How do wealthy individuals transfer property & assets to children using trusts to avoid taxes?

Thanks for the info! Question: If someone puts their house in an irrevocable trust, can they still live in it? And what about step-up in basis - do you lose that benefit with trusts?

Yes, you can continue living in your house after transferring it to an irrevocable trust through what's called a Qualified Personal Residence Trust (QPRT). You maintain the right to live there for a specified term, after which ownership transfers to your beneficiaries. This can significantly reduce the gift tax value of the property. Regarding step-up in basis, that's an important consideration. Assets in irrevocable trusts generally don't receive a step-up in basis upon death, which is one downside. However, assets in revocable living trusts do get the step-up benefit. This is why estate planning often involves weighing the estate tax benefits against potential capital gains tax implications for heirs.

Did it ask for any personal financial info? I'm hesitant to put sensitive details online. Also, does it help with setting up the actual trust docs or just give advice?

I'm curious how accurate it is. I mean, can software really replace an actual estate attorney? Estate planning with trusts seems pretty complex.

It asks for asset information to provide accurate analysis, but you can use general numbers without identifying details. The privacy policy is solid and they use bank-level encryption, but I understand the concern. The service doesn't replace attorneys - it's more about education and planning before you meet with professionals. It helped me understand my options so I could have an informed conversation with my attorney later. The attorney actually told me I saved us both time because I came in with clear goals based on the analysis.

Wait, how does this actually work? Does it just dial for you repeatedly or something? I've been trying to reach someone about an inherited IRA in a trust situation for months.

This sounds like BS honestly. The IRS is fundamentally unreachable - that's by design. I've tried everything to get through about a trust tax issue. No way this actually works.

It doesn't just redial - they use a system that navigates the IRS phone tree and holds your place in the queue until a representative is available. Then they call you and connect you directly to the agent. It's basically a sophisticated call-back system. I was in the same boat with questions about an inherited trust distribution that had unusual tax implications. Called normally for weeks with no luck - would wait on hold for hours then get disconnected. With this service I was connected within a day to someone who actually helped resolve the issue.

Do these dynasty trusts actually work though? I thought the generation-skipping tax was specifically created to prevent this kind of perpetual trust situation. Aren't there limits?

You're right that there's a generation-skipping transfer tax (GSTT), but each person currently has an exemption of $13.61 million (as of 2024) from this tax. For married couples, that's over $27 million that can go into a dynasty trust without triggering GSTT. Once assets are in the dynasty trust and protected by the exemption, all future growth happens outside the estate tax system. So if you fund the trust with assets that will appreciate significantly or with life insurance, the value can grow far beyond the initial exemption amount without any additional transfer taxes for future generations.

Revocable trust = you maintain control and can change/cancel it, but NO tax benefits since assets are still considered yours. Irrevocable trust = once assets go in, you can't take them back or change terms easily, BUT they're no longer part of your taxable estate, so big potential tax savings. Basically trading control for tax benefits.

That's fascinating. So the trust owns the policy, not the person? How do premiums get paid? Wouldn't that be considered a gift to the trust?

Exactly - the trust owns the policy, not the individual. For premium payments, the grantor makes cash gifts to the trust, and then the trustee uses those funds to pay the premiums. Yes, these premium payments are considered gifts to the trust beneficiaries, but that's where the annual gift tax exclusion comes in ($17,000 per beneficiary in 2023). To qualify for this exclusion, beneficiaries need "present interest" in the gifts, so trusts typically include "Crummey powers" - named after the court case that established them - giving beneficiaries temporary withdrawal rights over contributions. Most never exercise these rights, allowing the trustee to use the funds for premium payments instead.