Reason Number Two: PROTECTING ASSETS AND AVOIDING TAXES
Greedy relatives aren’t the only ones from whom you need to protect your assets. Litigation,
malpractice claims, creditors and divorce are examples of potential scenarios that must be considered
when creating your estate plan. The options for asset protection planning through the use of trusts
should be a part of every estate planning conversation. The most important time to take action to
establish asset protection is before it is needed; otherwise, you risk having the planning considered
a fraudulent transfer.
Perhaps the most obvious reason to utilize trusts in estate planning is to help minimize estate and gift
tax liabilities. If your estate is valued at more than $12.06 million (the federal estate tax exemption
amount for an individual in 2021), the balance is subject to estate tax at rates as high as 40% or more.
Proper planning through the use of certain types of irrevocable trusts can allow you to transfer assets
that can then grow outside of your estate and thus avoid estate taxes.
A trust can help you minimize state transfer taxes as well. Some states have particularly high estate tax
rates or low exemption amounts. Regardless of the size of your estate, it’s important to work with an
estate planner familiar with your state’s laws and tax rates to determine if a trust would be an effective
tool to help minimize your state estate tax liability.
A trust may be useful when planning for the eventual transfer and distribution of a retirement plan, such
as an IRA or 401(k). By structuring a trust as the beneficiary of a retirement plan, you may be able to
minimize the impact of individual income taxes on plan distributions, as well as plan for the ongoing
management and control of these assets once you pass away. Once you choose a trust as the
beneficiary, it’s imperative to name it in the beneficiary designation to ensure it’s properly funded.
An irrevocable trust can be an effective tool to “freeze” valuations of assets or business interests. By
transferring assets to an irrevocable trust, you may be able to shelter any resulting growth from future
federal and state taxes, depending on the trustee and state in which you domicile the trust.
Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James
financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate
professional.
© 2022 Raymond James Trust, N.A., is a subsidiary of Raymond James Financial, Inc. © 2022 Raymond James & Associates, Inc.,
member New York Stock Exchange/SIPC. © 2022 Raymond James Financial Services, Inc., member FINRA/SIPC. Raymond James
& Associates, Inc. and Raymond James Financial Services, Inc. are affiliated with Raymond James Trust, N.A. Raymond James® is
a registered trademark of Raymond James Financial, Inc. Investment products are: not deposits, not FDIC/NCUA insured, not
insured by any government agency, not bank guaranteed, subject to risk and may lose value. Raymond James Trust does not
offer legal or tax advice. You should discuss any legal or tax matters with the appropriate professional. 22-RJTRUST-40310-0989
TA 3/22