Legacy Trust and Your Family

Someone preparing an estate plan often wants to designate that certain funds, possessions, and resources be passed on to family members.  When there are significant assets, the individual may wish to leave their estate in a manner which can continue to generate income and increase in value for the benefit of their family continually.   In this situation, a legacy trust can provide a means to organize assets for the benefit of future family generations.

 

 

What is a Legacy Trust?

 

  • A legacy trust or dynasty trust is an irrevocable trust which allows the person creating the trust to name certain assets to be used for the benefit of their family members.

 

  • These types of trust can be funded during the trust creator’s (grantor’s) life as well as upon their death. Someone creating a legacy trust will have to state a specific purpose for the trust.  For example, the trust purpose could be to pay for the private education or care and maintenance of certain family members or to support a business venture.

 

  • The trust payments or disbursement will not be made to the named beneficiaries of the trust but will instead be for the express purpose stated in the legacy trust document. For instance, if the trust purpose is for a cousin’s healthcare needs, the payments would be made to their healthcare provider.

 

Benefits of a Legacy Trust

 

  • A central advantage of a legacy trust is that it protects the trust assets from estate tax when they are initially transferred. The result is what is often called the generation-skipping tax.  Essentially, when the trust assets pass to the next generations, they will not owe the tax that the first generations of beneficiaries owed.

 

  • If the value of the trust assets increases, that increase will not be taxed when the beneficiary dies.

 

  • Because beneficiaries do not own the trust assets, it is not possible for trust property or funds to be lost due to the individual beneficiary’s personal liability.

 

  • In Michigan, generally, legacy trust can exist without end. Meaning your family can continue to benefit from the trust assets in perpetuity.

 

We understand the importance of planning for your family’s future and estate and can help you build a trust which can create an enduring benefit for your loved ones.  Please contact us online or by phone if we may be of other assistance. https://www.michiganestateplans.com/contact/

 

 

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