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From: koch@mahler.DEC (Kevin Koch LTN1-2/B17 DTN229-6274)
Newsgroups: net.taxes,net.invest
Subject: Any probate experts out there?
Message-ID: <1122@decwrl.DEC.COM>
Date: Thu, 13-Feb-86 11:19:14 EST
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Posted: Thu Feb 13 11:19:14 1986
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     These are questions regarding trusts and the $600,000 lifetime 
gift transfer exclusion.  (Yes, I know the exclusion isn't $600,000 
yet.)

     Imagine that I set up a trust and put $100,000 into it.  This 
reduces the amount of my estate that can be transferred tax-free on my 
death to $500,000.  As I understand it, trusts can transfer unlimited 
amounts of assets without paying any transfer taxes.  Now lets imagine 
that during my life the assets in the trust double from $100,000 to
$200,000.  Do I still have $500,000 of transfer exemption?  Am I not
better off than if the assets doubled outside of the trust, where they
would use up $200,000 of the transfer exclusion when they are disposed
of? 

     Next question:  Given the above trust with $200,000 in it.
Imagine that I remove $100,000 from the trust, lets say to buy a
house.  Does my transfer exclusion limit go back up from $500,000 to
$600,000?  If so, what happens if I take the second $100,000 out of
the trust? 

     Final question:  Are there any reasons I'm missing why it would 
be a bad idea to hold my assets in a trust?  Here are the good reasons 
I know about:  1)  Trusts don't go through probate.  2)  If someone 
sues me they can't get at the assets in the trust.  3)  As the sole 
trustee while I am alive, I control the trust, and am liable for the 
trust's gains and losses exactly as if there were no trust.  The tax 
effects are neutral.  There *ARE* tax reasons why I would not want to 
hold my principal residence in a trust, so when I talk about assets, I 
don't include that residence.

Kevin Koch (Koch is it)
...decwrl!dec-handel!koch // koch@handel.dec@decwrl.ARPA