What if you could create a legacy, not only for your kids, but for your grandchildren and great-grandchildren as well? Would you do it? If the possibility intrigues you, it may be worthwhile talking to your estate planning attorney about a legacy trust. Before you do, let us take a moment to discuss some potential pros and cons.
As with any other estate planning tool, a legacy trust has certain advantages. For example, it can be created as an irrevocable trust that can accept gifts from you during your lifetime; or established as per the instructions in your living trust upon your death. Not only is it designed to withstand the tests of time, but it is legally considered separate from the rest of your estate. There are also certain tax benefits associated with a legacy trust. This includes the fact that legacy trusts are not subject to the same federal tax laws as a conventional estate.
A legacy trust is also useful in that it can act as a vehicle for ongoing charitable contributions. Furthermore, assets held in a legacy trust are usually shielded from creditors. The trust assets also generally enjoy being shielded from judgments.
There are, however, certain drawbacks to a legacy trust. Due to the irrevocable nature of the trust, no one can change the terms of the trust once it is funded. The creator of the legacy trust is also prevented from serving as trustee. Someone else must be appointed for this role. An additional drawback is the fact that the trust is subject to income taxes if its assets generate any earnings. Assets used to fund the trust are only exempt from certain taxes as long as they do not exceed the allowable limit.
These pros and cons cover only some of the basic qualities of a legacy trust. For more detailed insight into the potential of a legacy trust, contact our office. We are here to answer any of your estate planning questions.