St. Petersburg Defective Grantor Trust Attorney
There are many different trust options available that can assist with managing the transfer of your property to your beneficiaries while also allowing you to minimize your tax liability. Creating a trust can help make sure your loved ones are cared for after you pass away by providing them with financial security. A defective grantor trust can be a great addition to your estate plan, particularly if you can afford to pay taxes on the property you intend to place within the trust. Below, our St. Petersburg defective grantor trusts attorney explains more about these estate planning tools.
What is a Defective Grantor Trust?
Grantors are the people who create a trust. A grantor trust allows you, as the creator of the trust, to have some control over the property you place within it. The IRS outlines specific rules for grantor trusts and how they should work. When those rules are not followed, there are penalties that will apply. The purpose of creating a trust is to separate assets from your ownership while also providing a more tax-efficient way to leave an inheritance to your beneficiaries.
There are instances when grantors attempt to retain too much control over the trust. A defective grantor trust is structured in a manner that activates grantor trust rules, which causes a separate set of regulations governing the management of the assets in the trust for tax reasons.
How Do Defective Grantor Trusts Work?
The purpose of activating the grantor trust rules is to force the grantor to pay any income taxes generated by the property held within the trust. This may sound as though it is not beneficial for you, but it is a way to eliminate the need for a gift-tax exclusion in order to leave your beneficiaries an inheritance that does not require them to pay taxes, or that reduces their overall liability. Essentially, you are paying the taxes so your heirs do not have to.
Defective Grantor Trusts are Irrevocable
It is important to note that defective grantor trusts are irrevocable. This means you cannot revoke them once you have created it. The purpose of any irrevocable trust is to remove assets that are directly owned by your estate while also reducing your tax liability. It is very challenging to make changes to an irrevocable trust once you have created one. It is for this reason that you should always speak to a St. Petersburg defective grantor trusts lawyer who can advise on your case.
The fact that defective grantor trusts are irrevocable, comprehensive planning is required. You must make sure that you will be able to afford the income taxes on the assets within the trust so you do not find yourself in financial hardship in the future.
Call Our Defective Grantor Trusts Lawyer in St. Petersburg Today
You have many trust options available for your estate plan, but it is not always easy to determine which one is right for you. David Toback is a St. Petersburg defective grantor trusts lawyer who can outline your options and choose the one that is right for you. Call us now at 813-252-7529 or contact us online to schedule a consultation.