When to Use an Estate Freeze Trust

An estate freeze trust is an estate planning tool that many people use in order to limit estate and gift taxes. This type of trust arrangement can come in very handy during certain situations. Here are a few things to consider when deciding to use an estate freeze trust.

Avoiding Capital Gains

One of the best uses of an estate freeze trust is to avoid capital gains taxes. If you plan on holding an asset for an extended period of time, you may want to consider putting it into this type of trust. For example, if you own a valuable stock and you plan on keeping it for the next 20 years, it could be worth a substantial amount of money at that point. You would have to pay capital gains taxes on the money. By putting it into an estate freeze trust, you can avoid the taxes and still receive dividends from the stocks.

Protect the Assets

You might also use an estate freeze trust if you are interested in protecting your assets from creditors. If you think that there is a chance that someone could come after your assets, put them into this type of trust to protect them.