The Law Offices of Scott Alan Morrison, P.A.
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Does a trust need a see-through provision?

For Maryland residents looking to complete their estate plans, finding the best tools for their needs is often a main goal. Utilizing a trust is a route that many individuals take, and this planning tool can offer many benefits. However, it is important that parties use their trusts correctly because issues could arise from mistakes. 

One aspect that trust makers may want to consider involves any tax implications. If individuals do not utilize a see-through provision on their trusts, especially in cases where the trust acts as a beneficiary to a retirement account, substantial taxes could be applied. The reason for the potential tax issue is that trusts are taxed differently and often at a higher rate than retirement accounts themselves.

However, if individuals utilize a see-through provision, this issue may be avoided. A see-through provision allows the trust to essentially be overlooked by the IRS in order for the beneficiaries of the trust to be seen as the direct beneficiaries of the retirement account. As a result, the applicable taxes are applied without taking the trust into consideration.

Using a trust can help interested parties protect assets and distribute property without that property having to go through probate. However, without the proper provisions and other details, surviving family could face taxation and other unexpected issues. Therefore, Maryland residents hoping to get the most benefits from their trusts may wish to speak with experienced attorneys to ensure that they have not overlooked any vital details regarding their trusts and other estate planning tools.

Source: kiplinger.com, "Some of the Biggest Estate-Planning Mistakes People Make", Andrew McNair, May 25, 2017

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