Setting up a trust for children

[kempmaer]

What is the name of your state (only U.S. law)? TX

Is there a legal trust a parent can set up for children while parents are alive and one that the children can be both beneficiary and executor and have access to the funds before parents death?

 

[Zigner]

What is the name of your state (only U.S. law)? TX

Is there a legal trust a parent can set up for children while parents are alive and one that the children can be both beneficiary and executor and have access to the funds before parents death?

What you have outlined above is more commonly known as a gift.

What are you actually trying to accomplish?

 

[LdiJ]

What is the name of your state (only U.S. law)? TX

Is there a legal trust a parent can set up for children while parents are alive and one that the children can be both beneficiary and executor and have access to the funds before parents death?

It would have to be a revocable trust and they would have to receive no more than 14k per year each, or you would run into gift tax issues.

Also, you want the word "trustee" rather than "executor".

 

[Zigner]

It would have to be a revocable trust and they would have to receive no more than 14k per year each, or you would run into gift tax issues.

Also, you want the word "trustee" rather than "executor".

LdiJ - you know better.

The $14k per year is the amount that triggers a gift tax return. No gift tax would be due, just the return. Of course, the amount will eat away at the lifetime exclusion. But, I suspect that if we were talking about an estate in the >$5 million range, our OP wouldn't be seeking help on an anonymous internet forum

 

[LdiJ]

LdiJ - you know better.

The $14k per year is the amount that triggers a gift tax return. No gift tax would be due, just the return. Of course, the amount will eat away at the lifetime exclusion. But, I suspect that if we were talking about an estate in the >$5 million range, our OP wouldn't be seeking help on an anonymous internet forum

That is why I said "gift tax issues". I didn't want to get into it any deeper until the OP provided more info.

 

[Zigner]

That is why I said "gift tax issues". I didn't want to get into it any deeper until the OP provided more info.

What issues?

 

[LdiJ]

What issues?

The potential for having to file a gift tax return, for one. Whether or not tax is due, if you gift more than 14k, you have to file a gift tax return. They are quite the pain to do. Another potential would be the after effects of having a perfected gift prior to a parent's death, rather than inheriting assets with a stepped up basis. Would you have preferred it if I had just said "gift issues"? That might have been better wording.

 

[Zigner]

The potential for having to file a gift tax return, for one. Whether or not tax is due, if you gift more than 14k, you have to file a gift tax return. They are quite the pain to do. Another potential would be the after effects of having a perfected gift prior to a parent's death, rather than inheriting assets with a stepped up basis. Would you have preferred it if I had just said "gift issues"? That might have been better wording.

I agree that keeping the amounts transferred under $14k ($28k for a married couple) will avoid the hassle of a gift tax return.

As for the rest of your statement - the OP wasn't asking about property/assets. The OP was asking about money.

 

[LdiJ]

I agree that keeping the amounts transferred under $14k ($28k for a married couple) will avoid the hassle of a gift tax return.

As for the rest of your statement - the OP wasn't asking about property/assets. The OP was asking about money.

Unless the money is kept in bank accounts, rather than being invested, there will be assets with basis.

 

[kempmaer]

trustee/beneficiary trust

Ok, I am getting a clearer picture, but I thought their is a legal trust that can bet set up by parents before death (and the children are trustee) so that you can avoid estate taxation before death.

What type of trust is this? Is this similar or identical to the revocable trust that has a lifetime exclusion?

As far as how much can (could) be transferred, I am assuming it is >$5 million but not totally certain.

Is $5 million the lifetime exclusion allowed by Congress? Can the trustee (children) set up an irrevocable trust?

 

[Zigner]

Ok, I am getting a clearer picture, but I thought their is a legal trust that can bet set up by parents before death (and the children are trustee) so that you can avoid estate taxation before death.

What type of trust is this? Is this similar or identical to the revocable trust that has a lifetime exclusion?

As far as how much can (could) be transferred, I am assuming it is >$5 million but not totally certain.

Is $5 million the lifetime exclusion allowed by Congress? Can the trustee (children) set up an irrevocable trust?

If your estate is anywhere close to approaching $5 million, then you will want to seek the guidance of a local estate planning professional. It's worth it.

 

[LdiJ]

Ok, I am getting a clearer picture, but I thought their is a legal trust that can bet set up by parents before death (and the children are trustee) so that you can avoid estate taxation before death.

What type of trust is this? Is this similar or identical to the revocable trust that has a lifetime exclusion?

As far as how much can (could) be transferred, I am assuming it is >$5 million but not totally certain.

Is $5 million the lifetime exclusion allowed by Congress? Can the trustee (children) set up an irrevocable trust?

I think it would be better if you get a consult with an attorney experienced in estate planning. I can tell by your questions that you really need to be talking face to face with someone rather than trying to do it on an internet forum.

However, I will try to explain a few things.

There are two ways that your children can receive money from you. Either by a gift, or by inheriting the money.
Everyone has an estate and gift tax exclusion of a little more than 5 million.

When you put money into a trust, you are either gifting it to your children (irrevocable trust - you cannot ever take the money back) or putting it aside to be eventually inherited (revocable trust - where the money technically still belongs to you until you die). You can also have a trust that is a hybrid, a revocable trust where you have not given them the principal, but gift them amounts periodically.

Please do get a consult with an attorney.

 

[Stevebol]

There's no such thing as a 'revocable' trust. Maybe for you if you make it but not for an alternate trustee.

 

[TrustUser]

while this is a free forum for everyone, i think it would be a better one if people did not give advice when they really are not capable of doing so, because of lack of knowledge.

i only give advice about trusts, cuz that is my very small niche.

 

[TrustUser]

good post ldij,

however, i dont really think there is a hybrid trust.

for most revocable trusts, the trustor can do anything he wants with his own money, including giving gifts.

either we have a revocable trust or an irrevocable trust. if it is revocable, the trustor can gift as he chooses.