A revocable trust can be a wise choice for managing your assets, says nj.com’s recent article entitled “What are the advantages of putting assets into a trust?”
A revocable trust is a type of trust that can be changed once it is executed by the creator of the trust, known as the grantor. During the life of the trust, income earned is distributed to the grantor. After his or her death, the trust assets transfer to the beneficiaries of the trust.
A revocable trust can be advantageous because it has flexibility and provides this income stream and full access to the trust principal by the living grantor (also known as the trustor).
If you are the grantor, you can act as trustee, by yourself or with another as co-trustee.
When you no longer want to manage, or when you’re unable to manage your affairs, the co-trustee or a successor trustee can take over all of the duties.
If you didn’t put your assets in a revocable trust, you’d need to appoint an agent under a durable power of attorney to handle your financial affairs, if you become incapacitated.
However, some financial institutions would rather do business with a trustee instead of an agent under a power of attorney.
At your death, if all of your assets are in trust, your family can avoid the probate process. The trustee continues to manage the trust assets pursuant to the terms of the trust document. Those instructions do not need to be recorded any court in most jurisdictions.
Unlike a will, which is recorded with the government once it is probated, a trust is not a public document in most jurisdictions. Therefore, privacy is another advantage of a trust.
Finally, in states where an inheritance tax return is required, a revocable trust also avoids the need to obtain tax waivers, which are issued by the state to release any tax liens, upon death.
However, there are some downsides to putting assets into a trust.
First, the expense of creating a trust will be more than a simple will, and you would still need a will in the event you did not place everything in the trust during your lifetime or upon your death by a beneficiary designation.
Sometimes, having all of your assets in trust can also be more costly or cumbersome. For instance, insurance may be more expensive when an asset is in the trust.
Reference: nj.com (March 17, 2021) “What are the advantages of putting assets into a trust?”
The IRS said that Aretha Franklin’s estate owed more than $7.8 million in unpaid income taxes, interest and penalties from 2010 to 2017.
The Detroit Free Press’ recent article entitled “Aretha Franklin estate reaches deal with IRS to pay off claimed $7.8 million tax debt” reports a big breakthrough. It seems that Franklin’s four sons and the IRS have reached a settlement that would expedite the payment of the remaining tax burden and allow her sons access to some of the money from their late mother’s fortune.
Aretha’s heirs have not yet inherited anything from the estate because of the IRS situation.
In a petition filed February 19 in Oakland County Probate Court, the estate said the proposed arrangement includes an immediate $800,000 payment to the IRS. This is despite the fact that the estate continues to question the total tax bill owed.
Since her death, Franklin’s estate has been steadily paying on the tax debt, as well as the constantly growing interest, as it appeals the IRS’s claimed total. As of December 2020, the balance was $4.75 million.
The new petition says the final IRS bill will be determined “by agreement or litigation.”
The agreement between the estate and the IRS details the way in which Aretha’s posthumous revenue will be distributed, until the tax debt is resolved. Backdated to January 1 of this year, it includes new income from song royalties, licensing agreements and other money streams. This agreement states that 45% of quarterly revenue will go toward the existing IRS balance. 40% would also be earmarked for an escrow account to deal with the taxes due on the newly generated income. The other 15% of revenue would be used for managing the estate.
The agreement also provides an immediate $50,000 payment to each of Franklin’s four sons and approves quarterly cash payouts to them. This proposed deal, authorized by 10 attorneys representing the sons, was submitted to the court by attorney Reginald Turner. The Detroit lawyer and incoming American Bar Association president was appointed last year as temporary personal representative of the Franklin estate. The agreement has to be approved by Judge Jennifer Callaghan to be executable.
Franklin died in August 2018, after a long battle with cancer.
Reference: Detroit Free Press (March 1, 2021) “Aretha Franklin estate reaches deal with IRS to pay off claimed $7.8 million tax debt”