Trust provides more Protection than TOD

January 6, 2022

Many people incorporate a TOD, or “Transfer on Death” into their financial plan, thinking it will be easier for their loved ones than creating a trust. However, a trust provides more protection than a TOD. The article “TOD Accounts Versus Revocable Trusts—Which Is Better?” from Kiplinger explains how it really works.

The TOD account allows the account owner to name a beneficiary on an account who receives funds when the account owner dies. The TOD is often used for stocks, brokerage accounts, bonds and other non-retirement accounts. A POD, or “Payable on Death,” account is usually used for bank assets—cash.

The chief goal of a TOD or POD is to avoid probate. The beneficiaries receive assets directly, bypassing probate, keeping the assets out of the estate and transferring them faster than through probate. The beneficiary contacts the financial institution with an original death certificate and proof of identity. The assets are then distributed to the beneficiary. Banks and financial institutions can be a bit exacting about determining identity, but most people have the needed documents.

There are pitfalls. For one thing, the executor of the estate may be empowered by law to seek contributions from POD and TOD beneficiaries to pay for the expenses of administering an estate, estate and final income taxes and any debts or liabilities of the estate. If the beneficiaries do not contribute voluntarily, the executor (or estate administrator) may file a lawsuit against them, holding them personally responsible, to get their contributions.

If the beneficiary has already spent the money, or they are involved in a lawsuit or divorce, turning over the TOD or POD assets may get complicated. Other personal assets may be attached to make up for a shortfall.

If the beneficiary is receiving means-tested government benefits, as in the case of an individual with special needs, the TOD or POD assets may put their eligibility for those benefits at risk.

These and other complications make using a POD or TOD arrangement riskier than expected.

A trust provides a great deal more protection for the person creating the trust (grantor) and their beneficiaries than a TOD. If the grantor becomes incapacitated, trustees will be in place to manage assets for the grantor’s benefit. With a TOD or POD, a Power of Attorney would be needed to allow the other person to control of the assets. The same banks reluctant to hand over a POD/TOD are even more strict about Powers of Attorney, even denying POAs, if they feel the forms are out-of-date or don’t have the state’s required language.

Creating a trust with an experienced estate planning attorney allows you to plan for yourself and your beneficiaries. You can plan for incapacity and plan for the assets in your trust to be used as you wish. If you want your adult children to receive a certain amount of money at certain ages or stages of their lives, a trust can be created to do so. You can also leave money for multiple generations, protecting it from probate and taxes, while building a legacy. If you would like to read more about a TOD or POD, and how they work, please visit our previous posts.

Reference: Kiplinger (Dec. 2, 2021) “TOD Accounts Versus Revocable Trusts—Which Is Better?”

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TOD and POD Accounts are ways to avoid Probate

December 28, 2021

Kiplinger’s recent article entitled “TOD Accounts Versus Revocable Trusts – Which Is Better?” explains that a TOD account typically deals with distributing stocks, brokerage accounts or bonds to the named beneficiary, when the account holder dies. A POD account is similar to a TOD account. However, it handles a person’s bank assets (cash), not their securities. Both TOD and POD accounts are quick and simple ways to avoid probate.

That can be slow, expensive, public and possibly messy. Financial institutions offer TOD and POD at their discretion, but almost all major brokerage houses and investment houses now have these types of accounts, as well as most banks for standard bank accounts. Many even let you handle this online.

The big benefit of using a POD or TOD account is probate avoidance. As mentioned, TOD and POD accounts avoid the probate process, by naming a beneficiary or beneficiaries to inherit the asset directly when the account owner passes away. These accounts can distribute assets quickly and seamlessly to the intended beneficiary.

However, when someone passes away, there can be creditors, expenses of administering the decedent’s estate and taxes owed. The person or persons responsible for administering the decedent’s estate are typically empowered under the law to seek contributions from the POD and TOD beneficiaries to pay those liabilities. If the beneficiaries don’t contribute voluntarily, there may be no choice but to file a lawsuit to obtain the contributions. The beneficiary may also have spent those assets or have other circumstances, such as involvement in a lawsuit or a divorce. Consequently, these situations will complicate turning over those assets.

A trust lets you to plan for incapacity, and if the creator of the trust becomes incapacitated, a successor or co-trustee can assume management of the account for the benefit of the creator. With a POD or TOD account, a durable power of attorney would be required to have another person handle the account. Note that financial institutions can be reluctant to accept powers of attorney, if the documents are old or don’t have the appropriate language.

A trust allows you to plan for your beneficiaries, and if your beneficiaries are minors, have special needs, have creditor issues, or have mental health or substance abuse issues, trusts can hold and manage assets to protect those assets for the beneficiary’s use. Inheritances can also be managed over long periods of time with a trust.

Although in some cases POD and TOD accounts are ways to avoid probate, their limitations at addressing other issues can cause many individuals to opt for a revocable trust. Talk to an experienced estate planning attorney to see what’s best for you and your family. If you are interested in learning more about avoiding probate, please visit our previous posts.

Reference: Kiplinger (Dec. 2, 2021) “TOD Accounts Versus Revocable Trusts – Which Is Better?”

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Can You Sue A Trust Directly?

December 13, 2021

If you have a trust, plan to create one or are the beneficiary of one, you’ll want to understand whether or not a trust can be sued. It’s not a simple yes/no, according to a recent article titled “Estate Planning: Can You Sue a Trust?” from Yahoo! Finance. Can you sue a trust directly? Generally, no, but you can sue the trustee of a trust. You can also sue beneficiaries of a trust.

Understanding when a lawsuit can be brought against a trust should be considered when creating an estate plan, a good reason to work with an experienced estate planning attorney.

A trust is a legal entity used to hold and manage assets on behalf of one or more beneficiaries. A trustee can be a person or business entity responsible for managing the trust and the assets it holds. Trusts can be revocable, meaning the person who created them (the grantor) can make changes, or irrevocable, meaning transfer of assets is permanent (for the most part).

Trusts are used to manage assets while the grantor is living and after they have died. There are many different types of trusts, from a Special Needs Trust (SNT) used to manage assets for a disabled person, or a CRT (Charitable Remainder Trust) used for charitable giving. For instance, a trust generally cannot be sued, but a trustee can.

A trust cannot always protect the grantor or beneficiaries from litigation. If a person has debt and creditors want to be paid, they can sue a revocable trust, as you have not given up much in the way of control using this type of trust—you still directly own the assets in the trust!

Irrevocable trusts provide more protection. Once assets are in the trust, the grantor has given up control of the assets. However, if the trust was created mainly to protect assets from creditors, a court could determine the trust was created fraudulently, and rule against the grantor, leaving all of the assets in the trust vulnerable to creditor lawsuits.

Here’s an example. If you transfer a car into a revocable living trust and cause an accident leading to the death or serious injury of another driver, the driver or their family could sue the trust for damages indirectly, by suing you as the trustee.

Trustees are bound as fiduciaries to manage the trust assets as directed by the grantor and for the best interest of the beneficiaries. The trustee can be sued if someone, typically a beneficiary, believes the trustee is not carrying out their duties. A beneficiary might sue a trustee, if they were supposed to receive a certain amount of money at a specific time, but the trustee has not distributed the funds. This is known as a “breach of fiduciary duty.”

Trustees are also prevented from self-dealing or using trust assets for their own benefit. If a beneficiary believes a trustee is taking money from the trust for their own benefit, they can sue the trustee.

While you can sue a trust directly, it is only under very specific circumstances. A trust can also be “contested,” which is different from suing. Contesting a trust occurs when someone believes the grantor was coerced or subjected to undue influence in creating the trust. It also happens if someone believes the trust or amendments to the trust were the result of elder financial abuse, or if it appears trust documents have been forged or fraudulently altered.

Before a trust can be contested, there needs to be a valid suspicion the trust is somehow in violation of your state’s estate planning laws. You also have to have legal standing to bring a claim. The court may or may not side with you, so there are no guarantees. If you would like to learn more about how trusts works, please visit our previous posts.

Reference: Yahoo! Finance (Nov. 17, 2021) “Estate Planning: Can You Sue a Trust?”

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Understanding how Irrevocable Trusts work

November 10, 2021

However, below the surface of estate planning and the world of trusts, things get complicated. Revocable trusts become irrevocable trusts, when the grantor becomes incapacitated or dies. It is just one of the many twists and turns in trusts, as reported in the article “What’s the difference between a revocable and irrevocable trust” from Market Watch. If you are considering trusts as an option in your planning, understanding how irrevocable trusts work is vital.

For starters, the person who creates the trust is known as the “grantor.” The grantor can change the trust while living, or while the grantor has legal capacity. If the grantor becomes incapacitated, the grantor can’t change the trust. An agent or Power of Attorney for the grantor can make changes, if specifically authorized in the trust, as could a court-appointed conservator.

Despite the name, irrevocable trusts can be changed—more so now than ever before. Irrevocable trusts created for asset protection, tax planning or Medicaid planning purposes are treated differently than those becoming irrevocable upon the death of the grantor.

When an irrevocable trust is created, the grantor may still retain certain powers, including the right to change trustees and the right to re-direct who will receive the trust property, when the grantor dies or when the trust terminates (these don’t always occur at the same time). A “testamentary power of appointment” refers to the retained power to appoint or distribute assets to anyone, or within limitations.

When the trust becomes irrevocable, the grantor can give the right to change trustees or to change ultimate beneficiaries to other people, including the beneficiaries. A trust could say that a majority of the grantor’s children may hire and fire trustees, and each child has the right to say where his or her share will go, in the event he or she dies before receiving their share.

Asset protection and special needs trusts also appoint people in the role of trust protectors. They are empowered to change trustees and, in some cases, to amend the trust completely. The trust is irrevocable for the grantor, but not the trust protector. Another trust might have language to limit this power, typically if it is a special needs trust. This allows a trust protector to make necessary changes, if rules regarding government benefits change regarding trusts.

Irrevocable trusts have become less irrevocable over the years, as more states have passed laws concerning “decanting” trusts, reformation and non-judicial settlement of trusts. Decanting a trust refers to “pouring” assets from one trust into another trust—allowing assets to be transferred to other trusts. Depending on the state’s laws, there needs to be a reason for the trust to be decanted and all beneficiaries must agree to the change.

Trust reformation requires court approval and must show that the reformation is needed if the trust is to achieve its original purpose. Notice must be given to all current and future beneficiaries, but they don’t need to agree on the change.

The Uniform Trust Code permits trust reformation without court involvement, known as non-judicial settlement agreements, where all parties are in agreement. The law has been adopted in 34 states and the District of Columbia. Any change that doesn’t violate a material purpose of the trust is permitted, as long as all parties are in agreement. An experienced estate planning attorney can ensure you have a firm understanding of how irrevocable trusts work. If you would like to learn more about the different types of trusts, please visit our previous posts.

Reference: Market Watch (Oct. 8, 2021) “What’s the difference between a revocable and irrevocable trust”

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Which Trust Is Right for You?

September 21, 2021

Everyone wins when estate planning attorneys, financial advisors and accounting professionals work together on a comprehensive estate plan. Each of these professionals can provide their insights when helping you make decisions in their area. Guiding you to the best possible options tends to happen when everyone is on the same page, says a recent article “Choosing Between Revocable and Irrevocable Trusts” from U.S. News & World Report. Which trust is right for you?

What is a trust and what do trusts accomplish? Trusts are not just for the wealthy. Many families use trusts to serve different goals, from controlling distributions of assets over generations to protecting family wealth from estate and inheritance taxes.

There are two basic kinds of trust. It can be difficult to know which trust is right for you and your family situation. There are also many specialized trusts in each of the two categories: the revocable trust and the irrevocable trust. The first can be revoked or changed by the trust’s creator, known as the “grantor.” The second is difficult and in some instances and impossible to change, without the complete consent of the trust’s beneficiaries.

There are pros and cons for each type of trust.

Let’s start with the revocable trust, which is also referred to as a living trust. The grantor can make changes to the trust at any time, from removing assets or beneficiaries to shutting down the trust entirely. When the grantor dies, the trust becomes irrevocable. Revocable trusts are often used to pass assets to adult children, with a trustee named to manage the trust’s assets until the trust documents direct the trustee to distribute assets. Some people use a revocable trust to prevent their children from accessing wealth too early in their lives, or to protect assets from spendthrift children with creditor problems.

Irrevocable trusts are just as they sound: they can’t be amended once established. The terms of the trust cannot be changed, and the grantor gives up any control or legal right to the assets, which are owned by the trust.

Giving up control comes with the benefit that assets placed in the trust are no longer part of the grantor’s estate and are not subject to estate taxes. Creditors, including nursing homes and Medicaid, are also prevented from accessing assets in an irrevocable trust.

Irrevocable trusts were once used by people in high-risk professions to protect their assets from lawsuits. Irrevocable trusts are used to divest assets from estates, so people can become eligible for Medicaid or veteran benefits.

The revocable trust protects the grantor’s wishes, if the grantor becomes incapacitated. It also avoids probate, since the trust becomes irrevocable upon death and assets are outside of the probated estate. The revocable trust may include qualified assets, like IRAs, 401(k)s and 403(b)s.

However, there are drawbacks. The revocable trust does not provide tax benefits or creditor protection while the grantor is living.

Your estate planning attorney will know which trust is right for your situation, and working with your financial advisor and accountant, will be able to create the plan that minimizes taxes and maximizes wealth transfers for your heirs. If you would like to learn more about the different types of trusts available, please visit our previous posts.

Reference: U.S. News & World Report (Aug. 26, 2021) “Choosing Between Revocable and Irrevocable Trusts”

Estate Planning for Couples with Big Age Differences

August 31, 2021

Estate planning becomes more complicated for couples with big age differences. Seniors who are married to younger spouses have a special situation for estate planning, a situation that’s become more common, according to Barron’s recent article “Couples with Big Age Gaps Require Special Attention.”

This kind of family requires planning for the older spouse’s retirement needs and healthcare costs, while determining how much of the older spouse’s wealth should go to the children from any previous marriages while balancing the needs of a future child with a younger spouse. Beneficiaries for all financial accounts, last wills and all estate documents need to be updated to include the new spouse and child. The same goes for medical directives and power of attorney forms.

Social Security and retirement account considerations differ as well. The younger spouse may begin receiving their own Social Security at age 62, or a portion of the older spouse’s Social Security, whichever is greater. If the older spouse can wait to file for Social Security benefits at age 70, the younger spouse will receive more spousal benefits than if the older spouse claims earlier. Social Security pays the survivor’s benefit, typically based upon the older spouse’s earnings.

Pension plans need to be reviewed for a younger spouse. If the pension plan allows a survivor benefit, the surviving spouse will receive benefits in the future. IRAs have different beneficiary distribution rules for couples with significant age differences. Instead of relying on the standard Uniform Lifetime Tables, the IRS lets individuals use the Joint Life and Last Survivor Expectancy Table, if the sole beneficiary is a spouse who is more than ten years younger. This allows for smaller than normally Required Minimum Distributions from the IRA, allowing the account a longer lifetime.

Families that include children with special needs also benefit from trusts, as assets in the trust are not included in eligibility for government benefits. Many families with such family members are advised to use an ABLE Savings Account, which lets the assets grow tax free, also without impacting benefit eligibility. There are limits on the accounts, so funds exceeding the ABLE account limits may be added to special needs trusts, or SNTs.

A trustee, who may be a family member or a professional, uses the SNT assets to pay for the care of the individual with special needs after the donor parents have passed. The child is able to maintain their eligibility.

For same sex couples, revocable or irrevocable trusts may be used, if the couple is not married. Nontraditional families of any kind with children require individual estate plans to protect them, which usually involves trusts.

Trusts are also useful when there are children from different marriages. They can protect the children from the first marriage and subsequent marriages. Estate planning is more complicated for couples with big age differences. A wisely constructed estate plan can do more than prevent legal battles among children—they can preserve family harmony in the non-traditional family after parents have passed.

If you would like to learn more about estate planning for older couples, or those in second marriages, please visit our previous posts.

Reference: Barron’s (July 27, 2021) “Couples with Big Age Gaps Require Special Attention”

When Should You Terminate an ILIT?

August 17, 2021

When should you terminate an ILIT? The purpose of an irrevocable life insurance trust (ILIT) is to own and control term or permanent life insurance policies, so the policy proceeds aren’t part of the insured’s taxable estate upon death. Nj.com’s recent article entitled “Should I terminate this trust and do I need a will?” looks at the situation where a person created a revocable (RLT) and an irrevocable life insurance trust (ILIT) to take care of his family after his death.

However, now everyone in the family is financially independent and the value of his estate is far below the 2021 taxable threshold of $11.7 million.

Should he terminate the ILIT and RLT and simply designate his children as beneficiaries of his investment accounts and life insurance?

In this situation, the ILIT was funded with a term policy that’s set to expire soon. As a result, it may be easier to let the policy owned by the ILIT expire.

If that happens, the ILIT would be immaterial. Note that the terms of the trust will dictate the procedure for the termination of the ILIT. This can be simple or difficult. Talk to an experienced estate planning attorney to examine the trust’s language. A revocable living trust lets the individual creating the trust control the assets in the trust and avoid probate.

This type of trust can also be used to manage the trust assets by a successor trustee, if the grantor who created the trust becomes incapacitated.

An experienced estate planning attorney will know the state laws that regulate trusts, so consult with him or her. For example, banks in New Jersey may freeze 50% of the assets in an estate upon the owner’s death to make certain that any estate or inheritance taxes due are paid. In the Garden State, a tax waiver must be obtained to lift the freeze. However, the assets in a trust aren’t subject to a similar freeze.

At the grantor’s death, a trustee must pay income tax, if the gross income of the trust reaches the threshold. However, the trust may not accumulate gross income of $600, if the assets are distributed outright to the beneficiaries soon after the death of the grantor. Work with an estate planning attorney to ensure you have your finances in order if you terminate an ILIT.

If you would like to learn more about ILITs and other life insurance options, please visit our previous posts.

Reference: nj.com (June 15, 2021) “Should I terminate this trust and do I need a will?”

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The Advantages of a Testamentary Trust

August 16, 2021

One reason to have a last will and testament is to protect minor children. A will offers a means of providing for a minor child through a testamentary trust, which is also a good tool for leaving an inheritance to someone who might not use their bequest wisely, says the recent article “What is a Testamentary Trust and How Do I Create One?” from wtop news. This is one of the advantages of a testamentary trust.

Trusts are legal entities that hold assets, and money or other assets in the trust are managed according to the wishes of the person who created the trust, known as the grantor. A testamentary trust is created through the person’s will and becomes effective upon their death. Once the person dies, their assets are placed in the trust and are distributed according to the directions in the trust.

A trust can also be created while a person is living, called a revocable trust or a living trust. Assets moved into the trust are distributed directly to heirs upon the person’s death and do not go through the probate process. However, they are administered without probate, as long as they are in effect. Living trusts are also managed outside of the court system, while testamentary trusts are administered through probate as long as they are in effect.

A testamentary trust is used to manage money for children. Another advantage of a testamentary trust is the ability to protect assets in other situations. If you are concerned about an adult child getting divorced and don’t want their inheritance to be lost to a divorce, a trust is one way to keep their inheritance from being considered a marital asset.

The oversight by the court could be useful in some situations, but in others it becomes costly. Here’s an example. Let’s say a testamentary trust is created for an 8-year-old to hold assets until she turns 25. For seventeen years, any distribution of assets will have to take place through the court. Therefore, while it was less costly to set up than a living trust, the costs of court proceedings over the seventeen years could add up quickly and easily exceed the cost of setting up the living trust in the first place.

If someone involved in the estate is litigious and likely to contest a will or a trust, having the court involved on a regular basis through a testamentary trust may be an advantage.

Having an estate planning attorney create the trust protects the grantor and the beneficiary in several ways Trusts are governed by state law, and each state has different requirements. Trying to set up a trust with a generic document downloaded from the web could create an invalid trust. In that case, the trust may not be valid, and your wishes won’t be followed.

Once a testamentary trust is created, nothing happens until you die. At that point, the trust will be created, and assets moved into it, as stipulated in your last will and testament.

The trust can be changed or annulled while you are living. To do this, simply revise your will with your estate planning attorney. However, after you have passed, it’ll be extremely difficult for your executor to make changes and it will require court intervention.

If you would like to learn more about testamentary trusts, please visit our previous posts.

Reference: wtop news (July 19, 2021) “What is a Testamentary Trust and How Do I Create One?”

Short-Cuts in Planning can have Consequences

June 15, 2021

It seems like a simple way for the children to manage mom’s finances: add the grown children as owners to a bank account, brokerage account or make them joint owners of the home. However, these types of short-cuts in planning can have consequences for the parent’s estate and the children themselves, says the article entitled “Estate planning: When you take the lazy way out, someone will pay the price” from Florida Today.

By adding an adult child as owner to the account, the child is being given 50% ownership. The same is true if the child is added to the title for the home as joint owner. If there is more than $30,000 in the account or if the asset is valued at more than $30,000, then the mother needs to file a gift tax return—even if no gift tax is due. If the gift tax return is not filed in a timely manner, there might be a gift tax due in the future.

There is also a carryover basis in the account or property when the adult child is added as an owner. If it’s a bank account, the primary issue is the gift tax return. However, if the asset is a brokerage account or the parent’s primary residence, then the child steps into the parent’s shoes for 50% of the amount they bought the property for originally.

Here is an example: let’s say a parent is in her 80s and you are seeing that she is starting to slow down. You decide to take a short-cut and have her add you to her bank account, brokerage account and the deed (or title) to the family home. If she becomes incapacitated or dies, you’ll own everything and you can make all the necessary decisions, including selling the house and using the funds for funeral expenses. It sounds easy and inexpensive, doesn’t it? It may be easy, but it’s not inexpensive.

Sadly, your mom dies. You need some cash to pay her final medical bills, cover the house expenses and maybe a few of your own bills. You sell some stock. After all, you own the account. It’s then time to file a tax return for the year when you sold the stock. When reporting the stock sale, your basis in the stock is 50% step-up in value based on the value of the stock the day that your mom died, plus 50% of what she originally paid for the stock.

If your mom bought the stock for $100 twenty years ago, and the stock is now worth $10,500, when you were added to the account, you now step into her shoes for 50% of the stock—$50. You sold the stock after she died, so your basis in that stock is now $5,050—that’s $5,000 value of stock when she died plus $50: 50% of the original purchase. Your taxable gain is $5,450.

How do you avoid this? If the ownership of the brokerage account remained solely with your mother, but you were a Payable on Death (POD) or Transfer on Death (TOD) beneficiary, you would not have access to the account if your mom became incapacitated and had appointed you as her “attorney in fact” on her general durable power of attorney. What would be the result? You would get a step-up in basis on the asset after she died. The inherited stock would have a basis of $10,000 and the taxable gain would be $500, not $5,450.

Short-cuts in planning can have dire consequences for your loved ones. A better alternative—talk with an estate planning attorney to create a will, a revocable trust, a general durable power of attorney and the other legal documents used to transfer assets and minimize taxes. The estate planning attorney will be able to create a way for you to get access or transfer the property without negative tax consequences.

If you would like to read more about poor estate planning mistakes, please visit our previous posts.

Reference: Florida Today (May 20, 2021) , “Estate planning: When you take the lazy way out, someone will pay the price”

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Strategies to Reduce Estate Taxes

May 20, 2021

If the federal estate tax exemption is lowered, as is expected, it could go as low as $3 million, reports the article “How Trusts Can Be Used To Counter Tougher Estate Taxes” from Financial Advisor. For Americans who own a home and robust retirement accounts, this change presents an estate planning challenge—but one with several solutions. Trusts, giving and updating estate plans or creating wholly new estate plans should be addressed in the near future. There are strategies to reduce estate taxes.

Not that these topics aren’t challenging for most people. Confronting the future, including death and incapacity, is difficult. Adult children and their parents may find it hard to talk about these matters; emotions, death and money are tough to talk about on their own, but estate planning includes conversations around all three.

Once those hurdles are overcome, an unemotional approach to the business of estate planning can accomplish a great deal, especially when guided by an experienced estate planning attorney. Here are a few suggestions for families to consider.

Estate and gift planning strategies to reduce or avoid estate taxes include Grantor Retained Annuity Trusts (GRATs) and Spousal Limited Access Trusts (SLATs). A SLAT is an irrevocable trust created when one spouse (the donor spouse) makes a gift into a trust to benefit their spouse (the beneficiary spouse), while retaining limited access to the assets at the same time they remove the asset from their combined estate. One spouse is permitted to indirectly benefit, as long as the couple remains married.

The indirect access disappears, if the spouses divorce or if the beneficiary spouse dies before the donor spouse. Be careful about creating SLATs for both spouses; the IRS does not like to see SLATs with the same date of origin and the same amount for both spouses.

The GRAT and sales to an Intentionally Defective Trust (IDGT) are useful tools in a low-interest rate environment. For a GRAT, property is transferred to a trust in exchange for an annual fixed payment. A sale to an IDGT is where property is sold to a trust in exchange for a balloon note.

Gifting is an important part of estate planning at any asset level. For 2020 and 2021, the annual gift-tax exclusion is $15,000 per donor, per recipient. The simple strategy of aggressive lifetime gifting using that $15,000 exclusion is a good way to get money out of a taxable estate.

Protect the estate plan by reviewing it every four or five years, and sooner if there are large changes to the tax law—which is coming soon—and changes in the family’s circumstances.

Thoughtful use of trusts and gifting strategies can avoid the probate of the will and reduce estate taxes, ensuring that assets go directly to heirs. Reviewing the estate plan regularly with an eye to changes in tax law will protect the legacy. If you would like to learn more about estate tax strategies, please visit our previous posts.

Reference: Financial Advisor (April 19, 2021) “How Trusts Can Be Used To Counter Tougher Estate Taxes”

Category: Revocable Living Trust

Trust provides more Protection than TOD

TOD and POD Accounts are ways to avoid Probate

Can You Sue A Trust Directly?

Understanding how Irrevocable Trusts work

Which Trust Is Right for You?

When Should You Terminate an ILIT?

The Advantages of a Testamentary Trust

Short-Cuts in Planning can have Consequences

Photo by Brett Jordan from Pexels

Strategies to Reduce Estate Taxes

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