In our last post, we looked at three different scenarios that can be addressed through the utilization of some type of trust, and we promised to provide a follow-up. Let’s look at three more objectives that a trust can effectively satisfy.
Special Needs Planning
A significant percentage of people with disabilities qualify for Medicaid and Supplemental Security Income (SSI). These are need-based programs, so they are only available to people very limited monetary resources.
If you intend to leave an inheritance to someone that is relying on these benefits, you have to consider a potential loss of eligibility. Fortunately, there is solution in the form of a supplemental needs trust.
To implement this strategy, you fund the trust and name a trustee to act as the administrator. The beneficiary would not be able to directly access the assets in the trust.
Under the rules of these programs, the trustee would use the resources to satisfy the unmet needs of the beneficiary. As long as the guidelines are followed correctly, ongoing eligibility for these government benefits would not be impacted.
Inheritance Protection for Children From a Previous Marriage
Some parents that are getting remarried have to address a tricky estate planning dynamic. Let’s say that you are marrying someone that is younger than you are, and you have significant resources.
You want to be true to your new spouse when it comes to your inheritance plan, but at the same time, you have to protect the interests of your children. Since you never know what the future will hold, the implementation of safeguards would be prudent.
In a situation like this, you could create a qualified terminable interest property (QTIP) trust. Your spouse would be the first beneficiary of the trust, and your children would be the successor beneficiaries.
If you die first, your spouse would receive distributions of income that is generated by assets in the trust for the rest of their life. They could also use property that is owned by the trust.
They would benefit from the inheritance structure, but they would not be able to change the terms of the trust. After the death of the initial beneficiary, your children would become the active beneficiaries.
Estate Tax Efficiency
People that have enjoyed a very significant level of financial success have to be concerned about the potential impact of estate taxes. We are using the plural because there is a federal estate tax, and we have a state-level estate tax here in Connecticut.
The exclusion is the amount that can be transferred tax-free before the remainder would be subject to taxation. In 2021, the federal estate tax exclusion is $11.7 million, and the exclusion on the state level is $7.1 million.
If you are exposed to either or both of these taxes, you can use an irrevocable trust to mitigate your exposure. There are a number different trusts that can be used, including qualified personal residence trusts, grantor retained annuity trusts, generation-skipping trusts, and charitable lead trusts.
Attend a Free Seminar
We conduct seminars on an ongoing basis to cover all the most important estate planning and elder care topics. The positive feedback that we get from attendees is very rewarding, and these sessions are offered free of charge, so this is a great way to invest a bit of spare time.
You can see the dates if you visit our seminar page, and when you identify the session you would like to attend, follow the simple instructions to reserve your spot.
Need Help Now?
If you have already learned enough to know that you should work with an attorney to put an estate plan in place, we are here to help. You can set up a consultation appointment if you call us at 860-548-1000, and you can fill out our contact form if you would like to send us a message.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.
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