If you have a sizable estate that you ultimately plan to pass down to future generations one of your primary estate planning concerns should be how to transfer the family wealth without losing a substantial portion of it to gift and estate taxes. One option is to create what is commonly referred to as a “legacy trust”.
To understand how a legacy trust in St Louis MO can help you first need to understand what happens without one. All of the assets owned by you at the time of your death are subject to federal gift and estate taxes at the maximum tax rate of 40 percent. Although the lifetime exemption amount allows you to exempt just over $5 million worth of assets from gift and estate taxes, anything over that amount is taxable. Therefore, failing to create an estate plan that includes tax avoidance as one of its goals means that a significant percentage of your assets will be lost to taxes when you die.
A legacy trust in St Louis MO provides a mechanism by which you can transfer family wealth through the generations without incurring gift and estate taxes. A legacy trust is an irrevocable trust that allows you to transfer wealth to future generations by naming them as beneficiaries under the terms of the trust.
In Missouri, the trust itself can be funded by taking advantage of the annual exclusion which allows you to contribute up to $14,000 to as many beneficiaries as you choose each year free from gift and estate taxes. Gifts made pursuant to the annual exclusion do not count toward the lifetime exemption limit. The trust itself cannot exist indefinitely. Only charitable trusts are allowed to continue forever; however, a legacy trust can continue through the lifetime of the youngest beneficiary named in the trust plus an additional 21 years. This often means that a legacy trust can remain operational for 80, 90, even 100 years.
A legacy trust also provides a certain amount of asset protection by shielding the assets held by the trust from creditors and divorcing spouses. At the same time, the trust may be able to provide income to future generations, cover college expenses, and/or be a source of emergency funds for your children and grandchildren.
If you believe that a legacy trust could be a beneficial inclusion in your estate plan be sure to discuss the option with your estate planning attorney.