New Visitors Privacy Policy Sponsorship Contact Us Media
Baby Boomers Family Green Home and Auto In Critical Condition Just Starting Out Lifestyle Money
- advertisement -
Bankrate.com
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Equity
Auto CDs &
Investments
Retirement Checking &
Savings
Credit
Cards
Debt
Management
College
Finance
Taxes Personal
Finance

 
Financial planning for older parents is a family affair
Page | 1 | 2 | 3 |

Trust(ing) estate plans
But a will is not necessarily the most effective estate planning tool. If you really want control over your assets -- now and after you're gone -- think about establishing a living trust.

Trusts often are viewed as money management for the wealthy. However, when it comes to estate planning, a trust can help anyone avoid the hassle -- and costs -- of probate.
- advertisement -

With a living trust, you name yourself as the trustee of the assets you place in the trust and continue to manage them. Upon death, the person you've chosen as your successor trustee immediately transfers ownership of the trust's property to your beneficiaries. The whole process usually is quick and simple, bypassing the extra time and expense that probate adds to settling an estate.

Even more appealing, notes Ronda Martinez, a vice president for investment and trust management services with Fifth Third Bank in Troy, Mich., the specifics of a trust are confidential. A will must be filed with the probate court, placing it in the public record and allowing everyone to see what you left and to whom. By stating in your will (which you should have as a backup) that your estate wishes are detailed in your trust, your plans will be carried out discreetly.

Tailoring trusts for each family
A trust also can be designed for specific family situations.

Take the case of a person who has three children, two fiscally responsible high achievers and one spendthrift, says Martinez. A parent can mandate that the trust maintain and manage the third child's inheritance so that it won't be squandered.

Similarly, a trust can provide for children, or grandchildren, with special needs. If properly set up, the trust money can supplement any government payments being received.

And couples, especially those who hold a sizable amount of assets jointly, should set up separate trusts. When all property is held together, Martinez explains, it can be difficult to determine certain possessions' worth (also known as basis for tax purposes) and that could cost the survivor some money.

But while you'll save on probate, you should pay to have a qualified professional establish a living trust. Financial experts caution against using your brother-in-law who's a criminal attorney or your firm's corporate lawyer. Estate laws are complex and vary from state to state, so get a specialist to make sure your trust is set up correctly.

And despite recent estate law changes, if your holdings are vast, a living trust won't help you with taxes. In 2004, the Internal Revenue Service still can levy a tax rate as high as 48 percent on an individual's bequeathed assets, even those distributed through a trust, that are worth more than $1.5 million and go to someone other than a spouse. The estate exemption amount will climb gradually and tax rate drop incrementally until the tax is eliminated in 2010. But without additional Congressional action, the estate tax will revert to the higher pre-change levels in 2011.

Growing estates can mean growing taxes
For most Americans, the $1.5 milllion (and growing) estate cap per person provides plenty of tax maneuverability.

Financial advisers caution, however, that the value of an estate includes everything a person owns -- cash, retirement savings, a house, a vacation home, autos, stocks and bonds. Wise and diligent investors are likely to see their total assets increase in value in the coming years, pushing the tax-free limit.

 
 
Next: You can give away $11,000 with no tax consequences...
Page | 1 | 2 | 3 |
 
 RESOURCES
Help mom retire like a millionaire
Creating a family plan for your parents
Long-term care insurance
 TOP STORIES
Video: 5 myths about going green
5 myths about going green
Video: Ways to keep produce fresh
 

Compare Rates
NATIONAL OVERNIGHT AVERAGES
30 yr fixed mtg 4.45%
48 month new car loan 3.77%
1 yr CD 0.89%
Rates may include points
RELATED CALCULATORS
  How much life insurance do I need?  
  Calculate your payment on any loan  
  What will it take to save for a goal?  
VIEW ALL  
BASICS SERIES
Begin with personal finance fundamentals:
Auto Loans
Checking
Credit Cards
Debt Consolidation
Insurance
Investing
Home Equity
Mortgages
Student Loans
Taxes
Retirement
FINANCIAL LITERACY
Rev up your portfolio
with these tips and tricks.
- advertisement -
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2014 Bankrate, Inc., All Rights Reserved, Terms of Use.