A Dynasty Trust in Roselle and Schaumburg Can Help Leave Your Assets to Your Grandchildren – Not the Government!
A lot of people complain about high taxes. Looking at what the government takes from your weekly paycheck can be frustrating. But, it could be worse. Even people who don’t complain about taxes (there are a few) and understand it takes money to run the government would complain if they understood that it is possible for the government to tax the same money over and over and over. And, it happens more than you think.
Here’s a scenario:
You and your spouse leave a very large amount of money to your daughter without a trust – or, in a poorly drafted trust (yikes!). The money is taxed when it is transferred to your daughter. Your daughter leaves money she inherited to your grandchildren without a trust. Guess what? You’ve got it – that money is taxed again!
It is upon learning this that a well-meaning grandparent suggests leaving the money to their grandchildren rather than the child to avoid one of those tax events. Not so fast! In that scenario the federal generation-skipping transfer tax could apply.
Here’s another scenario:
You and your spouse leave $10 million to your child. If her inheritance grew over time, it would be subject to the estate tax at her death. That could result in millions going to pay estate tax.
There is a solution that could be used to stop the government from double-dipping. It’s called a Dynasty Trust. Assets that you put in a dynasty trust, plus any interest earned over the years, are still subject to federal estate tax, but just once – when you transfer them into the trust. The assets will not be taxed again even though several generations can benefit from them.
It’s important to note here that income taxes are still due on any income that is generated by the assets in the trust. Therefore, most people choose to put assets that do not earn money in the trust, such as growth stocks that don’t pay dividends and life insurance policies.
Dynasty trusts are complex legal documents, so they should be prepared by experienced estate planning lawyers in Roselle and Schaumburg who have experience with trust and tax planning strategies. If you are interested in talking with an attorney with this experience, call our office at 630-908-2752 to set up a consultation.
- Major life changes
Have you had any life changes since you last updated your estate plan? Have you gotten married? Have you had a child? Have you recently moved from another state? All of these life changes may impact you estate planning which require your will or trust to be updated.
- Consider your executor and/or trustee designations
- Grandma’s wedding ring
- Financial power of attorney
- Your health
- Life insurance and retirement funds
One of the most complex aspects of a Cook County wills and trust lawyer’s job is making sure that a trust is properly funded. While the attorney will be able to do much of the work on behalf of the client, there are a number of documents that are needed in order to transfer assets into the trust. Each of these documents serves to ensure that the asset has been accounted for and that ownership of it has been transferred from the client to the trust.
In order to smooth this complicated process, the wills and trusts lawyer supplies clients with a list of what needs to be collected. Not every item on the list will apply to each client, but by going through and gathering the documentation that is relevant, an individual can speed up the process and make sure that their assets, as well as their businesses, heirs, and personal lifestyle, are fully protected. Some of that information includes, but is not limited to:
- Any recorded deed for property owned by the individual
- Copies of title and/or homeowner’s insurance policies
- Copy of the most recent property tax bill for any real property owned by the individual
- Deeds of trust, mortgages, and promissory notes
- Vehicle registrations, including mobile homes
- Checking and savings accounts
- Money market accounts
- Credit union accounts
- Safe deposit boxes
- Investments, mutual funds, and dividend reinvestments
- Certificates of deposit
- Original savings bonds or treasury notes
- College tuition and savings programs
Specific Assets or Credits
- Original copies of publicly traded securities held as certificates
- Deeds of trust, promissory notes, mortgages, or other financing statement held by the individual
- Shareholder agreements
- Original stock certificates
- Trust agreements when the individual is a beneficiary
- Deeds/Contracts for burial plots
- Financials and contracts for annuities
- Pension plans, IRAs, 401(k), deferred compensation, etc.
- Closely held business or professional association – corporate books
- Partnership agreements for general or limited partnerships
- Operating agreement for LLCs
- List of assets for sole proprietorships owned by the individual
While gathering each of these documents can be a time-consuming process, it is an important part of working with the wills and trusts lawyer in Cook County in laying the right foundation for your trust. Each of the items above may be used to fund the trust, and therefore a change of title, beneficiary designations, or other aspect may be in order. There are some pitfalls that can cause difficulties or delays, so getting a quick start will bring about a quicker end! Your Cook County wills and trusts lawyer will have solid advice and suggestions on how best to track down this vital information.