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Accumulation Trust: What is it and Should I Include in in My Estate Planning?

An Accumulation Trust is a type of trust that allows the income generated by the trust assets to be accumulated within the trust rather than distributed to the beneficiaries. The income can be reinvested, allowing the trust assets to grow over time. The accumulated income is usually distributed at a later date or event specified in the trust document, such as when the beneficiary reaches a certain age or achieves a specific milestone.

Whether or not you should include an Accumulation Trust in your estate planning depends on your specific circumstances and goals. Here are some factors to consider:

Long-term wealth preservation: If your primary goal is to preserve and grow the assets within the trust for the benefit of future generations, an Accumulation Trust can be beneficial. By allowing the income to accumulate, you can potentially maximize the growth of the trust assets over time.

Financial responsibility of beneficiaries: Consider the financial maturity and responsibility of your intended beneficiaries. If you have concerns about their ability to manage a significant sum of money or want to ensure that the funds are used for specific purposes, an Accumulation Trust can provide a structured approach to asset distribution.

Creditor protection: Accumulated income within a trust may receive greater protection from creditors compared to distributed income. If you anticipate potential creditor issues for your beneficiaries, an Accumulation Trust can help shield the trust assets from such claims.

Tax planning: Consult with a qualified tax professional to understand the tax implications associated with an Accumulation Trust. Depending on your jurisdiction and the applicable tax laws, retaining income within the trust may offer tax advantages or strategies to manage the tax liability more effectively.

Flexibility and control: By incorporating an Accumulation Trust, you can specify the conditions or events that trigger the distribution of accumulated income. This allows you to have control over when and how the income is distributed to beneficiaries, aligning with your specific intentions and goals.

Legal advice: It is highly recommended to seek guidance from an experienced estate planning attorney who can evaluate your unique circumstances and provide tailored advice. They can help determine if an Accumulation Trust is appropriate for your estate plan and assist in drafting the trust document accordingly.

Ultimately, the decision to include an Accumulation Trust in your estate plan should be based on your individual circumstances, objectives, and the needs of your beneficiaries. We can provide comprehensive advice and assist you in creating an estate plan that best reflects your intentions. Call Gregorek & Associates at 425-284-3450 or fill out our contact form and we will be in touch to schedule a meeting.

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