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A QPRT may allow for the sale of the residence during its term. In addition, the trustee of the QPRT may hold the sales proceeds as long as the proceeds are held in a separate account. However, the residence may not be sold to the grantor, the grantor’s spouse, or any entity controlled by the… Read more »
If you are still living at the end of the term, you will have accomplished the goals of this planning strategy. Your children in our example (or trusts for their benefit) are now the owners of the house. However, you do not have to move out. To assure that you have a place to live,… Read more »
If you live to the end of the specified period, the residence, including all post-gift appreciation, passes to the children free of any additional federal estate or gift taxes. However, one disadvantage is that if you die before the end of the period, the value of the residence, as of the date of death, will… Read more »
A QPRT is a trust that holds a personal residence for a term of years, allowing you, in effect, to give away your residence at a discount and “freeze” its value for federal estate tax purposes—all while continuing to live in it. A Qualified Personal Residence Trust takes advantage of certain provisions of federal law… Read more »
The non-tax reasons for creating the dynasty trust vary depending upon the needs and desires of the trustmaker. Dynasty trusts can be created to provide creditor and “predator” protection for the beneficiaries of the trust, generation after generation. They can shield against divorce proceedings initiated against a beneficiary of the trust, or creditors of a… Read more »
You can utilize your Generation Skipping Transfer (GST) Tax exemption to plan for several generations and build enormous wealth. This type of planning is known as dynasty planning. One of the reasons Congress enacted the GST Tax is to curb the wealth-building effects of dynasty planning. The concept of dynasty planning is to pass the… Read more »
A Grantor Deemed Owner Trust (GDOT) is an irrevocable trust that is treated differently for federal income tax purposes than for federal estate tax purposes. For estate tax purposes, any gifts you make to the GDOT will be treated as completed gifts, meaning the gifts are excluded from your taxable estate (just like the ILIT)…. Read more »
No, contributions into an Irrevocable Trust do not determine the ultimate ownership of the property contributed. The distribution clause in the Trust controls the ultimate disposition. For example, you have two children, and you intend for them to be equal beneficiaries of your trust after your death. One child has two children and the other… Read more »
Depending upon state law, a life insurance trust can last as long as any other trust, including dynasty trusts. If the ILIT is a dynasty-type ILIT, it will be subject to generation-skipping transfer taxes as discussed in Chapter 4. However, your generation skipping transfer tax exemption can be applied against the amount contributed to the… Read more »
At your death, the death benefits are payable to the ILIT, because the ILIT is not only the owner of the policy, it is also the beneficiary. The death benefits are then held and administered by the Trustee according to the ILIT’s specific terms. The trustee can use those funds to provide liquidity to your… Read more »