Trusts are excellent vehicles for holding assets. These legal tools can be strategically implemented to protect income and property from debts, lawsuits, and even certain tax liabilities. Depending on your needs, there are several trust types you can utilize to accomplish those goals.
So, what can you put into a trust? The house? Your investment income? What about the family business? The answer is yes, yes, and yes! In fact, the financially savvy frequently use trusts to hold their corporations.
The Benefits of Moving a Corporation into Trust
Transferring a corporation into a trust offers several financial benefits, especially when the trust is used as a means of estate planning. When assets are owned in trust, they are shielded from personal liabilities that may arise later, like lawsuits and debt obligations. This added protection preserves the value of the corporation for your loved ones.
Trusts also offer probate benefits. When you or a loved one passes, their assets generally move through probate. Probate adds time and expense to the administration of estates, and the assets are additionally taxed. When a corporation is owned in trust, it won't have to go through probate.
It's never too early to begin planning your estate. Often, people don't realize that your estate plan isn't final. Instead, it is flexible and should evolve and grow with your needs.
Setting Your Trust Up Correctly
Before undertaking the steps to move your corporation into trust, it's important to understand how important it is to choose the right trust and trustees. In California, trustees of a trust that hold a professional corporation may need to be professionally licensed themselves. For example, if you are a professional architect and you want to move your firm into a trust, you can't simply name your spouse as trustee if they aren't also a professionally licensed architect.
There are also special IRS rules that you must adhere to if you want to move an S-corporation into a trust. It probably comes as no surprise to learn that California has its own specific laws regarding trusts.
Although these scenarios can get tricky, there are legal workarounds. You and an experienced trust attorney can develop a custom-tailored trust solution that accomplishes your goals.
Hiring An Experienced California Trust Attorney
If you have trust issues (the legal kind), DME & Associates can help. When implementing estate planning goals, it's always important to speak with an experienced attorney, especially if utilizing trusts. Doing it right the first time will save you or your loved ones time and expense down the road.