While a vast majority of taxpayers would appreciate the tax benefits of a trust, most would feel that they are out of the reach of anyone but a high income earner. Yet, there are trust options that can make it possible to set up a trust even in cases of taxpayers with more middle class income. The KISS Trust was created to meet the needs of those individuals who may have a lower-net worth, but would still like to take advantage of the options available in a trust. As you are determining if this trust is right for you, it is important to consult with a tax professional or accountant, such as Refund in Chicago, IL. Here are just a few things to keep in mind about the KISS Trust.
How Does It Work
A KISS Trust has a similar set up to a living irrevocable trust fund, in that it allows you to specify the beneficiaries and when or for what purpose, the funds can be used. The custom KISS Trust is prepared based on your wishes, then is held as a legal document until a disbursement condition is met. As you make payments into the trust, those funds are no longer yours because the trust is irrevocable.
Additionally, the trust protects those assets from bankruptcy, divorce, and a variety of tax liabilities. You also have the ability to decide how the funds can be invested. There are a host of options available, including mutual funds and annuities that can provide an added benefit by letting the trust grow tax free until disbursement is made to the beneficiary.
Another benefit is that the money being received by your beneficiary is not considered their property either. Therefore, if a child is applying for financial aid, these funds would not have to be claimed as assets. Funds can also be set up for a future generation. It can really turn into a legacy for your family for a variety of purposes.
It also helps that a KISS Trust can be set up with multiple contributors, so you can have more than one trustor on your newly created trust. This can really make it a family trust and provide tax benefits for multiple individuals.
This type of trust is an affordable option for those that might not have the highest net worth, but would still like to take advantage of the tax benefits that a trust can provide.
Who Could Be a Beneficiary?
A beneficiary for your trust can be anyone who will gain some advantage from the trust. This would include receiving distributions from a trust, will or even a life insurance policy. Your beneficiary may incur some tax liability as part of the process of receiving these assets or other distributions.
Still, most beneficiaries can reduce their tax liability by using their own tax planning when they receive any distributions from your trust or other inheritances. When you are setting up your KISS Trust, you may also be able to plan your distributions to minimize the negative tax impacts on your beneficiaries. This could include how you time your distributions or the type of conditions that you set up to trigger distributions.
Drawbacks to a KISS Trust
Like all irrevocable trusts, there are some drawbacks. While the biggest issue is typically fees, the KISS Trust does not have those large fees. Still, you cannot just get your assets back if you have a financial difficulty where those assets could provide a benefit. Additionally, most individuals who use trusts may find that they will to carefully walk through all the steps of the creation to handle all the potential conditions that you might want to include. Therefore, you really have to determine what you want upfront, because the trust cannot typically be changed once it is set up.
Still, the overall benefits of a KISS Trust can outweigh most of the negatives that might be part of what is considered an irrevocable trust. In many ways, this type of trust allows low-net worth individuals and families to enjoy the tax advantages of a trust, as well as an opportunity to build a legacy for future generations of their family.
Click on the link below to connect with a tax professional or accountant in the office of Refund in Chicago, IL, who can assist you in understanding the various tax benefits of a KISS Trust and how it can work for you and your family as part of the estate planning process.
