Trusts are more than just tools for wealthy individuals. When used the right way, they can offer a range of tax advantages that benefit families at many income levels.
Trusts can also ensure your assets are managed and distributed according to your wishes. Here are some interesting points to consider.
Trusts can help lower income taxes
Some types of trusts can shift taxable income to beneficiaries in lower tax brackets. This can be useful when a trust holds income-generating assets such as rental property or dividend-paying investments. A non-grantor trust is taxed separately from the person who created it, which opens up opportunities for tax savings when beneficiaries report the income instead. These savings depend on how distributions are handled and the trust’s structure, so they must be managed with care.
Some trusts reduce capital gains taxes
Capital gains tax can be a significant burden when selling assets that have appreciated in value. Certain trusts allow individuals to reduce or postpone this tax. A charitable remainder trust (CRT) is a well-known example. It lets you transfer assets into the trust, which then sells them without immediate tax consequences. You receive a steady income for a set period or for life. After that, the remaining assets go to a charity. This strategy not only supports a cause you value but also reduces your taxable estate while delaying capital gains tax.
A trust gives you control over how and when your assets are distributed. You can protect assets from creditors, ensure long-term care for a family member with special needs or keep property within the family. Trusts can also help avoid probate and reduce delays in settling an estate.