Home » Blog » What Kind of Trust Works Best for Your Estate Plan?
Select What Kind of Trust Works Best for Your Estate Plan? What Kind of Trust Works Best for Your Estate Plan?

What Kind of Trust Works Best for Your Estate Plan?

Troy Werner and his family

Written by Troy Werner

Troy Werner has been an indispensable asset to The Werner Law Firm since joining in 2009, providing exceptional legal service to its clients.

Get To Know Troy!
POSTED ON: December 22, 2023

Trusts are common. However, there are numerous variations, and there is still considerable confusion about what is legal and what is not.

There are two major categories of trusts, one in particular that everyone should have. Regardless of their financial status, most people could have an estate plan incorporating a trust to eliminate the need for a will to go through probate, according to a recent article from Forbes, “Which Trusts Save Taxes, Which Do Not, And Which Are Illegal?”

Probate is the process by which a court reviews a will, approves it as valid, and approves the named executor. Depending upon your jurisdiction, probate can take a very long time and be quite costly. Documents going through probate also become part of the public record, and anyone can read them. However, there is a way to keep your wishes private and avoid the expense of probate.

A revocable trust can be created, directing the disposition of assets. You will still need a will, but the will states that everything you own goes into the revocable trust. This is known as a “pour-over-will” since it pours all assets into the trust.

The trust is private, is not separately taxable and you may change it at any time. You may wish to add or subtract beneficiaries over time to be sure that the people inheriting your property are the ones you want.

A revocable trust is also tax-neutral. Let’s say you transfer your house or stock into a living trust. It’s not considered a transfer for tax purposes.

The other major type of trust is an irrevocable trust. Generally speaking, once created and funded, assets in the trust may not be taken out of the trust, and the trust may not be amended. It is separately taxable and must file its own tax return. Transfers to an irrevocable trust can lead to gift taxes. However, it is an excellent means of saving income, gift, or estate taxes in the long run, depending upon how the estate is structured.

Two other types of trusts are foreign and domestic trusts. Most living and irrevocable trusts are domestic, meaning U.S. law is applied. However, if the trust is foreign, many complex rules could make U.S. beneficiaries taxable on their share of the tax income, even if the trust income is never distributed to them. For most people, these are not a useful option.

Other trusts are designed to save on state taxes. Some California residents want to avoid paying California taxes without moving. The typical living trust won’t help since the grantor must include the income on their tax return. They seek to shield assets from California’s 13.3% tax rate via a “NING,” a Nevada Incomplete Gift Non-Grantor Trust. There is a similar trust in Delaware, “DING,” and one from Wyoming known as a “WING.”

These trusts can be tricky, so be sure to work with an experienced estate planning attorney who is familiar with these trusts and the intricate details. Some taxpayers have found themselves in court for pushing the trust envelope too far. A man from Estes Park, Colorado, and another from Frisco, Texas, along with others, were indicted for conspiring to defraud the United States and assisting in the preparation of false income tax returns for promoting and selling abusive trust tax shelters for clients nationwide for fees ranging from $25,000 to $50,000.

An ethical local estate planning attorney will not put their clients at risk with overly aggressive trusts but will instead craft an estate plan to achieve realistic goals of protecting assets, minimizing taxes, and preparing the necessary documents to protect their clients.

If you need help setting up a trust, or if you intend to set up your estate plan but don't know where to start, we are here to help! Contact The Werner Law Firm probate attorneys in Los Angeles for a free consultation.

If you have any questions, schedule a free appointment with us through our online appointment page.

You can also read reviews from some of the hundreds of clients we have helped over the years.

Reference: Forbes (Nov. 24, 2023) “Which Trusts Save Taxes, Which Do Not, And Which Are Illegal?”

Share This Post

Why Our Living Trust Law Firm & Probate Attorneys?

Founded in 1975 by L. Rob Werner and serving California for over 48 years, our dedicated attorneys are available for clients, friends, and family members to receive the legal help they need and deserve. You can trust in our experience and reputation to help navigate you through your unique legal matters.

Whether you need help creating a living trust or navigating probate, our living trust law firm's compassionate team of estate planning lawyers and probate lawyers are here to help you and ready to answer your questions.

Our goal is to make your case as easy as possible for you. Hiring a lawyer can be a daunting task, but it doesn’t have to be. From the moment you contact our firm, through the final resolution of your case, our goal is to make the process easy and understandable. We cannot change the fact that probate is a long and complicated process, but through our Werner Law Firm Difference, we strive to go out of our way to keep you informed of your case through every step of the way. We are constantly refining our processes and procedures for a more streamlined and calm client experience. Our goal is to have you feel like a burden was lifted from your shoulders, and that we made the whole process an easy one

If you're dealing with a legal matter, we urge you to schedule a free initial appointment today and join the many satisfied clients who have contacted Werner Law Firm.

Book an Initial Call Now

Join Our eNewsletter and our California Estate Planning and Probate Blog Digest

Werner Law Firm logo
The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. See full disclaimer here.
Santa Clarita, CA Office

27433 Tourney Rd, Suite 200
Santa Clarita, California 91355

Los Angeles, CA Office

445 S. Figueroa St., Suite 3100
Los Angeles, California 90071

Bakersfield, CA Office

4900 California Ave, Tower B-210
Bakersfield, California 93309

Newport Beach, CA Office

23 Corporate Plaza Dr., Suite 150
Newport Beach, California 92660

Lancaster, CA Office

626 W Lancaster Blvd.,
Lancaster, California 93534

Pasadena, CA Office

35 North Lake Avenue, Suite 710
Pasadena, California 91101

Simi Valley, CA Office

2655 First St, Suite 250
Simi Valley, CA Office, California 93065

Encino, CA Office

15760 Ventura Blvd, Suite 700
Encino, California 91436

Oxnard, CA Office

300 E Esplanade Dr., 9th Floor
Oxnard, California 93036

Santa Barbara, CA Office

7 W. Figueroa St., Suite 200
Santa Barbara, California 93101

IMS - Estate Planning and Elder Law Practice Growth Advisors
Powered by