Any of our Michigan readers who are familiar with previous posts know that sometimes estate planning can be complicated. When the idea of trusts is thrown in, many probably think that things are getting really complicated.
So, how can a Michigan resident incorporate trusts into their estate plan for maximum effect? Well, one aspect of establishing a trust that is important to remember is that a trust can be especially useful in protecting inheritance for beneficiaries. When it comes to tax planning, a trust can be one of the most useful estate planning instruments in delaying or reducing the amount of taxes that will need to be paid on the assets left for beneficiaries.
The so-called "death tax" can be particularly troublesome to deal with, as its future remains in flux due to gridlock in Congress. If a Michigan resident is planning to spend their remaining years living off of their retirement benefits in order to protect estate assets for their children or grandchildren, a trust may be the best option.
For example, the death tax in 2012 is basically non-existent. Anyone who dies this year by December 31 will leave their beneficiaries an almost tax-free estate. But, starting January 1, 2013, the death tax will revert back to 2002 levels unless Congress acts. At that time, only the first $1 million of an estate will be protected from taxation -- anything more than that will face a substantial tax.
There are many different types of trusts with many different types of benefits to consider. From revocable trusts and living trusts to trusts for children with special needs, only someone who is getting the most accurate and up-to-date information will be able to make the exact decision that is right for the estate planner's unique financial situation.
Source: Fox Business, "What Boomers Need to Know About Estate Planning," Casey Dowd, Sept. 13, 2012