Filing Taxes Properly

Avoid These 3 Mistakes When Using A Trust For Estate Planning

You've likely worked hard your entire life to build a career, raise a family, and accumulate substantial assets. Now it's time to plan a strategy for distributing those assets to your loved ones and favorite charities after you pass away. One effective tool to manage your legacy is a trust. A trust is a document that can give you more control over how and when your assets are distributed. It can also help you minimize probate costs and taxes, ensuring that more of your assets actually flow to your heirs. Trusts can be complicated, though, so it's important that you meet all rules and requirements in the setup and management of the document. Below are a few common mistakes to avoid with your trust.

Not funding the trust. Much like a will, a trust is a document that manages the estate distribution process. However, one of the big differences with a trust is that the trust must have property specifically assigned to it. A trust's instructions can only be applied to property that is owned by the trust. If you never put property in the trust or fund the trust, the document's instructions are basically irrelevant.

You can fund the trust in a variety of ways. One is to change the titling on certain accounts or assets so they are trust-owned. Another is to simply deposit money into bank accounts owned by the trust.

Not naming beneficiaries. Another key difference between a will and a trust is how heirs are named. In a will, you can often generally state that the will covers all of your children or all of your descendants. In a trust, you need to be more specific. You have to list every beneficiary of the trust and also document how they are to benefit from the trust's assets. If a person isn't named as a trust beneficiary, they cannot receive any of the property or any income generated by the property. They also likely won't have any legal recourse to resolve the situation, as beneficiary designations usually can't be challenged.

Not filing a tax return. Remember that a trust creates a completely new legal entity. While the assets in the trust may have come from you, they're technically not yours anymore. They're the property of the trust. That means your personal tax return doesn't cover those assets or the income generated by those assets. You'll need to file a trust tax return every year to meet your legal obligation.

If you or your trustee fails to file a return, the trust could rack up fees and penalties. That could mean that the trust could actually owe money when you pass away, forcing assets to be liquidated rather than distributed to heirs.

For more information, talk to an estate attorney or financial professional who works with trusts. They can help you reach your goals and objectives.

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Filing Taxes Properly

Once my business started taking off, I realized that any mistakes that I made with my taxes would have effects on a much broader scale. It occurred to me that instead of doing taxes on my own, it might be smart to have a professional accountant take over. I started looking around and I found a great business that specialized in tax services who could help. They were incredible to work with and I was really pleased with the services that they offered. They went through my account statements to look for problems, and I was really impressed. This website is all about filing taxes properly, and why you might need an accountant.