Making Your Mark: Financial Tools and Techniques for Securing Your Legacy

Written By: Alexander Gorman, Vice President, Morgan Stanley

You’ve worked hard to build a comfortable life for yourself and your family, and you want to create a meaningful legacy that lives on for generations. An effective estate plan can help you support the people and organizations you care about most, long after you are gone. As you map out a path to achieving your legacy goals, you may benefit from the effective use of trusts, gifting strategies and other wealth planning tools and techniques.

Exploring Trusts as Part of Your Estate Plan

Trusts can be used for many reasons, the most common of which is minimizing estate taxes. There are a variety of trust structures, and the type of trust you choose to incorporate into your estate plan will depend on your goals, circumstances and assets. If you are married, there are four main types of trusts to be aware of:

• Property under General Power of Appointment: This type of trust pays income to the surviving spouse, who can redirect trust assets at his or her subsequent death.
• Qualified Terminable Interest Property (QTIP): Under this trust structure, net income is paid to the surviving spouse, but assets must be distributed according to the stated wishes of the first spouse to die.
• Qualified Disclaimer Trust: This type of trust may allow the appreciation of assets held in the trust between the first spouse’s death and the death of the surviving spouse to pass estate tax-free to the heirs, instead of being included in the surviving spouse’s estate.
• Credit Shelter Trust: Also known as a “B trust” or “Exemption Trust,” this trust structure provides income to the surviving spouse during his or her lifetime, then passes assets on to the children upon the surviving spouse’s death.

Other types of trusts that may be considered as part of an estate plan include:

• Revocable Living Trust: Typically used to avoid probate, this flexible structure allows the owner of the trust to make or amend terms or provisions, change beneficiaries, determine the investment of trust assets or terminate the trust at any time.
• Charitable Remainder Trusts: Under this structure, the trust owner may receive lifetime income from assets in trust, which pass to a qualified charity at death. This type of trust may have significant tax benefits, particularly when funded by highly appreciated assets.
• Irrevocable Life Insurance Trust: This type of trust is used to hold life insurance policies, providing the trust owner with greater control over how proceeds are used by beneficiaries.
• Special Needs Trust: Established for the benefit of someone who will need some level of lifelong care, this is often used to shelter assets so that the beneficiary remains eligible for public assistance.

Taking Advantage of Federal Gift and Estate Tax Exemptions

Under current law, each person has a federal estate and gift tax limit of $11.4 million. This exemption doubles for married couples. For 2019, the annual gift exclusion remains at $15,000 for individuals and $30,000 for couples. As part of your estate plan, these exemptions can help minimize the amount of your estate that is subject to the 40% federal estate tax. 

However, tax laws are complex and subject to change. Working with a trusted team of advisors—including an accountant, estate planning attorney and Financial Advisor—can help you identify and implement lifetime wealth transfer strategies that help you preserve your hard-earned wealth and enable you to create the legacy you envision.

Disclosures

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor. 

Alexander Groman is a Vice President, Financial Advisor Wealth Management in 1 Penn Plaza, Fl 43 New York, NY 10119 at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at alexander.gorman@morganstanley.com or by telephone at 212-643-5708. 

This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.

Alexander Gorman may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where he is registered or excluded or exempted from registration, https://advisor.morganstanley.com/the-compass-group-10829105

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