Can a living trust reduce estate taxes?
Both a living trust and will can be used to reduce or eliminate estate (or “death”) taxes under certain circumstances, and especially for married couples. Tax saving clauses that are included in your living trust are virtually identical to the tax saving clauses that would be included in your will. However, in addition to potential tax savings derived from a comprehensive estate plan, a living trust can also assist in organizing your finances. Thus, a living trust is well suited to both of these purposes.
A simple probate-avoidance living trust has no effect on taxes. More complicated living trusts, however, can greatly reduce the federal estate tax bill for people who own a lot of valuable assets. One tax-saving living trust is designed primarily for married couples with children. It’s commonly called an AB trust, though it goes by many other names, including “credit shelter trust,” “exemption trust,” “marital life estate trust,” and “marital bypass trust.” Each spouse leaves property, in trust, to the other for life, and then to the children. This type of trust can save up to hundreds of thousands of dollars in estate taxes, money that will be passed on to the couple’s final inheritors. To learn more about tax-saving trusts, read Tax-Saving AB Trusts.
A simple probate-avoidance living trust has no effect on taxes. More complicated living trusts, however, can greatly reduce the federal estate tax bill for people who own a lot of valuable assets. The AB trust is a tax-saving living trust designed primarily for married couples with children (it can also be called a “credit shelter trust,” “exemption trust,” “marital life estate trust,” or “marital bypass trust.” Each spouse leaves property, in trust, to the other for life, and then to the children. This type of trust can save hundreds of thousands of dollars in estate taxes, money that will be passed on to the couple’s final inheritors. If your net assets are between $1,000,000 and $7,000,000 you will need an AB trust.
A simple probate-avoidance living trust has no effect on taxes. More complicated living trusts, however, can greatly reduce the federal estate tax bill for people who own a lot of valuable assets. One tax-saving living trust is designed primarily for married couples with children. It’s commonly called an AB trust, though it goes by many other names, including “credit shelter trust,” “exemption trust,” “marital life estate trust” and “marital bypass trust.” Each spouse leaves property, in trust, to the other for life, and then to the children. This type of trust can save up to hundreds of thousands of dollars in estate taxes, money that will be passed on to the couple’s final inheritors.
