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Preserving family businesses through trusts


Many Washington residents think of trusts as a kind of bank account they can leave behind for their heirs. That's not an accurate way to describe them. In fact, there are many ways to organize trusts to provide for many different types of beneficiaries.

At the basic level, a trust is formed when a person, known as a grantor, provides the property for a trust, and places it in the care of a trustee for the benefit of designated beneficiaries. The trustee's control over the property is limited by the terms of the trust.

Beyond that basic level, trusts can be very different. Perhaps the two major categories are testamentary trusts and inter vivos trusts. Testamentary trusts go into effect upon the grantor's death. Inter vivos trusts go into effect during the grantor's lifetime.

One common function of an inter vivos trust is to keep control of a business within a family. Using a type of trust known as a Grantor Retained Annuity Trust, or GRAT, the grantor can place his or her share of the business into the trust while retaining control of it until death. For certain types of businesses, this allows the business to pass to the next generation without incurring tax penalties and avoiding some of the disputes that can develop among heirs.

Trusts are very powerful tools, and setting them up requires a lot of care. Washington estate planning attorneys can help all kinds of families assess their options - wills, trusts and others - to preserve a legacy for their families or favorite charities.

Source: NerdWallet.com, "Intentionally Defective Grantor Trusts," Craig W. Smalley, May 23, 2014

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To speak with an attorney at Gellner Law Group about estate planning, probate, trusts, wills or tax controversy, contact our law office in Kent, Washington, today. You can call 425-336-2908 or send us an email. We provide representation across the entire Seattle-Tacoma metropolitan area.

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