Today I'm gonna talk to you about trusts. Some of the most common questions that I get from people regarding trusts are, why do I want one? What benefits am I gonna get from it? What is it gonna mean? What is it gonna cost me? Am I gonna be restricted on what I can do with my money? Those are all good questions, so let us begin to tackle some of those and get you some answers.

Video Transcript - Trusts

It's time to get down to the Brass Tacks. My name is Mel Sams. I'm the managing associate of Sam's CPA. Today I'm gonna talk to you about trusts. One of the most common questions that I get from people regarding trusts is, why do I want one? What benefits am I gonna get from it? What's it gonna mean? What's it gonna cost me? Am I gonna be restricted on what I can do with my money, et cetera, et cetera. Obviously that could be a very long answer. Let me just tackle that.

A trust is a separate legal entity from yourself, that can help protect your assets, it cane help execute your wishes upon your death with who you wanna leave your things to. A trust can be used for a lot of different reasons and strategies. There are many different types of trusts out there. Some of them are governed by state law, some of them are governed Federal. Some trusts too, more notably, some trusts have become irrelevant with the changing of estate tax laws and with the increased exemption for someone's estate tax.

There used to be trusts that would protect against you against that, but now that's not an issue anymore. You can see trusts evolve with the current tax law. Why a trust? It'll help you protect your assets, it will help execute on your wishes when you die. Living versus irrevocable, or revocable versus irrevocable. You've probably heard, or may have heard of a living trust or a revocable trust, revocable meaning it can be revoked at any time by the person creating it. A revocable trust is something that, while you're alive, you can create, and you can assign your assets to that trust.

Now, while you're alive, you don't even know it's there. It's name might show up on your bank account or your stock broker statement, but other than that, you're not gonna know it's there. You still on about your business. That trust is in place for when you die, it becomes irrevocable, it cannot be changed anymore, because you were the one that created it and you've passed away. When the trust becomes irrevocable, it truly does take on a life of its own. It's a separate legal entity, files its own tax return in a lot of cases, and the trust has someone known as a trustee, who helps execute upon your wishes that are in the trust document, with what is to happen to your assets.

Again, a trust can be used to maintain control of family businesses, to maintain control of your property, your stocks, your portfolio, your money, whatever. There's probably a trust that can be used to control that. Trusts are taxed, and depending on what type of trust it is, trusts can be taxed in some unique ways. Generally, trusts operate with the same marginal tax rates than individuals do. The tax brackets for a trust are very narrow. You get to the top level very quickly as your income goes up.

With that said, an individual who may be in the eight percent bracket, or 10% bracket, with 20,000 dollars of income, a trust might be in the top tax bracket with 20,000 of income. There's a lot of planning opportunities there, when it comes to the taxation of trusts. Trusts can pay taxes, just like we do, or a trust can distribute income and assets to beneficiaries and then the beneficiaries are taxed, as opposed to the trust. It can operate as a pass through.

Again, there are many different types of trusts. I recommend a conversation with your estate planning attorney, with your CPA, and they can help advise you on whether a trust makes sense for you and what type makes sense for you. And then, your CPA can help with the tax planning, to ensure that the trust does not pay taxes unnecessarily. If you have any questions, comments, or ideas for future videos, we'd love to hear 'em. We love getting your feedback. If you'd like to watch any of our other videos, or be notified when a new video becomes available, please subscribe to our YouTube channel.