What Is a Family Wealth Trust?

What Is a Family Wealth Trust? There are many different things to take into consideration when you are devising your estate plan. What is important for one person may not be important for the next, so you should understand the facts and act in a fully informed manner. Personalized attention is of great value, because your plan should be custom crafted to suit the unique needs of your family.

With the above in mind, high net worth individuals must be concerned about the potential impact of the federal estate tax. This tax carries a hefty 40 percent top rate, but the good news is that there are steps that you can take to mitigate your exposure.

Various types of family wealth trusts can be used to reduce your estate tax liability if you are exposed. We should emphasize the fact that there is no particular trust with the formal name “family wealth trust.” This is just a way of describing a trust that would protect your family wealth from the ravages of the federal estate tax.

One family wealth trust that can be useful to reduce the taxable value of your home is a qualified personal residence trust. The way that it works is you convey your house into the trust, but you can continue to live in the home as usual for a period of time that you decide upon when you create the trust agreement.

In this agreement, you name a beneficiary who will assume ownership of the home after the term of the trust expires. There is a gift tax in addition to the estate tax to stop people from giving tax-free gifts to avoid the estate tax. So, this transfer would be subject to the gift tax. However, for tax purposes, the value of the home would be much less that its true fair market value.

This is because no neutral buyer would pay full fair market value for the home if he or she could not assume possession of it for a number of years. The IRS takes this into account.

In the end, the home would be transferred to the beneficiary at a significant tax discount.

The qualified personal residence trust is just one type of family wealth trust that can be used to reduce your estate tax exposure. Other possibilities would include grantor retained annuity trusts, charitable lead trusts, charitable remainder trusts, and generation-skipping trusts.

Schedule a Free Wealth Preservation Consultation

If you would like to obtain more detailed information about family wealth trusts, our firm can be of assistance. We offer free consultations, and you can contact us through this page to set up an appointment: Dallas TX Estate Planning Attorneys.

At the consultation we will get to know you, we will become apprised of your objectives, and we will ultimately make recommendations. If you decide to go forward, we can help you put a custom crafted estate plan in place.