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Protect Your Right to Life and the Environment with a “Land Trust”

Any trust, either a complex trust or a simple trust, gets a tax deduction for money it pays out to the beneficiaries. Thus, it is relatively easy to “zero out” a trust’s income and avoid paying taxes on trust money.

A complex trust may have to file a 1041 tax form, but if there isn’t any income retained in the trust, the tax will be zero, even if a 1041 form is filed.

Note that when a simple trust says all of its “income will be paid out at least annually,” that doesn’t mean the money has to be transferred from the trust’s accounts to the beneficiary’s accounts. It simply means that the beneficiary(ies) have to claim all of the income on their tax return(s). Thus, a simple trust does not retain income, at least as far as the IRS is concerned.  Yes, the money will still be in the trust’s account, but it has been recognized as paid out by having the beneficiary claim it as his or her income.

Think twice before letting your trust get into a position where it is subject to a tax liability. Tax rates for a trust are bad news.

Trust Tax RatesTrust tax rates are outrageous. (See table of Trust Tax Rates below.) There are two types of trusts: a simple trust and a complex trust.  The type of  trust you get will determine whether or not you are subject to trust tax rates.

Simple trusts  include the standard estate planning “living revocable trust,” and many other trusts. One example is a Living Revocable Trust or Family Trust. Simple trusts are often used in estate planning to hold property. Most of them are revocable.

Simple trusts usually do not have a tax ID number. If a tax ID is asked for, the grantor/trustee/beneficiary’s Social Security number is used. A simple trust is required to pay all of its income out every year to the beneficiaries. Technically, a simple trust can’t accumulate income.

On the other hand, a complex trust can accumulate income and make its corpus (trust estate) grow. Because complex trusts can accumulate income, they are required to have their own tax ID number. This will need to be an EIN.  Even though complex trusts can accumulate income, it’s usually not wise to have the trust actually do so, because the trust will be taxed on the income it accumulates. With trust tax rates hitting 37% at only $12,500 it’s not good to pay taxes out of a trust. Additionally, the 3.8% Obama-care surtax kicks in at that same “top” level. Obviously, trust tax rates are outrageous.

Tax table rates will blow your mind:

Trust Tax Rates Table

If taxable income is: The tax is:
Not over $2,600 10% of the taxable income
Over $2,600 but not over $9,300 $260 + 24% of the amount over $2,600
Over $9,300 but not over $12,750 $1,868 plus 35% of the excess over $9,300
Over $12,750 $3,075.50 plus 37% of the excess over $12,750

The rates in the table were set in the Tax Cuts and Jobs Act and updated for 2019 cost of living increases. These rates apply to estates and trusts. The Obama-care net investment income tax of 3.8% started in 2013 and applied to trust income above the $12,150 level.  Trust tax rates have been inflation-adjusted each year, so note that the rates in the table above are for 2018 and check for the year you are interested in. The rates are set to go back to 2017 rates in 2025.

For great tax saving ideas, check out my 10 Tax Tips.

Note: This post was updated on September 13, 2018.

Keep your Affairs out of Court: Put your Property in the Name of the Trust

AKA: Avoiding probate, (How to fund the trust): If You Have a Revocable Living Trust, congratulations. Thats just the first step… DONT FORGET TO TRANSFER ALL ASSETS TO THE NAME OF THE TRUST.

There’s a big estate planning problem out there. The titling process is getting neglected causing families to go through probate.

However, when the assets are put in the name of the revocable living trust, the estate settlement is a beautiful thing. But your living trust is only as effective as the assets that you title into it. (https://www.legalzoom.com/articles/revocable-vs-irrevocable-living-trusts-which-one-is-right-for-you)

Many fully funded trusts are settled without court involvement if your put all assets and property in the name of the trust.

There are a few reasons that trusts don’t get funded. People forget they owned that piece of property. People thought they had beneficiaries on all accounts. People didn’t think about buying the new property in the name of their trust. People didn’t think about opening that new account in the name of their trust. People may not have known that they needed to transfer their LLC to their trust. They kept a minimal amount of shares out of the trust. They thought their attorney was going to handle getting everything in the trust, but an attorney can only transfer certain assets into your trust.

Do these three things:

(1)  If you are an estate planning attorney, share with your clients along with a note to contact you if they need legal help. If you are a financial advisor, share with your clients and prospective clients along with a note to contact you if they need help titling and beneficiary designations.

(2) Fund your trust. While the process isn’t difficult, it’s easy to get sidetracked or procrastinate. Just make funding your trust a priority and keep going until you’re finished. Take a look at everything you have this is titled. Determine whether assets are probate or non probate. Probate assets, in general, go in your trust. There are many excellent attorneys around the country willing to help. If you need a lawyer’s help, get it. While you are at it, update your beneficiary designations.

(3) Write a Comment. if this video can help one person avoid probate and make things easier for their survivors, it’s worth it. Comment with your positive comments and experiences on youtube or linkedin or wherever else you might see or hear this, so that others can and will benefit from your experience.

Now go leave a legacy! Your family will thank you for it.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Louisiana Estate Planning Attorney
http://www.RabalaisEstatePlanning.com
Phone: (225) 329-2450

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Related:

Revocable vs. Irrevocable Living Trusts – Which One is Right for You?

by Michelle Kaminsky, Esq.
Freelance writer
Revocable vs. Irrevocable Living Trusts – Which One is Right for You?
by Michelle Kaminsky, Esq., March 2015
Living trusts can be a great option for distributing your assets after your death. If you’re thinking of creating a trust as part of your estate plan, you’ll want to learn the differences between a revocable living trust and an irrevocable living trust so you can make the best decision as to which one is right for you.
What Is a Living Trust?
Before moving on to the distinctions between revocable and irrevocable trusts, it is important to note that both trusts are an “inter vivos” trust: a living trust so named because you create it while you’re still alive.
A living trust is a written legal document through which your assets are placed into a trust for your benefit during your lifetime and then transferred to designated beneficiaries at your death by your chosen representative, called a “successor trustee.”
To get the most benefit out of a trust, you should make sure everything you own is held in trust form. No assets become a part of the trust without specific inclusion, so it is important that you revisit your trust provisions from time to time to ensure all of your assets are included.
Now you are ready to move on to whether you want to make your living trust revocable or irrevocable.
Revocable Living Trust vs. Irrevocable Living Trust
With a revocable living trust, the person creating it can later change his or her mind regarding not only the property placed into it, but also the existence of the trust itself.
Some of the benefits of a living revocable trust include the following:
1. Avoids probate, which can mean a faster distribution of assets to your heirs.
2. Potential money savings, though this depends on your financial situation, and remember it does cost something to set up a trust on the front end.
3. More privacy than a will, whose provisions are made public after your death; a living trust’s provisions are kept private.
4. Ability to choose someone to manage your affairs without court intervention should you become incapacitated. Also, since the trust is revocable, if you dispute your incapacity, you can retain control yourself.
An irrevocable trust, on the other hand, is just as it sounds—not revocable. That is, once you put property into it, you cannot retrieve it as it belongs to the trust. Accordingly, this property is not included in your estate’s value for estate tax purposes. This is one big potential benefit of an irrevocable trust, although if your total estate value falls under the federal estate tax exemption, this probably isn’t a concern for you anyway.
Final Living Trust Considerations
Remember that when you establish trusts, be aware of any potential tax consequences (gift, estate and state inheritance) involved with property transfers, and note that you should always have a pour-over will to catch any assets that didn’t make it into the trust or your last will and testament.
Now that you know the differences between the two types of living trusts, you’re ready to move on to the next step in creating your estate plan.
Create a revocable living trust through LegalZoom. Or if you want to create an irrevocable living trust, you can speak to an attorney through the LegalZoom personal legal plan.
Ensure your loved ones and property are protected START MY ESTATE PLAN

https://www.legalzoom.com/articles/revocable-vs-irrevocable-living-trusts-which-one-is-right-for-you

 

Can a Video be used as a Will? via Texas Estate and Probate Law

This column first appeared in the San Antonio Express News and other Hearst Newspapers on February 18, 2019. Dear Mr. Premack: My grandmother while in ICU stated that she wanted all she owned including her house to go to me and my bother in law. This was caught on cell phone video. She was later […]

via Can a Video be used as a Will? — Texas Estate and Probate Law

Jury Verdict: Lowell MA must pay $1.5 M, plus interest, to owners of condos built on top of former garbage dump via Independent American Communities

By Deborah Goonan, Independent American Communities Today’s post is an update to a story IAC has been following since 2016. In 2009, during installation of a drainage system, the Grand Manor Condominium Association discovered contaminated soil surrounding their housing complex. That prompted three years of investigation. The City of Lowell delayed responding at first, then […]

via Jury: Lowell MA must pay $1.5 M, plus interest, to owners of condos built on top of former garbage dump — Independent American Communities

Estate Planning & Land Trust

Planning for Future by Estate Planning & Land Trust

Section 502(e)(1) states the general rule requiring the court to disallow any claim for reimbursement or contribution of an entity that is liable with the debtor on, or that has secured, the claim of a creditor to any extent that the creditor’s claim against the estate is disallowed.

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5 Things Aspiring Landlords Should Know Before Buying a Duplex or Multi-Family Home

When my husband and I—aspiring landlords that we are—found out we could get an FHA loan to cover the purchase of a duplex, triplex, or fourplex, we thought we had it all figured out. But four months and a dozen offers later, we were still discovering surprises right and left. Here’s what we wish we’d […]

via 5 Things Aspiring Landlords Should Know Before Buying a Duplex or Multi-Family Home — Round Two