Planning for your family’s future, especially in your absence, can be a daunting task. It takes an emotional toll on you and your loved ones to even conceptualize why you need to put things like this in place. In case the unthinkable happens, or even just for end-of-life affairs, it is important to organize now what you might not be able to later. Like a family trust.
Below you’ll find some frequently asked questions that will help you understand family trusts and the need to work with a CPA during the process.
Family Trusts and Estate Planning FAQs
In order to get started, the first step is to understand what your options are and who you can depend on to help you through every step of the way in planning your estate. The seasoned team of expert CPAs at Wasatch can handle all of your accounting needs through this process. To help understand more about this, below are some answers to frequently asked questions about family trusts and estate planning:
Q: What is a family trust?
Most family trusts are a form of living trust. This type of trust is one you establish during your lifetime. This is when one person gives another person authority to manage assets.
The “grantor” is the person who creates the trust. The “trustee” is who the grantor assigns to manage the trust. The “beneficiaries” are who will receive the assets from the trust after the grantor dies according to the terms of the trust. As it is a family trust, typically the beneficiaries are the grantor’s family members. This can assure that not only will your family be financially supported after your death, but also will keep property within your family generationally.
Q: What are the pros and cons of a family trust?
- A family trust can help avoid probate. Transferring property through a family trust can save money, time, and especially any confusion regarding the property upon the death of the trust creator.
- By avoiding probate, your financial documents and affairs will remain private. With a family trust, only you and your family will know the financial situation established within the trust.
- It allows for ease of succession in cases of incapacitation before death.
- There is flexibility with a family trust as it allows you to edit the beneficiaries and what assets they receive in real-time. You can even name the trust back to yourself or terminate the trust whenever you want.
- There are fees associated with all of the legal documents you must prepare and submit for a family trust.
- A family trust comes with a lack of tax benefits, namely when filing income taxes. The trust must file a federal tax return upon the death of the grantor.
Q: How do trusts avoid taxes?
A trust is essentially invisible to the IRS as long as there is no gain, loss, or gift tax assessed on the sale. If all assets are sold at fair market value there will be no income tax associated with payments with the sale paid to the grantor.
Q: What is the difference between a trust and an estate?
A trust allows the trust creator to edit assets and beneficiaries throughout their lifetime. It establishes an ongoing transfer of assets before and after the grantor’s death.
An estate is a one-time distribution of property and assets after death.
Q: What are the 5 key components of estate planning?
- Having a medical directive
- Creating a will
- Putting trusts in place
- Establishing power of attorney
- Beneficiary designation
Wasatch CPA Services LLC: CPA Estate Planning
When you need a CPA for estate planning you can count on Wasatch CPA Services to help you choose the best options for you and your family. Call us today at (801) 609-3119 or book an appointment now by clicking here.