Specialized Trusts Can Reach Different Estate Planning Goals

Estate planning strategies should be tailored to the unique circumstances of the person making the plan. However, it’s also an area that can change rapidly based on state and national politics. In the future, the estate tax exemption may drop from $11.4 million to as little as $3.5 million, and the gift exemption could drop from $11.4 million to $1 million. For couples in Georgia who are considering their estate plans, the possibility of a drop in the estate tax exemption may require taking steps to ensure their assets are protected.

Some of the options available are to establish a grantor trust, set up a spousal lifetime access trust, or create a self-settled domestic asset protection trust. With a grantor trust, the settlor records trust income on a personal tax return and pays income tax on it. The trust should allow the trustee to pay back the settlor for these taxes.

With a spousal lifetime access trust, the settlor’s spouse is the beneficiary, so the settlor may benefit indirectly via distributions to his or her spouse. A self-settled domestic asset protection trust allows the settlor to remove assets from his or her estate and have them protected against creditors. The settlor can still be named as a beneficiary though. Not all states allow these trusts, but assets owned in a state that allows them may be placed in a self-settled domestic asset protection trust.

An attorney who practices estate planning law may be able to help interested parties anticipate and prepare for potential regulatory changes. Legal counsel might examine the client’s circumstances and suggest one or more specialized trusts to move assets into or draft the documents necessary to establish those trust instruments. With careful estate planning and drafting, it may be possible to protect assets and reduce tax liability.

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