There are individuals out there who question why you would want to (or need to) engage the services of an estate planning attorney. They figure that all you have to do is draw up a last will and the matter is closed. And in fact, there are websites out there that will sell you blank generic last will documents. They tell you that all you have to do is fill in the blanks and you have all of your bases covered.
The truth is that estate planning is not something that you want to take on as a hobby or Do-it-Yourself project. It is a serious matter that involves transferring very significant financial assets to those that you love the most as your final act of giving. Doing so requires expert advice, and one of the reasons for this is because of the fact that you as a layperson are probably not aware of all of the various estate planning vehicles that are available to you.
One of these legal instruments is the charitable remainder unitrust or CRUT. These trusts can satisfy your philanthropic desires while providing you with an ongoing source of tax efficient income for life. The way that it works is you fund the trust and make yourself the primary beneficiary and the trustee. You receive annuity payments from the trust equaling at least 5% of its value but no more than 50% of its value annually. You also name a charitable beneficiary who will inherit the remainder that exists at the end of the trust term, and this remainder must be at least 10% of the original fair market value of the trust.
When you fund the trust you are removing those assets from your estate so you gain estate tax efficiency in the process. You are also entitled to a charitable deduction under IRS regulations governing charitable remainder unitrusts. If you place appreciated securities into the trust they can be sold incrementally by the trust and as a result your capital gains responsibility will be spread out over the trust term. And in addition, because it is an irrevocable trust assets placed within it are protected from creditors.
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- When Do I Need to Update a Trust Agreement? - January 19, 2023