There are many different types of trusts that people choose to use for estate planning purposes. The most basic, however, are known as revocable living trusts. You can set up a trust like this by contacting a local estate planning lawyer and discussing which assets you hope to place into or distribute through the trust.
This involves the grantor or the creator setting up a trust that keeps that person in control while they’re still alive.
This can also include the appointment of a separate trustee to manage the assets inside, but many revocable living trusts allow control and flexibility, which is why the creator stays involved over the course of their life. In the event that any changes are needed for the trust, the creator can revoke or amend it. The trust then owns the assets, but any dividends, income and capital gains are taxed to the creator while they are still alive.
The tax ID number for many revocable living trusts, for example, is also the creator’s social security number. In most cases, when the grantor of the trust passes away, it becomes irrevocable. That means it may be subject to tax trust rates for income that accumulates inside the trust, however, some deductions may apply, which means that higher tax rates may not be added. The most common deduction is known as distributable net income.
Trusts can be a very powerful and yet complicated asset management tool, depending on how they are structured. Finding an estate planning attorney who can walk you through the pros and cons and discuss your next steps is helpful. Our New Hampshire and Maine trust lawyers can help you with your entire estate plan.