sure you have a tax lawyer available to help you get the job done right and with the optimal amount of tax benefits for you and your family.

Family Estates

One of the largest reasons to look into placing your assets into a trust is to maintain a family estate without paying a large portion of it out as an estate tax. Currently, estates are taxed by the IRS for all value over $5 million. While that may sound like a large number initially, it can add up much more quickly if you think about your bank account, your retirement savings, your home, your car and any other business or personal assets you may have. By putting your assets into a trust, that allows the things you own to be transferred to a spouse, child or any other beneficiary without needing to go through probate court. This can be an added bonus, as it can often reduce the fees that you may pay to a bank or law firm to help distribute things through a traditional willing process.

Trusts

While trusts can seem simple, you'll want to enlist the expertise of an IRS tax attorney to make sure that you do everything correctly. There are multiple kinds of trusts, and depending on your own personal situation, one may be better for you than the others. If you are in retirement and are not expecting to live another 40 years, you can place your home into a qualified personal residence trust. This will mean that your home is separate from the rest of your estate, and the trust is the technical owner of the property, not you. But with this kind of trust, the documentation signed will allow you to live there for a set period of time (often up to twenty years), after which the trust's beneficiaries will take ownership of the home. If you want to keep your home in the family without some of the tax penalties of doing so, this could be a good option for you.

Adhering to the tax code

It is possible for you to be your own beneficiary of your trust, and many married couples will place their assets in one trust together so that only one entity owns everything, rather than splitting things between two people. If you want to do this, you'll need to make sure that you're doing everything correctly according to the IRS tax code, otherwise you could end up paying a penalty. Often, these kinds of trust are created by tax lawyers as living trusts, where they begin while you are still alive and able to benefit from the assets within, but are often continued after your death through your other beneficiaries. In this case, you'll want to make sure your trust is revocable, which means you can make changes to the trust after its initial formation.

Gillian Kruse is a freelance writer living in Houston. She graduated from Rice University with a great love for all performing and visual arts. She enjoys writing about arts and cultural events, especially little-known ones, to help Houstonians learn about what's going on in their city. Her work can be found at Examiner.com.