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What is a Qualified Personal Residence Trust and How Does it Work

August 24, 2017

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 »

Are There Non-Tax Reasons to Use a Dynasty Trust?

August 22, 2017

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 »

What is a Dynasty Trust?

August 18, 2017

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 »

What is a Grantor Deemed Owner Trust?

August 16, 2017

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 »

I’ve Created an Irrevocable Trust and am Interested in Gifting Annual Exclusion Amounts to Decrease my Taxable Estate, but I am Gifting in Disproportional Amounts for Each of the Children’s Families. Isn’t This Giving Unequal Amount to My Children?

August 14, 2017

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 »

Can the Irrevocable Life Insurance Trust Last Forever

August 10, 2017

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 »

What Happens to the an Irrevocable Life Insurance Trust When I Die?

August 08, 2017

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 »

Can I Put Something Other Than Life Insurance in the Trust?

August 04, 2017

Yes. Any asset can be placed in the ILIT.  Sometimes an income producing asset is placed inside of an ILIT to provide an income stream from which to pay the premiums on the life insurance. This technique eliminates any further gifts by the trustmaker/insured to the ILIT for the purpose of paying the life insurance… Read more »

Who May Serve as Trustee of the Irrevocable Life Insurance Trust?

August 02, 2017

To avoid “incidents of ownership,” and thereby pull the insurance proceeds back into your estate for federal estate tax purposes, the Trustee should be someone other than you. A family member may be named as the sole Trustee of the ILIT, but it is usually better to name a professional Trustee, such as an accountant… Read more »

Is the ILIT Useful for Anything Else Besides Keeping Insurance Proceeds Out of the Estate?

July 31, 2017

Another benefit of an ILIT is to place the cash value and death benefit of the life insurance policy beyond the reach of lawsuits and claims against the insured. If the purpose of the insurance is to replace the income that would be lost upon the death of the insured, the ILIT provides a viable… Read more »