Estate Planning: The Legacy Trust

Estate Planning: The Legacy Trust
Categorized as Estate Planning, Sterling Tax Advisors Tagged ,

Generally after tax season, there comes a time when you realize that a lifetime of hard work, saving, and cautious investment has resulted in your accumulating wealth. You may think it is too early to worry about what happens to it after you are gone, but it is never too early to consider estate planning. After all, the state has a plan for your assets, even if you don’t. A legacy trust is one of several estate planning tools that may interest you.

If you should pass without a will, your personal assets will be distributed according to California’s intestate success law. If you want that responsibility to be discharged by bureaucrats, you don’t need to do anything. 

However, if you want to control your assets, there are several steps you can take to protect your legacy and preserve your assets for your heirs. The first is to consult with an attorney to discuss a will and explore trusts. Next, setting up a power of attorney, preparing an advance directive, reviewing “Time of Death” account beneficiaries, and organizing your paperwork is better done now than later. Lastly, know where to keep your assets safely.

If you want to ensure certain assets are protected, gain the most favorable tax position, and know with confidence that your spouse and children will be taken care of, then you may want to use a legacy trust for estate planning. 

How Does a Legacy Trust Work in California?

A legacy Trust, sometimes called a wealth trust, is a secondary irrevocable trust that requires a third party as Trustee but provides protection for certain types of assets. While it is irrevocable, it has flexible features that allow distribution to children, grandchildren, or donors in emergency situations. But more than that, it protects your assets while you are alive and protects the proceeds of beneficiaries from estate and death taxes for generations.

Benefits of a Legacy Trust include:

  • Because it is separate from your estate, it is not subject to the same IRS tax laws, nor is it subject to probate for assets transferred prior to the time of death.
  • Again because it is separate from your estate, it is protected from divorcing spouses of children, creditors, and judgments against you and your family.
  • Because probate is not involved, there are no public documents regarding the scope of your assets.

A legacy trust is sometimes referred to as a dynasty trust. Both trusts accomplish similar goals, passing on wealth over the generations while avoiding estate taxes. However, the funds in a dynasty trust remain the property of the originating estate for as long as the state will allow.

The description here is a simplified overview intended to provide the basics of a legacy trust. They are not for everyone, but if you are interested in passing on your legacy in the most efficient manner possible, it is a vehicle you might want to explore. 

Estate planning is complex and can be very confusing given the plethora of estate and death taxes. 

At Sterling Tax Advisors, we provide Trust Tax Planning and Trust Planning in general for clients all over the country. We invite you to contact – us to arrange a review of your estate objectives. Together we can map a way to ensure tax laws and other challenges do not diminish your assets. Contact us today at 888-297-3321.

Sterling Tax Advisors is a division of William Rogers Company.