Spousal Lifetime Access Trusts: What You Should Know

No one wants to pay more taxes than they have to. To carry out this objective, many people search for the perfect estate planning tool that will allow them to control as much of their money and property as possible while reducing the amount they or their loved ones will have to pay the government. If you have looked for the tax-saving estate planning tools, chances are you might have come across the spousal lifetime access trust (SLAT). Here are some important things you should know before you settle on this tool as your estate planning solution.

What is a spousal lifetime access trust?

A SLAT is a type of irrevocable trust created by one spouse (trustmaker spouse) for the benefit of the other spouse (beneficiary spouse) that is used to transfer money and property out of the trustmaker spouse’s estate. This strategy allows married couples to take advantage of their lifetime gift and estate tax exclusion amounts by having the trustmaker spouse make sizable, permanent gifts to the SLAT that decrease the value of their estate while maintaining some limited access to the money and property that is gifted for the beneficiary spouse’s benefit.

How does it work?

The trustmaker spouse gifts money or property (of which they are the sole owner) to the SLAT for the benefit of the beneficiary spouse. If the couple resides in a community property state, they will likely need to convert community property into separate property through a partition agreement. The trustmaker spouse reports the gift on a gift tax return. The beneficiary spouse can receive distributions from the trust, from which the trustmaker spouse may also indirectly benefit. Upon the death […]

The Death of Anne Heche: Lessons for Estate Planning

Anne Heche’s recent accidental death was a shocking reminder of how the everyday can quickly turn into the tragic. While driving through the Mar Vista neighborhood of Los Angeles on August 5, 2022, Heche was involved in a car crash and succumbed to her injuries a week later. The official cause of death was burns and smoke inhalation.

As the media reflects on her legacy as an actress and celebrity, and as some corners of the internet are awash with conspiracy theories around the circumstances of her death, Heche’s situation also provides some tough lessons about the need for estate planning.

Not having a will can place surviving family members in a difficult position and undermine the privacy that public figures try so hard to maintain. An email was presented to the court purporting to appoint her ex, James Tupper, as the administrator of her estate and dividing everything equally among her two children to be given to them at the age of twenty-five.[1] It has been speculated that this document will not meet the standards of a valid will in California, however, because it was not in Heche’s handwriting, she did not sign it, and there were no witnesses. Rather than Heche’s estate being distributed according to her final wishes, it is now subject to state law and a very long and public probate court proceeding.

Heche’s Legacy

When Heche passed away on August 11 at age fifty-three, it spurred many questions. Was she really involved in three separate car accidents in a span of thirty minutes? Why did her crash into a two-story home cause such a massive fire? How was it possible that it […]

2023-02-25T12:44:12-08:00November 1st, 2022|Common Problems, Estate Planning, Rich & Famous|

An Introduction to Dynasty Trusts

When people create estate plans, they typically focus on handing down their money and property to their children, grandchildren, and other living heirs. But some people want to leave behind a more enduring legacy. For those interested in multigenerational wealth transfer, a dynasty trust could be the answer.

A dynasty trust is an irrevocable trust that offers the tax minimization and asset protection benefits of other types of trusts, but unlike a trust that ends with outright distributions to your children or grandchildren, a dynasty trust can span more than two generations. Also known as a perpetual trust, a dynasty trust theoretically can last forever—or at least for as long as trust money and property remain. Because the trust could last for many years, and the rules generally cannot be changed once the trust is created, a dynasty trust must be set up with great care.

How Does a Dynasty Trust Work?

A dynasty trust starts the same way as any other trust. The trust’s creator (i.e., the grantor) transfers money and property into the trust, either during their lifetime or at the time of their death, in which case the trust is a testamentary dynasty trust. Regardless, as an irrevocable trust, once the dynasty trust is funded, it is set in stone. It cannot be revoked, and the rules the grantor sets for the trust can only be altered under certain state statutes governing trust modifications.

Who Should Serve as Trustee of a Dynasty Trust?

One role that the grantor must seriously consider is who will act as the trustee. It is common for the grantor of a dynasty trust to name an independent trustee, such as […]

2023-02-25T13:42:24-08:00October 25th, 2022|Asset Protection Trusts, Beneficiaries, Estate Planning, Trusts|

Will Our Child Have to Handle Multiple Trusts after Our Deaths?

When a married couple creates an estate plan using a revocable living trust, they have the option of creating a single joint trust or two separate individual trusts. While the pros and cons of each are beyond the scope of this article, spouses may choose to create separate trusts for a variety of reasons including the following:

  • the desire to leave property to different beneficiaries or for greater asset protection from the financial risks of one spouse
  • the ability to keep inherited or individually owned property separate from jointly acquired property, or
  • the need for greater flexibility or more certainty with respect to tax planning after the death of the first spouse.

Whatever the reasons for creating separate trusts, when the ultimate beneficiary is the same for both spouses’ trusts (often the couple’s child or children), the question that inevitably arises is whether the beneficiary of these separate trusts will always have multiple trusts to deal with? Keeping track of the property owned and invested by each trust and filing tax returns for multiple trusts can be an administrative headache. The good news is that, in general, if multiple trusts have similar terms and neither the trust agreement nor state law prohibit the consolidation of the trusts, then the trusts can usually be combined into one.

Under section 417 of the Uniform Trust Code (UTC), which has been adopted (either completely or in some form) in thirty-five states and the District of Columbia[1] as of the date of this writing, a trustee, after giving notice to the qualified beneficiaries, may combine two or more trusts into a single trust, “if the result does not impair rights of […]

2023-02-25T13:49:21-08:00October 20th, 2022|Asset Protection Trusts, Beneficiaries, Estate Planning, Trusts|

The Pros and Cons of Probate

In estate planning circles, the word “probate” often carries a negative connotation. Indeed, for many people—especially those with valuable accounts and property—financial planners recommend trying to keep accounts and property out of probate whenever possible. That being said, the probate system was ultimately established to protect the deceased’s accounts and property as well as their family, and in some cases, it may even work to an advantage. Let us look briefly at the pros and cons of going through probate.

The Pros

For some situations, especially those in which the deceased person left no will, the system works to make sure all accounts and property are distributed according to state law. Here are some potential advantages of having the probate court involved in wrapping up a deceased person’s affairs:

  • It provides a trustworthy procedure for redistributing the deceased person’s property if the deceased person did not have a will.
  • It validates and enforces the intentions of the deceased person if a will exists.
  • It ensures that taxes and valid debts are paid so there is finality to the deceased person’s affairs rather than an uncertain, lingering feeling for the beneficiaries.
  • If the deceased person had debt or outstanding bills, probate provides a method for limiting the time in which creditors may file claims, which may result in discharge, reduction, or other beneficial settlement of debts.
  • Probate can be advantageous for distributing smaller estates in which estate planning was unaffordable.
  • It allows for third-party oversight by a respected authority figure (judge or clerk), potentially limiting conflicts among loved ones and helping to ensure that everyone is on their best behavior.

The Cons

While probate is intended to work […]

2023-02-25T13:54:13-08:00October 19th, 2022|Common Problems, Estate Planning, Probate|

Three Tips for Overwhelmed Personal Representatives

While it is an honor to be named as a trusted decision maker, also known as a personal representative or personal representative, in a person’s will, it can often be a sobering and daunting responsibility. Being a personal representative requires a high level of organization, foresight, and attention to detail to meet responsibilities and ensure that all beneficiaries receive the accounts and property to which they are entitled. If you are a personal representative who is feeling overwhelmed, here are some tips to lighten the load.

  1. Get help from an experienced attorney.

The caveat to being a personal representative is that once you accept the responsibility, you also accept the liability if something goes wrong. To protect yourself and make sure you are crossing all the “t’s” and dotting all the “i’s,” hire an experienced estate planning attorney now. Having a legal professional in your corner not only helps you avoid pitfalls and blind spots, but it will also give you greater peace of mind during the process. In fact, in some states it is a requirement that a personal representative be represented by competent legal counsel, so it is always a good idea to discuss your responsibilities with an attorney before you take action. It is also important to note that the expense of hiring an attorney does not have to be borne by you. As a personal representative, you are allowed to hire professionals to assist you in carrying out your responsibilities, and they can be paid from the deceased person’s money. This includes professionals such as financial advisers and certified public accountants.

  1. Get organized.

One of the biggest reasons that you […]

2023-02-25T14:15:28-08:00October 4th, 2022|Common Problems, Estate Planning, FAQ, Probate|

The Unique Estate Planning Needs Of The Unmarried

Forbes says:

“Unmarried people should put a priority on developing the traditional estate planning documents that don’t pertain to disposition of property: the health care proxy (or advance medical directive or living will) and financial power of attorney. Without these documents, when the single person is unable to make medical decisions or take care of financial matters, there might not be someone to make decisions whose authority will be readily recognized.”

2021-11-02T10:46:36-07:00November 2nd, 2021|Estate Planning, Estate Planning for Singles|

Should You Put Your Home in a Trust?

Simpleshowing's article discusses the pros and cons of putting your home in a revocable living trust.

“Once you become a homeowner, estate planning needs to include what will happen to your house after you pass away.  If you don’t put those intentions in writing, your intended recipient may have to spend a lot of time and money in order for that to happen, or they could even end up losing it altogether.  This is why you may want to put your home in a trust.”

2021-11-02T10:42:50-07:00November 2nd, 2021|Estate Planning, Trusts|

Do You Need a Trust?

Charles Schwab asked three of their own professionals important questions regarding the differences between wills and trusts.

A trust is a fiduciary arrangement that specifies how your assets are to be distributed, usually without the involvement of a probate court. They can be structured to take effect before death, after death, or in case of incapacitation. In contrast, wills take effect only upon death and typically need to be authenticated by a probate court, which can take time and involve additional costs.

Trusts can be arranged to accomplish a variety of different goals. For example, you can use a trust to transfer property, help minimize estate taxes, preserve assets for minors until they are adults, or benefit a charity.

What Singles Need to Know About Estate Planning

Real Simple explains what singles need to know about estate planning, according to experts.

“Everyone needs a financial plan, and everyone also needs an estate plan,” says Amy Richardson, a certified financial planner with Schwab Intelligent Portfolios Premium. And yes, that includes singles without obvious heirs—i.e., kids of your own. Of course, the cornerstone of any estate plan is a will, which at its core is a document aimed at outlining how you would like your life on earth to be closed out.”

2021-11-05T07:32:52-07:00September 8th, 2021|Estate Planning, Estate Planning for Singles|

How to Give Assets to Loved Ones in an Asset Protected Trust

Most of our estate planning clients create a trust because they want to leave assets to children and loved ones in a trust that protects the assets from the child's or loved one's creditors and ex-spouses.  When we are hired to prepare an estate plan with a trust we prepare a revocable living trust that contains language that causes the successor trustee to create a beneficiary controlled asset protected trust (a BCAPT) for each child or loved one on the death of the trust maker or death of the second spouse if the trust is a joint trust.   See the contents and prices of our two estate plan packages.

If the future beneficiary of the BCAPT ever got sued the creditor could not touch the assets in the trust.  If the future beneficiary were to marry and get divorced the ex-spouse could not get any of the assets in the trust.  You cannot predict if your child or loved one will ever have a creditor or ex-spouse problem, but it is prudent to protect against these two problems.

It is also possible to create a BCAPT while you are alive if you want to transfer valuable assets to your child or loved one now before you die.  We prepare BCAPTs for people who want to give valuable assets to their children or loved ones now and protect the assets from their future creditors and ex-spouses.  To learn more about the BCAPT see my article called “Beneficiary Controlled Asset Protected Trusts.”

2023-03-04T09:07:58-08:00August 21st, 2021|Asset Protection Trusts, Estate Planning, Trusts|

How to Set Up a Trust Fund if You’re Not Rich

Investopedia discusses how to set up a trust fund if you're not rich:

Trust funds are designed to allow a person's money to continue to be used in specific ways after they pass away, and to avoid their estate going through probate court (a time-consuming and expensive legal process). But trusts aren't only useful for ultra-high-net-worth individuals, the middle-class can use trust funds as well, where setting one up isn't out of financial reach.

Wealth Transfer Strategies to Take Before Congress Reduces the Estate Tax Exemption Amount

Democrats want to return federal estate taxes to their historic norms, which means taxpayers need to act now before Congress passes legislation that could adversely impact their estates. Currently, the federal estate and gift tax exemption is set at $11.58 million per taxpayer. Assets included in a decedent’s estate that exceed the decedent’s remaining exemption available at death are taxed at a federal rate of 40 percent (with some states adding an additional state estate tax). However, each asset included in the decedent’s estate receives an income tax basis adjustment so that the asset’s basis equals its fair market value on the date of the decedent's death. Thus, beneficiaries realize capital gain upon the subsequent sale of an asset only to the extent of the asset’s appreciation since the decedent’s death.

If the Democrats get control of the Senate it could mean not only lower estate and gift tax exemption amounts, but also the end of the longtime taxpayer benefit of stepped-up basis at death. To avoid the negative impact of these potential changes, there are a few wealth transfer strategies it would be prudent to consider before the year-end.

Spousal Lifetime Access Trust

With the threat of a lowered estate and gift tax exemption amount, a spousal lifetime access trust (SLAT) allows donors to lock in the current, historic high exemption amounts to avoid adverse estate tax consequences at death. The donor transfers an amount up to the donor’s available gift tax exemption into the SLAT. Because the gift tax exemption is used, the value of the SLAT’s assets is excluded from the gross estates of both the donor and the donor’s spouse. An independent trustee administers the SLAT for the […]

2020-11-22T06:59:01-08:00November 22nd, 2020|Estate Planning, Spousal Lifetime Asset Trusts|

Do Domestic Asset Protection Trusts Work?

A domestic asset protection trust (DAPT) is an irrevocable trust established under the laws of a state that adopted a DAPT statute.  Currently 17 states have passed DAPT statutes.  These states are Alaska, Delaware, Hawaii, Michigan, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia, West Virginia and Wyoming.  Unfortunately Arizona does not yet have a DAPT statute.

A DAPT is an irrevocable trust that allows the trust maker to be a discretionary beneficiary and the trust's assets are protected against claims made by the trust maker's creditors.  The trustmaker retains access to the trust's assets, but the assets are protected against many types of creditor claims.

A lawyer on a list serve I follow wrote:

“Why do people still push DAPTs? There are so many cases defeating them. And they are part of the bankruptcy estate unless they've been in existence for 10 years. I feel like it's the 1970s again, and everyone is telling each other how stupid seat belts are and that cigarettes are healthy and help with weight loss. Talking about Wyoming vs. South Dakota vs. Alaska vs. Nevada is like discussing which brand cigarette is healthier. None of them are good. And there are much better options that have tons of case law backing them … like special power of appointment trusts.”

The following text was written by Nevada DAPT attorney Steve Oshins in response to the above comment.  Steve is a friend and my choice as the best domestic asset protection trust lawyer in the United States.

“I substantially agree with your comments about regular DAPTs for residents of non-DAPT states. However, not for residents […]

2020-11-05T04:01:52-08:00November 5th, 2020|Asset Protection Trusts, Estate Planning, Trusts|

Last Will And Testament, Power Of Attorney, And Healthcare Proxy

Above the Law discusses the importance of having a Last Will And Testament, Power Of Attorney, And Healthcare Proxy:

Like an annual physical exam or dental cleaning, we know we must, but we often delay. Fear, anxiety, cost, and time are all factors in delaying that which all adults, regardless of familial structure and net worth, should accomplish. Executing estate planning documents, specifically a last will and testament, power of attorney and healthcare proxy, need not be a tremendous production, especially in the precarious times in which we live. At a minimum, we should all execute three basic documents, thus mitigating any future drama.

Interest in Estate Planning Picks up with Pandemic

This article in the Herald Mail Media states:

“the most important document people should be getting right now is the equivalent of a medical power-of-attorney. The document's name depends on the state. . . . First, appoint an agent or decision-maker for healthcare decisions in case you are unable to make or communicate an informed choice yourself . . . . Second, the document should express your wishes in case you end up in a terminal condition or persistent vegetative state. Do you want interventions or not?”

2022-10-11T15:45:05-07:00April 9th, 2020|Estate Planning, Peace of Mind|

Estate Planning Is More Important Than You Think

This article in Kiplinger starts with “Smart Insights from Professional Advisors” then says:

“An estate plan is a necessary tool that allows you to protect, maintain and manage your property if you become ill or pass away. But more than that, it can also help people make sure their minor children are protected in the event of an emergency or minimize taxes paid on assets by beneficiaries. . . . So, why do so many hardworking people fail to take the time and effort to build an estate plan and preserve their hard-earned assets? . . . a common misconception most people have is that estate planning is for those who are older or possess substantial wealth. Many people also assume that the process will be complex, time intensive and pricey. But some — if not all — of the problems mentioned aren’t true the majority of the time.”

2022-10-11T15:45:13-07:00April 7th, 2020|Estate Planning, Peace of Mind|

Estate Planning: Do it Early and Avoid Grief

Ron Wynn writes in Culver City News:

“People often try to put certain things that are not so pleasant on the back burner and say, “I will get to it.” If that is you, you are no different than anyone else. One of the things that people often put aside is estate planning. We all think that we have plenty of time to do that, and that is not our biggest priority.

And then of course, when people get unfortunately ill, it becomes a scramble. Set everything up early in advance when it comes to how you want your estate handled. It’s not a pleasant thing, but it’s something that has to be done and the sooner you do it, the better off you are.

The first thing you want to do, assuming you have assets, is to contact an estate planning attorney and listen to his/her advice. The likelihood is if you own property and other sizable assets, they will suggest you create a family trust. They will explain the kind of family trusts there are, including a revocable trust and an irrevocable trust, and they will also explain to you what the benefits of each are and how they work.

2020-04-05T08:08:39-07:00April 5th, 2020|Estate Planning, Peace of Mind|
Go to Top