High net worth families or those in high-risk professions such as real estate developers, business owners, and professionals such as doctors and lawyers are often intrigued by the Family Bank Trust (FBT). The FBT offers both asset protection and access.
Here’s how the family bank trust works:
- A spouse transfers assets into a trust for the benefit of her spouse and/or children.
- These beneficiaries have access to trust funds for their needs: health, education, maintenance, and support.
- The spouse who made the transfer (“grantor spouse”) pays the income taxes on the trust funds, thereby providing an additional non-taxable gift.
Here are the benefits of the family bank trust:
- The beneficiaries’ creditors such as divorcing spouses, bankruptcy trustees, lawsuit creditors, and the like have no access to the funds. (Asset protection.)
- The grantor spouse’s creditors cannot seize trust funds. (Asset protection.)
- Federal estate and generation-skipping taxes are eliminated on all assets transferred into the trust and paid in income taxes on trust funds. Trust assets will not be taxed in either the estate of the grantor spouse or the beneficiaries. (Tax avoidance.)
Here are some additional opportunities the family bank trust allows:
- If the estate is significant or both spouses participate in high-risk professions, each spouse can set up an FBT for the other, thus providing asset protection and eliminating federal transfer taxes on about $11 million.
- The FBT can be used as a retirement trust.
- The FBT is an irrevocable trust, yet, if carefully crafted, trust protectors can make sure your goals are carried out even if the law or circumstances change – without court interference.
You may have also heard the names “bypass trust,” “lifetime bypass trust,” or “spousal trust” to describe the family bank trust. They are one and the same and, if they sound intriguing to you, come in for a meeting to get the details on how the family bank trust would work for you and protect your family.
