Decoding Tax Reform: Grantor vs. Nongrantor Trusts – Which Way Do I Go?

Topics: Estate planning, Grantor trusts, Trusts

H.R. 1 (“Tax Act”) has dramatically altered the tax consequences and economics of many common irrevocable trust plans given the combination of higher exemptions for gift, estate, and generation skipping transfer taxes (collectively “transfer taxes”) and changes to the taxation of individuals and trusts. Grantor trusts, which tax the trust’s income to the trust grantor,…

Reciprocal Trusts – A Refresher

Topics: Estate planning, Trusts

Legacy planning for spouses and other related parties often involves the creation of mutually-beneficial irrevocable trusts to provide equal protection and benefits for each party (e.g., spouses may each wish to establish a spousal lifetime access trust (SLAT) for the benefit of the other). Mutually-beneficial trusts, however, can run afoul of the reciprocal trust doctrine,…

It Can Really Last Forever: Irrevocable Life Insurance Trusts & the Generation-Skipping Transfer Tax – 4 Things to Know

Topics: Estate planning, GST, Irrevocable trusts, Trusts

The GST tax generally applies to transfers to irrevocable life insurance trusts (“ILITs”) that benefit both “skip persons” (e.g., grandchildren and more remote descendants) and non-skip persons (e.g., children). The annual GST tax exclusion and GST tax exemption are available to apply to ILITs, but the rules regarding their application are complex.

Mandatory or Discretionary Trusts – Which, When, and Why

Topics: Estate planning, Trusts

A chief concern of many senior family members is that transferring wealth to the next generation may create disincentives or disrupt the lives or work ethic of younger family members. Trusts, when properly structured, offer an ideal solution to this concern. By basing distributions upon a beneficiary’s attainment of certain goals (graduating from college, matching…

Attention Trustees- Better Understand the Uniform Principal and Income Act

Topics: Estate planning, Trusts

Allocation of revenues (“receipts”) and costs and expenses (“disbursements”) between trust income and principal can directly impact beneficiaries and their rights to distributions. To assist trustees with treating beneficiaries fairly and impartially, most states have adopted a version of the Uniform Principal and IncomeAct (“UPIA”) to provide direction regarding the allocation of receipts and disbursements…

Case Study Series – Trust Decanting in Action: Breathing New Life into Old Trusts

Topics: Estate planning, Trusts

Trust decanting allows a trustee to transfer assets from an existing irrevocable trust to a different irrevocable trust and may be used to address a wide array of issues, including correcting drafting errors, changing distributions standards or beneficiary powers of appointment, amending administrative provisions, and updating fiduciaries and their powers.

Case Study Series- Location, Location, Location – Changing the Situs of an Irrevocable Trust.

Topics: Estate planning, Irrevocable trusts, Trusts

Long-term irrevocable (dynasty) trusts can become inefficient over time. Moving the trust to a new jurisdiction may provide opportunities to refresh the administration of the trust, address state income tax issues, strengthen creditor protection, and decant trust assets to a new trust. The authority to move a trust’s situs may be found in the trust…

“Trouble Ahead, Trouble Behind,” and You Know that Notion Never Crossed My Mind- Avoiding 5 Common Mistakes in Life Insurance Planning.

Topics: Estate planning, Irrevocable trusts, Trusts

According to experts, some of the most common mistakes in life insurance planning include: (1) failure to qualify gifts to irrevocable life insurance trust (“ILITs”) for the annual gift tax exclusion; (2) improper allocation of GST tax exemption to ILIT gifts; (3) retention of incidents of ownership in an ILIT-owned policy; (4) failure to understand…

New Rules on Trust Decanting – Coming to a State Near You

Topics: Estate planning, Trusts

Generally, a trust decanting statutorily authorizes a trustee to transfer assets from an existing trust to a new or another existing trust with different terms. The process allows modifications to irrevocable trusts without expensive judicial proceedings and may be used to achieve a wide range of goals, such as correcting drafting errors, changing administrative or…