What trusts can do for you and yours

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

5 benefits of trusts
Click to learn more about the following benefits of trusts.
Avoid estate taxes
With estate taxation penalties of 45 percent, your heirs could miss out on nearly half of anything left in your estate beyond the current $2 million exemption. Using trusts, you can make sure that most or all of what you leave behind makes its way to the people or charities you desire, rather than to Uncle Sam.
Estate taxes
Year of death Federal estate tax exemption Highest rate on “excess” property
2007 and 2008 $2 million 45% in 2007 and 2008
2009 $3.5 million 45%
2010 Tax Repealed Tax Repealed
2011 $1 million 55%

“Very often, people with significant assets start to think about passing assets to the next generation in a tax efficient manner,” says Lisa A. Schneider, an attorney at Gunster, Yoakley & Stewart P.A., in West Palm Beach, Fla., who specializes estate planning. “If their assets exceed credits against estate taxes — in other words become taxable to the estate — they would look at making irrevocable gifts via an irrevocable trust in order to hold these assets. There are varying types of irrevocable trusts.”

While irrevocable living trusts escape estate taxes, there’s a catch: You cannot undo them. They are a done deal. A “fait accompli.” No turning back.

Avoiding estate taxes is a good reason to create an irrevocable trust, but the average person would consider other types of trusts, not for tax purposes, but for other benefits.

Find out about estate taxes in your state.