How to Use a Trust to Protect Assets in Montana

How to Use a Trust to Protect Assets in Montana

May 8, 2018

Tanko Law Montana

Owning a large estate is a tremendous benefit to you and your family. However, it can also cause major burdens when you pass away. An estate tax can have a hefty cost and drastically decrease the financial well-being you worked so hard to build for your loved ones.


A trust will keep your assets safe after you pass away. However, it's important to know how a trust works and know which type is best for you. Discover how to use a trust to protect assets in this guide from Tanko Law.


What Is a Trust?


A trust is an arrangement whereby a third party, called a trustee, holds assets on the behalf of a recipient, also called a beneficiary. There are many ways to arrange trusts, and the trustee can specify how and when assets pass to the beneficiary or beneficiaries.


If properly funded, a trust allows your beneficiaries to avoid probate and grants them access to your assets sooner than if your estate passes through a Will. Trusts can also potentially provide protection from creditors. Please call Tanko Law Office for more information on how a Trust can help protect your assets from creditors.


Regardless of the type of trust you choose, a trustee is responsible for managing specific assets for the benefit of your beneficiaries. There are several types of trusts including revocable and an irrevocable trusts. A revocable trust may be modified during the trustor’s lifetime while an irrevocable trust cannot. Choosing a trust that will fit your needs is essential and Tanko Law Office is here to help you understand what trust is best for you.


Advantages of a Trust


Trusts offer many advantages that a Will does not including the following:


  • Allowing a Trustor to set specific conditions for distributions to beneficiaries;
  • Assisting with tax planning in order to ensure that your beneficiaries receive your estate and not the government
  • Offering asset protection from your creditors and your beneficiaries’ creditors
  • Allowing you to designate your successor trustee, to ensure proper management of your trust assets after your death


Family Trust


In a family trust, also called a bypass trust, you make a will bequeathing the amount up to the estate-tax exemption to the trust. The remainder of the estate passes tax-free to your spouse. You'll also specify exactly how the trust is to be used; for example, you may want to stipulate that trust income goes to your spouse after you die and that the trust principal is to be distributed tax-free to your children after your spouse dies.


Because your spouse is entitled to an estate-tax exemption as well, you and your spouse can, in effect, double the share of your children's' inheritance that can be shielded from estate taxes.

Once you place money in a bypass trust, it will always be exempt from the estate tax, even if the amount of money grows. So with wise investing on the part of your surviving spouse, he or she can significantly add to the amount of the children's inheritance.


Generation-Skipping Trust


Also known as a dynasty trust, a generation-skipping trust allows you to transfer money tax-free to beneficiaries at least two generations younger than you. Usually, the recipients are grandchildren, though they can also be great-grandchildren. You may stipulate that your children are to receive income from this trust and that they may use the principal for things that help the beneficiaries, such as college tuition or bills.


There is an important detail to note with this type of trust, however. If you leave your children more than the amount of the exemption, this bequest becomes subject to a transfer tax. The transfer tax is independent from estate taxes, and it's intended to prevent wealthy seniors from transferring all their money to their grandchildren.


Qualified Personal Residence Trust


A qualified personal residence trust (QPRT) removes the value of your home from your estate. It's useful for a home that is going to appreciate in value. A QPRT allows you to give someone your home as a gift, usually your children, while allowing you to keep control of it for a length of time that you specify. If you choose, you may continue living in the home during that time, and you will maintain full control of it.

In assigning value to the gift, the IRS presumes your home is worth less than its current value, as the recipient won't take possession of the house for years. However, there is a catch. If you do not outlive this trust, the IRS will count the full market value of the house when calculating your estate. To ensure that a QPRT is valid, you must outlive it, then either vacate the home or pay your children rent according to the fair market rent to continue living there.


There are several types of trusts, including Revocable Family Trusts or Irrevocable Trusts. Each trust has benefits to ensure that your assets are properly distributed to your beneficiaries. In order to determine which trust best fits your Estate Planning goals, please contact Tanko Law Office so that our team of experienced attorneys can assist you in determine which trust is right for you. Tanko Law Office has helped Montana residents with trusts since 1995. Visit our website for More information or call us at (406) 257-3711 to schedule your free 30-minute consultation with one of our experienced attorneys.


Let Us Help You


At Tanko Law, our team of experienced attorneys has helped Montana residents with trusts since 1995. Visit our website for more information. Our attorneys will answer your questions and show you how to use a trust to protect your assets. Call us at (406) 257-3711 for a free consultation today.

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Brian Tanko brings over 20 years of experience as an attorney, CPA, and Certified Fraud Examiner to every estate plan. Schedule a consultation to discuss your situation.

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