Here we are on our way out of town to avoid the coming storm – Hurricane Fay. In recent posts I have talked about our need to use alternative energy and get away from fossil fuel. Not just for the air we breathe and our melting icebergs but for our economic health. I for one would like to see the DOW go to 20,000 and there are two quick ways to get there. The first would be a drastic drop in oil and the second would be a massive increase in the birth rate. We got the second one last year. In 2007 it was the highest birth rate since the 60s. Now if we could work on getting the oil down we could all do well in the market. Today I noticed that the market again responded to the scare of the potential oil problems that may occur in the Gulf if the storm takes out the rigs or the refineries.
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Summary:
A revocable living trust can be a useful and practical estate planning tool for certain individuals, but not for everyone. This type of trust is most commonly used to avoid probate because, unlike property that passes by will, trust assets are distributed directly to heirs. This type of trust is also used as a way to maintain management of one’s financial affairs during a period of incapacity because someone else can immediately take charge when needed. A revocable living trust does not minimize income, gift, or estate taxes, nor does it shelter trust assets from creditors in most cases.
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What is a revocable living trust?
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A revocable living trust (also known as an inter vivos trust) is a separate legal entity created to own property, such as a home or investments.
The trust is called a living trust because it’s meant to function while the grantor is alive. The trust can continue after the grantor’s death, but the trust becomes irrevocable the moment the grantor dies.
Revocable living trusts are used to accomplish various purposes:
- To ensure that property continues to be properly managed in the event the grantor becomes incapacitated
- To reduce costs and time delays by avoiding probate
- To lessen potential challenges to or elections against a will
- To maintain privacy
- To avoid ancillary administration of out-of-state assets
Read more…
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Summary:
In general, transfers of property between spouses can be made federal gift and estate tax free under the unlimited marital deduction. However, transfers of terminable interests to spouses are disqualified from the marital deduction. A terminable interest is one that terminates or fails at a certain time or upon an occurrence or lack of occurrence of a certain event or contingency. A QTIP trust is an exception to this rule.
A QTIP trust is used when a spouse or both spouses want property of the first spouse to die to qualify for the marital deduction and provide lifetime income to the surviving spouse, but also want that property to be preserved and ultimately passed on to other beneficiaries. |
A QTIP trust (also called a marital deduction trust) is an irrevocable marital trust used to ensure that a decedent’s property will provide lifetime income to his or her surviving spouse and then pass to other beneficiaries. A QTIP trust qualifies for the unlimited marital deduction, allowing the surviving spouse to use his or her federal gift and estate tax exemption (also called the applicable exclusion amount–$2 million in 2008) and/or federal generation-skipping tax exemption (same amount as the applicable exclusion amount).
A QTIP trust is designed to transfer property free of transfer taxes under the marital deduction just as an outright transfer would. The result, as in an outright transfer, is that the property will then be subject to taxes in the surviving spouse’s estate, but can be offset to the extent of the surviving spouse’s available exemption(s). Another advantage of a QTIP trust is that the property does not pass outright to the surviving spouse–it passes to an independent trustee who controls and manages the property on behalf of the surviving spouse for his or her life, and then passes to beneficiaries (typically children and grandchildren) named by the first spouse to die. Read more…
