The Revocable Living Trust (RLT)
A Revocable Living Trust is the most common type of trust, whether for separate individuals or married couples. Over the last four decades or so, trusts have become the most prudent and cost-effective way of holding assets. Indeed, trusts are most calculated to protect your family’s wealth and allow it to grow over time for the benefit of your family. As a revocable trust, when you create it as the “Grantor,” you hold the power to amend, restate, or revoke that trust for various purposes in your family’s estate plan. This does not change your control of your own property and money as you will also act in the roles of “Trustee” and “Beneficiary” during your lifetime. But, by holding your assets in trust, you will eliminate the delays and costs of any future probate of your estate, and you will have multiple tools designed to avoid estate taxes and other liabilities. If you do not yet have a trust, or if you want to update your old trust, it would be our pleasure to talk you through a Family Wealth Planning Session where we custom design an RLT specifically suited and tailored to you and to your family’s long-term goals, needs, values, and future security.
The Lifetime Asset Protection Trust (LAPT)
When it comes to leaving an inheritance, most lawyers will advise you to place your assets and money in a trust, which is the right thing to do. However, most lawyers would have you distribute the trust assets outright to your loved ones at specific ages, such as one-third at 25, half of the balance at 35, and the rest at 40. But giving outright ownership of the trust assets in this way puts everything at risk. While a trust may protect your family’s inheritance so long as it is held in trust, once the assets are disbursed to the beneficiary, those assets can be lost to future creditors, an accident, illness, divorce, bankruptcy, or lawsuit. By contrast, when you gift an inheritance to your children via an LAPT, the assets are protected, held in continued trust for their lifetimes, and distributed at the trustee’s discretion in following your express direction. If you distribute the assets of your Revocable Living Trust to your beneficiaries in LAPTs, you will have given a foundation to your beneficiaries that they could not have created for themselves, and it would be protected and there for them no matter what.
The Charitable Trust (CT)
Charitable Trusts are a tremendous estate planning tool that come in different forms and serve different purposes for those who want to save in taxes and give to their most loved causes, educational institutions, or charities. They are particularly well-designed for appreciated assets. For example, with a Charitable Remainder Trust (CRT), you will name both income beneficiaries and charitable beneficiaries. When you contribute an appreciated asset into your CRT, you get a charitable tax deduction for the donation, and the CRT does not pay any capital gains taxes upon sale of those assets. The asset, or cash generated by the sale of the asset, generates income as invested by the trustee, which income can be distributed to the noncharitable beneficiary for his or her lifetime. If the income is not paid out, it can accumulate in the CRT without being subject to income tax, until it is then finally given to the charitable beneficiary. Really no one who does any substantive charitable giving should ignore this strategic tax-saving tool.
The Irrevocable Life Insurance Trust (ILIT)
Surprisingly as it may seem, many persons’ estates end up owing estate tax because their life insurance death benefits are normally included as a part of their overall taxable estate. The current estate tax is 40%. As of 2023, the estate tax exemption is $12.92 million. At the end of 2025, the estate tax exemption will be only $6.2 million. Meanwhile, about half of Congress has proposed to increase the estate tax rate to 45% and decrease the estate tax exemption to $3.5 million. The Irrevocable Life Insurance Trust (ILIT) is another sophisticated estate planning tool that removes life insurance proceeds from one’s taxable estate. For that to work, your trust will purchase and own the life insurance, and you will not be the trustee or retain the right to revoke the trust. ILITs can also be a very effective means of providing liquidity to pay income taxes, debts, or other expenses at death. They can also be used as a wealth replacement tool such that the life insurance proceeds replace the money given to the charitable beneficiary of a Charitable Remainder Trust. Whenever an ILIT can benefit from utilizing this kind of trust, it is always a great pleasure to provide this type of legal planning for our clients.
The Special Needs Trust (SNT)
If one of your family members has a disability, whether physical or developmental, a Special Needs Trust (SNT) can be the best way to fund that loved one’s long-term financial and personal needs. A SNT can be customized to the special circumstances of each family facing the need to secure the future of a disabled family member, while also keeping access to government benefits like Medicaid and Supplemental Security Income (SSI) intact. In fact, the best planned SNT will maximize the use of both private and governmental resources to benefit your disabled family member. This often involves a two-pronged strategy of using the family’s assets in the SNT to provide for quality of life enhancements such as education, training, vacations, hobbies, causes, and pets as a secondary source of support that supplements the government benefits provided to meet basic needs. The reason this works is because assets placed into an SNT for the benefit of a disabled person are not considered “available resources” for purposes of government benefit eligibility requirements. If you want to provide a trust like this that will last for the lifetime of the SNT beneficiary, it will be both an honor and a privilege for us to help you to accomplish this goal.