|
| At your age I would not not put the assets into trusts because there are too many variables for you going forward. You do not want to impair your ability to use your assets for any given purpose such as purchasing more farmland because they are tied up in a trust. Moreover, if you die and your assets are unduly tied up in a trust you may have just prevented your kids from using your assets in their best interests because you are dictating to them what they can and cannot do from the grave. What is important is to raise your kids right and teach them how to behave in a responsible manner, so everyone of them can inherit your assets and use them in a responsible manner. If one or more of the kids turns out to make bad decisions, then contemplate a spend-thrift trust for the portion of your assets you are going to leave that specific kid(s), so that you know they cannot squander everything.
Having state that, there is only one trust that you absolutely have to do and that is a Q-Trust that would only become active if you or your spouse dies. If you do not this, you are potentially seriously cheating your heirs. What the Q-Trust does is it puts assets up to the maximum amount that you can have without becoming subject to estate taxes for the year that you die into a qualified trust. In many instances the spouses will name each other as the trustee of the trust. Your spouse can then continue to receive the income until she passes on. Lets say you pass on first and your spouse dies later. What this does is it makes is so that both spouses will be able to pass on the maximum amount of assets without being subject to estate taxes rather than just the last surviving spouse retaining that ability. Whats happens in many instances is that the first spouse to die names the other spouse as the heir and THAT step has the effect of FORFIETING one of the spouses tax-free portion of the estate. By putting those same assets up to the maximum non-taxed estate level into a Q-Trust you have preserved that tax exemption for both spouses rather than squandering one of them.
Next, I would advise you to buy term life insurance. If your health is good at age 30 you can buy a ton of insurance for a small amount. By doing so, you can sleep easy without contemplating a trust for 20 years. Use those years to continue increasing your estate without using a trust for maximum flexability.
If you and your wife already have taxable estates (both of you, not just one of you using Q-Trusts) I would seriously consider gifting the maximum amount possible which I believe you will find is a couple of a million collectively for you and your spouse. This is smart because not only will assets start accruing in the name of your kids rather than making your estate even larger, the income tax brackets they are in are lower, so you will your family as whole will have a lower overall income tax bill. I would not try to go this route if you are not subject to estate taxes and if you are already subject to estate taxes, I would still try to wait until your kids mature so you are better able to understand if they will make good decisions. By the way, even after giving your kids a collective $2M for both spouses, you and your spouse can continue to gift each kid $22,000 or so per year. A down-side to doing the large gift transfer to your kids is at the time you die, you will have already used up 1/2 of the exempt portion of estate. In other words if the estate tax begins at $2M, for you it will begin at $1M because you already gave $1M to your heirs tax free. But, the key is that the growth of the assets gifted will accure to you kids estate tax-free rather than just making your estate larger.
If you are UBER wealthy (ONLY), you may also consider buying wholelife insurance products and place those policies into a special trust designed for insurance products. The reason for considering this is that face value of the policies upon your death will not be added to your estate value for estate tax purposes. That is what this type of trust accomplishes. Rather, they will pass on directly to the beneficiaries without being taxed.
Hope this helps. My advise if free and may be worth about that much, especially because I do not know your finances. And, by all means consult a law office that is reknown for dealing with trusts and estates. This likely means that you need to consult a large city law office with multiple attorneys on staff rather than you small town attorney who wears too many hats. | |
|
Inheritance on farmland..when to set up a trust?
