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Gifting Through Living Trusts

The Church is of God and will be preserved to the end of time


A Living Trust: Is it right for you?

The revocable or living trust is frequently presented to the public as an alternative that is superior to the probate process. Although a living trust may provide advantages, it is important for you to have a realistic expectation of what a living trust can accomplish in order to know whether such a trust is appropriate for you

What is a living trust?

A living trust is a trust that you set up during your lifetime and to which you transfer most of all of your assets. You have the right to receive the income of the trust, and you may withdraw a portion or all of the principal of the trust whenever you wish. Unless you intend to have your assets professionally managed, you may wish to act as trustee. The trust should provide for a successor trustee to act should you become incapacitat4ed or upon your death. You may revoke or amend the trust at any time. Upon your death, the trust becomes irrevocable, and its income and assets are disposed of as you have specified in the trust instrument. You have the same flexibility to dispose of your assets by means of a trust as you do with a will.

Tax consequences

Perhaps the greatest misconception concerning living trusts is that they reduce federal estate taxes. This is not the case. Transferring your assets to a living trust does not remove them from your taxable estate. This misconception may be based on a standard estate planning technique for married individuals that calls for establishing a trust at the first spouses death in order to preserve that spouses $1 million unified gift and estate credit equivalent. However, such a trust can be established under either a living trust or a will.

In fact, a living trust is neutral in terms of both estate and income taxes. A living trust can provide the same estate tax planning flexibility as a will. As for income taxes, the owner of a living trust is taxed on its income as if the assets were owned out-right. A separate tax return generally is not required.

A warning is in order if you intend to make gifts from a living trust. Under certain circumstances, gifts made directly from a living trust may be counted as part of the taxable estate for estate tax purposes. In such cases, the remedy is to withdraw the property from the trust before making the gift.

Probate cost savings

The most commonly cited advantage of living trusts is that, upon the trust owners death, trust assets are distributed without going through the probate process. This is also the case with jointly owned assets and assets that are distributed to individual beneficiaries according to a beneficiary designation, such as bank accounts, pension benefits and IRAs, and life insurance benefits.

By avoiding probate, people generally expect to reduce or eliminate executor and/or attorney fees and probate court costs. These savings often may be smaller than expected, however.

First, it is difficult to avoid probate and some probate costs altogether, unless title to all of your assets, including your personal property, is transferred to the trust. Transferring title to mortgaged real estate or personal possessions may be impractical or undesirable, which is why a so-called pour-over will is used in conjunction with a living trust. A pour-over will ensures that the assets in your probate estate are distributed to the trust so that they can be administered according to the terms of the trust. A probate proceeding also may be required if you have minor children. Although a trustee can administer your assets to safeguard a childs financial well-being, only the probate court can appoint someone to act as guardian of the person or the child (to have custody of the child).

Second, although using a living trust to reduce your probate estate may save attorneys fees for administering the estate, attorneys fees are incurred at an earlier date when the attorney establishes and transfers your assets to the trust.

Third, if trust assets must be retained and administered before they can be distributed, the trustees fees may approximate those of an executor. Even with a trust, a period of administration may be necessary to file income and estate tax returns, collect assets, pay debts, and distribute assets.

Advantages of a living trust

Although the anticipated savings of a living trust must be carefully evaluated, living trusts do offer several advantages other than reducing the cost of passing your assets to your beneficiaries.

Incapacity: A living trust is an excellent means for planning for incapacity. The trust can instruct the trustee or successor trust to manage your assets and provide for your financial support. A durable power of attorney can also authorize your agent to transfer additional property to the trust. Thus, a living trust and durable power of attorney can avoid the need for a court-appointed conservator.

Speedy Distributions: Upon your death, the trustee of a living trust can begin to make distributions to surviving beneficiaries without the delays and procedures that the probate process requires. Delays are also avoided with joint accounts, insurance proceeds, and other assets that pass directly to the beneficiary without going through probate.

Out-of-State Property: A living trust can be very beneficial if you own real property in more than one state because, otherwise, additional probate proceedings are required in every state in which you own property. Transferring such property to a living trust avoids multiple probates.

Avoidance of disputes: A living trust offers an advantage over a will if you anticipate discord among your beneficiaries. Unlike a will, family members do not have to be notified of the existence of the trust. A living trust also may withstand legal attacks better than a will. If the trust is established and administered for some time during your life, it becomes more difficult for disgruntled family members to prove that the trust was the result of incapacity, fraud, or undue influence.

In all of our giving, let us never forget the priceless gift that was given to us in Jesus Christ. 

 

 

This information was developed to provide you with basic information about Planned Giving to Mesquite United Methodist Church.

Planned Giving provides opportunities for us to express our love for the Lord and keep His Ministries strong and vital for generations to come.

If you are interested in discussing financial gifts to our church, we encourage you to talk to any member of the Finance Committee, the Pastor, or call the church office 702-346-4663.

 

Finance Committee:

  • Sam Latendresse, Chair
  • Wayne Adams

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420 W Pioneer RD
Mesquite NV 89027
Phone: 702-346-4663
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