In the past, trusts often were drafted with little flexibility. Now, more and more, trusts tend to be drafted with increased flexibility and there are even ways to change trusts which have become “irrevocable.” There are several ways to modify a trust, including by a Trust Protector, by a procedure under the state’s version of the Uniform Trust Code, by decanting under state law, or by some other judicial modification or by agreement. Whatever the method chosen, the threshold question is … [Read more...] about Consequences of Modifying an Irrevocable Trust
The Tax Cuts and Jobs Act increased the standard deduction to $12,000 per person and $24,000 per couple (for 2018 and inflation-adjusted thereafter). This was great news for those who don’t itemize their deductions. However, for those itemizing deductions, there was some bad news in the new law, too. The law included a cap of $10,000 (not inflation adjusted) for state and local taxes (“SALT”), such as state and local income and real property taxes. The $10,000 limitation is the same for single … [Read more...] about SALT Deduction Limit…Can You Get Around It?
A prior blog discussed the taxation of trusts generally and that they could be taxed as either grantor trusts or nongrantor trusts. This blog will focus on the advantages and disadvantages of taxation as a nongrantor trust. Unlike a grantor trust, which is taxed to the grantor, a nongrantor trust is taxed as its own separate taxpaying entity. The trustee of the trust has the trust file its own tax return, Form 1041. On that return goes all the trust’s items of income and expense. The … [Read more...] about Nongrantor Trusts Can Be Very Useful in Certain Situations
A prior blog discussed the taxation of trusts generally and that they could be taxed as grantor trusts or nongrantor trusts. This blog will focus on the advantages and disadvantages of taxation as a grantor trust. A grantor trust is one that is taxed to the grantor (or other substantial owner) pursuant to the rules of Section 671 and following sections of the Internal Revenue Code. For example, if you can revoke the trust, it’s a grantor trust pursuant to those rules. A grantor trust, such as … [Read more...] about Grantor Trusts Provide Flexibility and Ease
I was recently privy to quite a spirited online debate among a group of estate planning attorneys. The topic? Revocable Living Trusts and whether most clients really need them. I didn’t actually participate in the debate (I didn’t see the discussion until after the fact), but the topic is an important one, so I thought I’d take a few minutes to contribute my thoughts. First and foremost, there are certain states where the time and costs involved in probating a decedent’s estate are … [Read more...] about Are Revocable Living Trusts Appropriate for Everyone?