TIPS FOR DISSOLVING YOUR TRUST

Setting up a trust can be a valuable decision for your estate plan. Trusts allow you to protect specific assets from estate tax burdens for example, and they have a variety of other business-related uses. Now, though, many investors are learning that trust matters do not only relate to the establishment of the trust, but also its dismantling. With the estate tax structure changing, some families find that they need to get rid of their trusts. How can you do so safely while protecting your assets?

Changes to the tax code have raised the threshold at which an estate will trigger federal income tax. That means that individuals must be preparing to hand down $5.25 million and couples must be distributing $10.5 million in order for those taxes to be relevant. This raised ceiling has eliminated the need for trusts among scores of Floridians. Now, the question remains about how to get rid of the trusts themselves.

Even if you do not think you will need a trust in the future, it is often much easier to simply transfer assets from one type of trust to another. Dismantling the entire trust structure is an incredibly complicated process that requires expertise in a wide range of Internal Revenue Service code. The easiest trusts to dismantle are known as AB trusts, which are designed to postpone federal estate taxes. This trust structure shields a surviving spouse from estate taxes, allowing the estate to continue to flourish until the second spouse passes. These trusts are simple to unwind if both spouses are still alive, but they are irrevocable if one is already dead.

If your trusts hold a significant amount of money or a business asset, a professional financial adviser and attorney should be called in to ensure proper transfer or dissolution of a trust. Choosing to do this on your own could result in financial missteps that could cause future problems for your estate. Estate plans need the support of professional decision-makers to be successfully executed.

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Written by Luis E. Barreto

Luis E. Barreto

Luis is a probate and guardianship litigator with over 23 years of experience in the field. Determination of heirs, will contests, breaches of fiduciary duty, removal of personal representatives, guardians and trustees are just some of the types of litigation he addresses. In addition, he administers non-contested estates and guardianships.