Irrevocable trusts and other estate planning instruments
In recent posts, we’ve explored some of the tax saving features of trusts. One such example is an irrevocable life insurance trust. To avoid hefty tax determinations and other costs arising during probate, an individual can set up an irrevocable life insurance trust to cover payments of estate tax.
In fact, commentators are speculating that the late owner of the Buffalo Bills may have set up this type of trust to cover estate taxes arising from his professional football franchise. That’s assuming that he didn’t simply avoid estate taxes altogether by transferring the franchise to his surviving spouse. In that event, taxes would not be due until the death of the surviving spouse.
Of course, trusts can be created for many reasons. Some trusts may be set up for the purpose of reducing taxes. Other trusts may be used to provide support during a beneficiary’s lifetime, or perhaps to protect certain estate assets from a beneficiary’s creditors. The beauty of trusts is that the creator can determine the instrument’s purpose and restrictions. Some choices that are currently popular include charitable remainder trusts, spendthrift trusts, life insurance trusts and special needs trusts.
Regardless of the instrument, estate planning is essential to avoid disputes among beneficiaries. If questions about a will or trust do arise, the resulting dispute can be financially and emotionally draining. With the careful planning of an attorney, however, an individual can hopefully avoid such ambiguities and disputes. An attorney can help you find the option that is best for you.
Source: Buffalo Business First, “Estate taxes may hold key to Bills' future after Wilson's death,” Alissa Kline, March 25, 2014