[Date]
[Client Name]
[Client Address]
[Client City, State Zip]
Dear [Client Name]:
There is a great deal of literature in circulation today concerning
the use of trusts, and not all of what you may have seen is entirely
accurate. Certain aggressive promoters have been marketing various
trusts that promise certain tax advantages. The IRS is fully aware of
these promotions and is on the lookout for what they believe are abusive
trust agreements. We can help you sort through the information and
explain the advantages and disadvantages of using trusts.
Trusts serve a number of legitimate financial and estate planning
needs. Often, a testamentary trust (a trust created in your will) is
used to manage and protect assets for your beneficiaries until they
attain an age at which you believe they will be mature and responsible
enough to handle the property. Another very popular trust is the bypass
trust used in estate planning. Typically, the bypass trust receives
assets valued at an amount equal to your applicable estate tax exclusion
amount ($3.5 million for 2009). Using such a trust will keep these
assets out of the surviving spouse’s estate and reduce your combined
estate taxes.
Trusts are also used to keep certain assets out of your estate (such
as a life insurance trust) or as part of a wealth transfer program (such
as a children’s educational trust). They can also provide asset
protection benefits by sheltering assets from a beneficiary’s creditors
claims.
If you have charitable inclinations, we can assist in the structure
of a charitable gift that allows you or family members to retain some
benefits from the property while also benefiting the charity. For
example, a charitable remainder trust can be used to avoid immediate
taxation on the disposition of appreciated property while providing the
donor with a cash flow stream for life, an income tax deduction, and the
knowledge that you have significantly benefited your favorite charity.
If you would like more information on how trusts might accomplish
your tax and financial goals, please don’t hesitate to contact us. If
trusts are already in place, I suggest we review the trust instruments
to ensure your intentions are clear in the instruments. Please call at
your convenience so we can discuss this matter further.
Best Regards,
(Planner or client contact person)
