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Wealthy families can still tweak last minute estate plans from 2012, P.1

On Behalf of | Jan 24, 2013 | Estate Planning |

Wealth transfer to younger generations has always been a significant concern for some wealthy families. How to leave money to the next generation without ruining their desire to work and be productive has always been a bit tricky. The new estate tax rules established by Congress late last month, while certainly a good thing for wealthy families, have left some of them with the question of whether to use their tax exemptions to leave as much as $10.5 million to their children, and if so, what is the best way to do so.

Many families already made the decision to utilize their full exemption amount for children, late last year in the rush before the expiration of the exemption. For families that have already set up estate plans to capture the tax break before it was made permanent, perhaps without thinking through all the consequences, there are still some was to take back some control over when heirs receive their money and how. Here we’ll look at several options.

First of all, in the rush late last month to beat the anticipated expiration of the estate tax exemption amount, many families chose to set up so-called “quiet trusts.” In a traditional trust, the trustee usually reports directly to beneficiaries or to their parents if the beneficiaries are children. With quiet trusts, the donor specifies who the trustee reports to and when, leaving open the option of keeping things secret from beneficiaries.

Families that set up these trusts may want to tweak their approach to leaving their wealth behind. It is important, when making use of quiet trusts, to ensure that the trustee regularly reports to someone who is aware of the beneficiaries’ situation, so these families should ensure this is happening. It is also advisable not to wait too long in letting beneficiaries know of their financial situation, picking a reasonable age to reveal it to them.

In out next post, we’ll continue looking at this topic.

Source: Wall Street Journal, “Can You Trust Your Kid With $5.25 Million?,” Kelly Greene, Arden Dale, January 18, 2013