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Complex Planning for Large Estates

Some clients have very specific needs that call for extra planning beyond a Will, Trust and Incapacity Plan. Clients who have the desire to reduce their exposure to estate tax often add additional layers of planning to their estate plan to accomplish tax reduction and charitable goals. We assist clients in including Credit Shelter Trusts in their Will or Trust, and in creating Charitable Remainder Trusts, Irrevocable Trusts, Qualified Personal Residence Trusts and Family Limited Partnerships for clients with large estates, unique assets or who have charitable intent. Experience is essential for the creation and administration of complex estate plans, and we can ensure that clients with complex planning needs have their plan created correctly and administered in accordance with their wishes.

Family Limited Partnerships

A Family Limited Partnership is an invaluable tool for clients to make gifts of an asset over time. A Family Limted Partnership allows for advantageous tax planning, asset protection and can play an important role in your overall estate plan. A Family Limited Partnership that has been effectively drafted and funded can offer protection from creditors.

Family Limited Partnerships can be used to accomplish a number of important estate planning goals. These include establishing a centralized structure to hold family assets, involving children in decisions regarding family investments and protecting assets from risk. They also allow wealth to be transferred over time, so the asset passes to the next generation less burdened by tax. With the great potential for reducing tax there is also great potential for scrutiny of a Family Limited Partnership. Experience in creating and administering a Family Limited Partnership is essential to ensure that the Partnership is operated properly to accomplish its goals of tax reduction in the transfer of wealth.

A Family Limited Partnership is controlled by the family members. There are two types of partners: general and limited. The general partners direct all management and investment options and bear total liability. The limited partners cannot contribute to the management of the partnership and only have limited liability. Often, the family's senior members will contribute assets to the partnership and will determine the amount and type of partnership interest they wish to have. They also can give limited partnership interest to their children directly, or they can set that amount in trust.

The partnership itself is not subject to taxation. The owners of the partnership are responsible for the income and deductions on their personal tax return, in proportion to their interests. Transferring limited partnership interests to family members reduces the taxable estate of senior family members. However, they still retain control over the decisions and distributions of the investment. A transfer of a limited partnership interest is also entitled to the annual gift tax exclusion. This is an excellent means of reducing taxes.

A Family Limited Partnership offers the family member owners the ability to amend the partnership agreement as family circumstances change Our attorneys will work with you in order to determine the type of estate planning tools that best suits your needs. We help our clients develop a personalized plan that meets their individual needs for the future and ensures their wishes are carried out as intended.

Charitable Remainder Trusts

A charitable remainder trust allows an individual to transfer low-basis assets into a trust and liquidate them without incurring any capital gains tax. The proceeds are then reinvested and used to pay the donor a sum of money for life or a term of years. There are generally two ways these payments can be created:

  • A charitable remainder unitrust (CRUT), where a specific percentage of the trust corpus is paid out to the donor each year.
  • A charitable remainder annuity trust (CRAT), where the donor is paid a specific dollar amount each year.

At the end of life term or term of years, any remaining balance is then passed on to a charity.

It is important to understand that a charitable remainder trust is an irrevocable trust; it cannot be eliminated once it has been created. The only change that can ever take place is the name of the charitable beneficiary.

Irrevocable Trusts

An irrevocable trust is not as flexible as a revocable trust because once it is put into effect, it can not be amended or altered or terminated. While it is not does not adapt to changes like a revocable revocable trust is, it is an excellent option for those who wish to reduce estate taxes that are otherwise payable upon death. It is generally not the sole component of an estate plan, but is instead created in conjunction with a will and other type of revocable trust.

Creating an irrevocable trust means moving your assets into the trust while you are living. You will give up the opportunity to control the disposition of the property once it has been included in the trust. The trustee will direct and control the property; the trustee has a legal duty to make decisions regarding the trust property in the best interests of the beneficiary. This type of trust should be considered a specific estate or gift tax option which is coordinated with the rest of your plan.

There are many different types of revocable trusts that can be used in your estate plan, including:

  • Life insurance trusts
  • Self-declaration trusts
  • Support trusts
  • Charitable trusts
  • Spendthrift trusts
  • Honorary trusts

Our attorneys are experienced in creating Irrevocable Trusts that are appropriate for the estate plans of certain clients and are ready to work with you and your financial advisors to create a plan that will reduce your tax exposure and distribute your estate to your beneficiaries according to your wishes.

Inherited IRA Trusts

We are among the first attorneys to begin creating Inherited IRA Trusts within our client's Wills and Trusts which ensure that beneficiaries take advantage of the opportunity to "stretch" IRA distributions over their life expectancy. These special trust provisions allow beneficiaries to take required minimum distributions (and additional amounts if needs arise) but also allow the asset to grow considerably, instead of being immediately taxed if the beneficiary liquidated the IRA completely upon your death.

Many beneficiaries choose to take a lump sum distribution from the IRA. Not only does he or she immediately have to pay taxes on the entire distribution, but he or she will also miss the significant growth enjoyed by "stretching" the IRA. In order to avoid this type of disbursement, our attorneys can draft special provisions into your will or trust that will require an IRA beneficiary to "stretch" the IRA to ensure that the maximum benefit of inheriting an IRA is realized.

Our attorneys will work with you to include an Inherited IRA Trust as part of a comprehensive estate plan. An Inherited IRA Trust can be included as a component in either a will or a trust. We will work with you and your financial advisors in order to determine the best option for your particular estate plan.

Attorneys:  Dwight P. Cummins

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