Using,Trusts,Protect,Heirs,Est law Using Trusts to Protect Heirs
Bankruptcy is a situation, wherein an individual is termed as unable to discharge all the debts. When a person or a company is not able to pay off its creditors, it has an obligation to file a bankruptcy suit. In fact, a bankruptcy suit is a When you work with an attorney, you will have no problem reducing the risks associated with getting your case in front of a judge and jury, or other formal court, when you need to. However, every case is different. It is important to work wi
Estate planners use trusts to protect beneficiaries from their inability, their disability, their creditors and their predators. Included under creditors are the IRS and divorced spouses. More sophisticated estate planners generally create multi-generational dynasty trusts for their clients descendants that are (1) estate tax protected, (2) creditor protected and (3) divorce protected while at the same time allowing the primary beneficiary to control the trust as the trustee. These trusts are sometimes referred to as beneficiary-controlled trusts. Following are the design features of the typical beneficiary-controlled trust:The donor (i.e., parent or grandparent) is the grantor of the Trust.The child and his/her descendants are the beneficiaries of the Trust. However, the child is the primary beneficiary of the Trust during his/her lifetime and, therefore, the childs needs take priority over the needs of his/her descendants.The Trust has two trustees the primary beneficiary as the investment trustee, and an independent trustee as the distribution trustee. The independent trustee can be the primary beneficiarys friend, trusted advisor or bank.The primary beneficiary has the power to remove and replace the independent trustee from time to time, thereby maintaining the beneficiary controlled feature of this trust design, so long as the replacement trustee is not a related or subordinate party as defined in IRS § 672(c).The trustees can provide the beneficiaries with income and principal as needed for health, education, maintenance and support.The trust agreement allows the trustees to purchase assets for the primary beneficiarys use and enjoyment (with remuneration) such as vacation homes, artwork, jewelry, etc.The primary beneficiary can be given a broad non-general power of appointment during life and/or at death in favor of anyone other than the primary beneficiary, his/her creditors, his/her estate, or the creditors of his/her estate.At the primary beneficiarys death, the assets remaining in trust pass to his/her children (i.e., the grantors grandchildren), in equal shares, but in further trust. At such time, the grandchild becomes the primary beneficiary of his/her separate trust, which now benefits the grandchild and the grandchilds descendants. To the extent of the grantors generation skipping tax exemption, there would be no generation skipping taxes due.The beneficiary-controlled trust is gaining popularity among estate planners. Beneficiary-controlled trusts can be created at death as part of the grantors living trust, or can be used in irrevocable trusts, including irrevocable life insurance trusts. In addition, trusts created during the grantors lifetime can be designed as so-called grantor trusts. With such trusts, the grantor is responsible for paying the trusts income taxes. Thus, the trust grows income tax free. In essence, the grantors payment of the trusts income taxes is a tax-free gift to the beneficiaries of the trust. In short, a beneficiary-controlled trust should be considered whenever it is worthwhile to protect beneficiaries from creditors, divorcing spouses and estate taxes.THIS ARTICLE MAY NOT BE USED FOR PENALTY PROTECTION. THE MATERIAL IS BASED UPON GENERAL TAX RULES AND FOR INFORMATION PURPOSES ONLY. IT IS NOT INTENDED AS LEGAL OR TAX ADVICE AND TAXPAYERS SHOULD CONSULT THEIR OWN LEGAL AND TAX ADVISORS AS TO THEIR SPECIFIC SITUATION.
Using,Trusts,Protect,Heirs,Est