Estate planning involves more than avoiding probate and estate taxes. Probate can be avoided by using Revocable Living Trusts. Estate taxes are not a concern for most U.S. taxpayers with the gift and estate tax exemption now at $11.4 million per person. Because of “portability,” a husband and wife can either gift or pass upon death $22.8 without paying any gift or estate tax, regardless of how assets are titled among spouses. But there are many other reasons for a comprehensive estate plan. For example, parents who have a child with special needs want the child’s inheritance to be protected so that any available government assistance remains in place despite the child’s inheritance. The Department of Health and Human Services estimates that 15% of US minor children have special needs. Absent the proper trust, the special needs child’s inherited assets would negatively affect government assistance eligibility. The key to drafting a special needs trust is to avoid the typical “ascertainable standards” prevalent in standard trusts. These ascertainable standards are “health, education, maintenance and support” – words within the trust world, interpreted by courts and commentators, that provide distribution guidelines for trustees. A special needs trust would not use ascertainable standards. In contrast, the special needs trust terms must expressly prohibit distributions that would disqualify the beneficiary from receiving government support. The trustee must have sole and broad discretion to distribute all or none of the trust income and principal. Thus, selecting a trustee in any trust is critical, but even more so with a special needs trust.
I have previously written about the $15,000 annual exclusion, and Irrevocable Life Insurance Trusts (“ILIT’S”). ILIT’S are created primarily to own life insurance and remove the death benefit from the insured’s taxable estate. To achieve the desired estate tax benefit, premiums must be paid by the Trustee on behalf of the ILIT as the policy… Read »
Irrevocable Trusts, “ILIT” – short for Irrevocable Life Insurance Trust – are created to own life insurance policies. The significant advantage of having insurance policies owned inside an ILIT is that the death proceeds are not included in the insured’s taxable estate upon his death. Further, the death proceeds are not taxable in the surviving… Read »
When individuals consider how assets pass upon death, they immediately think of Wills (and perhaps Revocable Trusts for probate avoidance). What often is not considered, and even misunderstood, is that even if individuals have executed valid Wills, their wishes may not be respected. Why – because those estate documents will not generally supersede asset titling… Read »
The annual exclusion gift amount remains at $15,000 for 2019. The annual exclusion gift is the amount that you can give to any recipient during the calendar year without gift tax consequence. For example, in 2019, if husband and wife have two children, they each can give $15,000 to each child, total of $60,000. Upon… Read »
The 2019 inflation adjusted amount for the federal gift and estate tax exemption is now $11.4 million per person. Because of “portability,” a husband and wife can either gift or pass upon death $22.8 without paying any gift or estate tax, regardless of how assets are titled among spouses. The $11.4 amount increased from the… Read »
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About Revocable Trusts
John P. Dedon
John P. Dedon is a tax lawyer with a talent for explaining the complexities of tax law in lay terms. Working in the estate planning, asset protection and business areas for more than 35 years, John helps clients preserve assets and plan for the future with traditional planning tools, including Trusts (dynasty trusts, intentionally defective trusts, grantor retained annuity trusts), LLC and partnership entities, and cutting-edge concepts such as cryonic preservation trusts.
Fellow of the American College of Trust and Estate Counsel (ACTEC)
Martindale-Hubbell AV Rating/Top Rated Estate and Taxation Lawyer
Consecutive years named Washingtonian Best Lawyers; Best Lawyers in America® for Trusts and Estates; Washingtonian Magazine’s Top Wealth/Financial Advisor; Top Financial Professional by Northern Virginia Magazine.