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How Heritage Trusts Work in Texas

If you or someone you know wishes to make gifts to your minor children, to set up an education fund for their benefit, or to transfer wealth out of your estate to avoid possible death taxes (among many other reasons), you should consider establishing a Heritage Trust for your child’s or children’s benefit.

Using a Heritage Trust is a great way to take advantage of your annual $14,000 gift tax exclusion. This means that everyone may gift up to $14,000 per child every year without incurring gift tax liability. For example, a married couple may each gift $14,000 per child, totaling $28,000, each year, per child. Other family members may also gift to the same Heritage Trust for your child’s benefit.

As the creator of the Heritage Trust, you may decide who will act as the Trustee, or in other words, who will administer the trust for your child’s benefit. You may even name yourself as the Trustee. You may also designate a certain age at which point your child may be the Trustee of his or her own Heritage Trust.

Gifting money to a Heritage Trust does not mean your child must wait until a certain age to benefit from that money (as opposed to a commonly used 529 Plan). Instead, the Trustee may distribute the money to your child for his or her health, education, maintenance, or support. Your child needs only to ask the Trustee for assistance, and your Trustee has the discretion to say if and how much money to distribute.

Some of the benefits of a Heritage Trust include:

    Asset protection
    • Assets in the Heritage Trust are neither considered part of your estate nor that of your child if ever you or your child is sued
    • Assets in the Heritage Trust are not considered Community Property, and therefore are not vulnerable if your child gets divorced
    Takes advantage of your annual gift tax exclusion
    • You, your spouse, and anyone else may gift up to $14,000 each year to the Heritage Trust for your child and not incur any gift tax liability
    Control how the Heritage Trust assets are administered even after your child reaches adulthood
    • As opposed to a bank "custodial account" which requires that all funds inside be distributed outright when your child reaches age 21, the Heritage Trust may be customized to make distributions to your child at any age you choose
    You control who benefits from the Heritage Trust should your child pass away
    • Instead of going to your child’s spouse (who, for your minor children, you may still have never met), you may state that the assets will instead pass to your grandchildren, your favorite charity, your alma mater, or anyone else
    Assets in a Heritage Trust may not be counted as part of your child’s estate when calculating his estate tax liability at death
    A Heritage Trust may be crafted so that your child may benefit from the Trust as well as qualify for government need-based aid (See Special Needs Trusts for more information).

For more information about Heritage Trusts, please click here to select a seminar to attend and register today!

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Vacek, Freed & Thain, PLLC serves Texas families with their estate planning, estate tax planning, charitable planning, revocable living trusts, irrevocable trusts, Heritage trusts, wills, power of attorney, family limited partnerships, advanced asset protection planning, declaration of guardian for minor children, healthcare documents, will based estate planning and the hazards of will planning, special needs estate planning, estate administration and trust administration. Contact Vacek, Freed & Thain, PLLC if you or your loved ones reside in the Houston, Texas area, including: Katy, Cinco Ranch, Mission Bend, Pecan Grove, Richmond, Rosenberg, Greatwood, Sugar Land, Meadows Place, Bellaire, Fresno, Pearland, South Houston, Spring Valley Village, Pasadena, Clear Lake, Friendswood, and more!

Copyright © IMS. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement. Some artwork provided under license agreement.