Log in to AXA

For Customers, Financial Professionals and Employees

New to AXA? Need to register?

For Employer Plan Administrators

Retirement Gateway, Retirement Strategies or Momentum
- View demo

EQUI-PATH 403(b) Mutual Fund

Need to Register?

What kind of access do you need?

Employee Benefits

Third party financial professionals

For Life Insurance Only call (800) 924-6669

Business Strategies

Log in to AXA

For Customers, Financial Professionals and Employees

New to AXA? Need to register?

For Employer Plan Administrators

Retirement Gateway, Retirement Strategies or Momentum
- View demo

EQUI-PATH 403(b) Mutual Fund

Protect Your Assets With A Trust

In this article
  • Trusts are becoming more widely used
  • Some trusts offer tax-saving benefits
  • Trusts can help manage and preserve assets
  • A legal advisor can help identify the right trust

Contrary to what many people think, estate planning trusts are not necessarily reserved for just the wealthy. Even if you're not among the top 100 moneymakers in the country, you may be able to benefit from the tax-saving benefits of certain trusts.

What Is A Trust? Trusts Defined And Categorized

A trust is a three-part agreement in which the owner of an estate, or the trust's "grantor," transfers the legal title to assets to somebody else (the trustee) for the purpose of benefiting one or more third parties (the beneficiaries). Trusts may be revocable or irrevocable and may be included in a will to take effect at death.

Revocable Trusts Can Be Changed Or Revoked At Any Time.

For this reason, the government considers the specified assets to still be included in the grantor's taxable estate. Therefore, you may possibly have to pay estate taxes on those assets remaining after your death. In addition, you may have to pay income taxes on revenue generated by the trust during your lifetime.

Irrevocable Trusts Cannot Be Changed Once They Are Set Up.

In general the assets placed into an irrevocable trust are permanently removed from a grantor's estate and transferred to the trust. Income and capital gains taxes on assets in the trust can be paid by the trustee on behalf of the trust or the grantor, depending on the type of trust. Upon a grantor's death, the assets in the trust generally are not considered part of the estate and are therefore not subject to estate taxes.

Most revocable trusts become irrevocable at the death or disability of the grantor.

The Trustee Plays An Important Role.

The trust's grantor names a trustee to handle investments and manage the portfolio. In some cases, the grantor can work with the trustee on major decisions, or the trustee can be assigned full authority to act on the grantor's behalf.

A trustee may be an individual such as a relative, friend, an attorney or accountant, or it may be an entity that offers experience in such areas as taxation, estate law, and money management.

Different Needs: Different Kinds Of Trusts

Different kinds of trusts are designed to meet different needs and objectives. For example, if your primary goal is to ensure privacy in the settlement of your estate and to provide expert management of your affairs should you become incapacitated, you might choose a living trust.

The Living Trust

Allows you to remain both the trustee and the beneficiary of the trust while you're alive. You maintain control of the assets and receive all income and benefits. Upon your death, a designated successor trustee distributes the remaining assets according to the terms set in the trust, avoiding the probate associated with a will. Should you become incapacitated during the term of the trust, your successor or co-trustee can take over its management.

A Qualified Personal Residence Trust (QPRT)

Allows you to remove a residence from your estate if certain conditions are met. For example, you can turn over your vacation home to a trust but still use it for a designated period of time, after which the home belongs to the trust or its beneficiaries, depending on mandates outlined in the trust. The benefit is that any gift tax you might incur from giving away the property is decreased because you still have rights to the house. The potential drawbacks are that if you die before the term of the trust ends, the home is considered part of your estate and if you live beyond the term of the trust, you must pay rent to continue to use the home.

A Generation-Skipping Trust

Is used to leave money to your grandchildren. It can help preserve your generation-skipping tax exemption ($5.12 million in 2013) on bequests to your grandchildren and avoid the tax on bequests exceeding that amount, which currently can be up to 40%. Note: The generation-skipping exemption is equal to the federal estate tax exclusion.

For example, even if you put $50,000 in a generation-skipping trust and allow it to accumulate earnings for many years, your lifetime exemption would be eroded by only the original $50,000.

A Charitable Lead Trust

Can help you benefit a favorite charity while serving your own trust purposes. This trust lets you pay a charity income from a particular asset for a designated amount of time, after which the principal goes to the beneficiaries, with reduced estate taxes. Although gift taxes are paid up front, the amount of the gift is reduced by the charity's or gift's income interest.

Another Charitable Option, The Charitable Remainder Trust

Allows you to leave assets to a charity and receive income and a charitable income tax deduction. Through this trust, the trustee can sell the donated property or assets, tax-free, to the trust, and establish an annuity payable to you, your spouse, or your heirs for a designated period of time or life expectancy. Upon completion of that time period, the remaining assets go directly to the charity.

Trust Terms

Grantor: The owner of the assets that are transferred to the trust.

Trustee: The person or entity that oversees management of the trust according to the grantor's specifications in the trust.

Beneficiary(ies): The person(s) or entity(ies) that receive benefits from the trust.

Fees Vary With The Trust

Different types of trusts and trustees can require a variety of fees for administration and wealth management. As you develop your trust strategies, remember to consider the costs that may be involved and weigh them carefully in relation to the benefits.

Is There A Trust That's Right For You?

Although not quite as popular as wills, trusts are becoming more widely used among Americans, wealthy or not. Increasing numbers of people are discovering the potential benefits of a trust -- how it can help protect their assets, reduce their tax obligations, and define the management of assets according to their wishes in a private, effective way. Your legal advisor can help you evaluate a certain type of trust to determine if it may be appropriate for your circumstances.

Points To Remember

  1. A trust involves three parties: the grantor who creates the trust; the trustee who administers the trust; and the beneficiary who benefits from the trust.
  2. Trusts are either revocable or irrevocable.
  3. Because you can change or discontinue a revocable trust at any time, the government considers the trust's assets as part of your estate for tax purposes.
  4. Irrevocable trusts cannot be altered once they are established; for this reason, they are considered a gift at the time of transfer but generally are not considered part of your estate for tax purposes.
  5. There are some basic types of trusts: living trust, qualified personal residence trust, generation-skipping trust, charitable lead trust, and charitable remainder trust.
  6. Different types of trusts involve different costs for administration and management.
  7. Your legal advisor can help you determine if a trust will meet your needs.

Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2013 S&P Capital IQ Financial Communications. All rights reserved.

Life insurance and annuities are issued by an affiliate, AXA Equitable Life Insurance Company (NY, NY) and by various unaffiliated carriers. Securities products and services are offered through AXA Advisors (member FINRASIPC), 1290 Avenue of the Americas, NY, NY 10104 (212-314-4600). Securities (including mutual funds) are not FDIC insured, not bank guaranteed and subject to investment risk, including possible loss of principal invested. AXA Advisors and AXA Equitable are affiliated and do not provide tax or legal advice.

Amount in equity investments are subject to fluctuation in value and market risk, including loss of principal.

International securities carry additional risk including currency exchange fluctuation and different government regulations, economic conditions or accounting standards.

Stocks of small-size companies may have less liquidity than those of larger companies and may be subject to greater price volatility than the over all stock market. Smaller company stock involve a greater risk than is customarily associated with more established companies.

Bond investments are subject to interest rate risk so that when interest rates rise, the prices of bonds can decrease and the investor can lose principal value.

An investment in a money market fund is not insured or guarantee by the Federal Deposit Insurance Corporation or any other government agency.

Please consider the charges, risk, expenses and investment objectives carefully before purchasing a mutual fund. For a prospectus containing this and other information, please contact a financial professional. Read it carefully before you invest or send money.

Information provided has been prepared from S&P Capital IQ Financial Communications sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is provided for informational purposes only, and is not intended for solicitation or trading purposes. S&P Capital IQ Financial Communications is not an affiliate of AXA Equitable. Please consult your tax and legal advisors regarding your individual situation. Neither AXA Equitable nor any of the data provided by AXA Equitable or its content providers, such as S&P Capital IQ Financial Communications, shall be liable for any errors or delays in the content, or for the actions taken in reliance therein. By accessing the AXA Equitable website, a user agrees to abide by the terms and conditions of the site including not redistributing the information found therein.