There are a variety reasons why creating a trust may be the right solution:
1. Minimize estate taxes
Assets that have been transferred to an irrevocable trust more than three years prior to your death and following tax-planning strategies are not included in your gross estate when you die for estate tax purposes. It is important to note, however, that gift taxes may have to be paid at the time of the original transfer to the trust. However, any appreciation in the assets after the transfer will avoid both estate and gift taxes.
2. Shield assets from potential creditors
Lawsuits, taxes, accidents, and other financial risks are facts of everyday life. And though you'd like to believe that you're safe, misfortune can befall even the most careful person. What can you do? First, identify your potential loss exposure, and then implement strategies that are designed to help reduce that exposure without compromising your other estate and financial planning objectives. A protective trust can protect both business and personal assets from most creditors' claims. A trust works because it splits ownership of trust assets; the trustee has equity ownership and the beneficiaries have beneficial ownership.
3. Avoid the expense and delay of probate
Assets in both a revocable and irrevocable trust do not pass through probate at your death. The assets are distributed in accordance with the terms of the trust, which may even continue past your death. Your estate, therefore, avoids the cost and delay of probate. A further benefit of using a trust is that you will have increased privacy. A will is a public document (i.e., anyone can go down the probate court and review the contents of your will). However, a trust remains private.
4. Preserve assets for your children until they are grown
In case you should die while your children are still minors, generally, under age 18, you may want to use a trust if you plan to leave your assets to them. Because you cannot predict when you will die, you may want to set up a contingent trust in your will in case you die when your children are still minors. The assets could then be transferred to the trust, and the trustee could manage the assets and make the necessary distributions when your children reach an older age.
5. Create a pool of investments that can be managed by professional money managers
6. Set up a fund for your own support in the event of incapacity
Another reason to use a trust is to protect yourself in case of a mental or physical disability or other age-related problems. You can set up a trust, name yourself as the beneficiary, and then name yourself and another person as the trustees. If you become infirmed or mentally incapacitated, the other trustee can manage your assets for you and distribute those assets in a way that is in your best interest.
7. Shift part of your income tax burden to beneficiaries in lower tax brackets
By transferring income-producing assets to certain types of trusts, you may be able to transfer income to those heirs who are in a lower income tax bracket than you. By doing this, you may be able to reduce your own income taxes.
8. Provide benefits for charity
These types of trusts may provide you with both income and estate tax benefits, and also allow you to give to your favorite charity upon your death.
For More Information
To find out more about PNC Trusts, call us at 888-762-6226 7:00 a.m. to 10:00 p.m., ET, Monday through Friday and 8:00 a.m. to 5:00 p.m., ET, Saturday and Sunday to speak with a Wealth Management representative.