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Wealthy families can still tweak last minute estate plans from 2012, P.2

On Behalf of | Jan 29, 2013 | Estate Planning |

In our previous post, we began to discuss the topic of leaving wealth to children. Specifically, we were speaking about people who took last minutes steps in 2012 to make gifts to children to take advantage of the high estate tax exemption, which has now become permanent. Leaving a lot of wealth to children isn’t necessarily a bad thing. It depends on a lot of factors. In some cases, it isn’t the best decision.

For those who gave money to children in 2012 last-minute, there may still be the opportunity to tweak their plan to ensure it works out for the best. Here we’ll continue looking at some ways to do that.

Parents that give big gifts to children can take advantage of several strategies to tweak for better control of how money is handled in the future. One way to do this is to add spouses as potential beneficiaries, so they can tap into the trust if necessary. Another possibility is to establish a nonreciprocal spousal lifetime-access trust, in which the surviving spouse has continued access to the deceased spouse’s trust.

One way to have a say later on in how money is distributed to children is to set up a trust with gifts for children, but to give the other spouse the power to direct distribution of property among a defined class of eligible beneficiaries, usually descendants, other trusts or charities.

A technique called “decanting” allows the trustee to move assets among various trusts. Not all states allows this practice and there are only certain trusts in which this strategy works. In addition to allowing for control of beneficiary interests, decanting can be used to move a trust to a different state with more advantageous trust accounting or administration rules or tax rates.

Parents thinking about liquidating their trusts and distributing the money under the new lifetime gift-tax exemption amount should think twice about doing so. There are ways to tweak an already existing plan. It is important to work with an experienced attorney in doing so, to ensure that things are done correctly and with the planner’s specific goals in mind.

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