TRANSCRIPT:
Why is our family trust paying more in taxes than we are?
Hi, I’m Jeremy Riggs, certified financial planner at Base Wealth Management.
A couple asked me that this week. Their balance sheet was tidy. CDs neatly listed on a spreadsheet, two modest Roth IRAs, and a small trust funded by a late family member. But the tax bite was anything but tidy at all.
We followed the trail to how the trusts are taxed. Trusts hit higher tax brackets at relatively low income levels. So even modest interest from your CDs can be taxed steeply inside the trust.
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Now, back to the video.
In their case, most of the income was coming from cash and CDs titled to the trust. The fix started with a simple structure. We moved appropriate assets from the trust cash and CD position to a taxable brokerage account in their names. Then coordinated with an estate attorney to update the plan for their four kids so control and intent stayed intact.
From there, we set a multi-year plan, dollar cost average the idle cash and maturing CDs into a mix that provides income now, growth for the kids later, and a materially lower tax bill compared to keeping that income trapped at the trust rates.
Account titles matter just as much as your asset mix.
When was the last time you checked whether your structure matches your goals?
