The attorneys with Nay & Friedenberg explain how an Irrevocable Trust can help you save on estate taxes.
For example, if a person wants to give assets away in order to remove them from their estate at death, and the beneficiary of the gift is a minor, or not particularly responsible, a ‘Crummey’ irrevocable trust may be used to receive and hold the gifted funds. The gift to the trust may have a gift tax filing but any appreciation in the trust would occur free of any estate tax. If the beneficiary is disabled and needs to keep their public benefit options, then a special needs trust is an option.
A variation of the ‘Crummey’ trust strategy involves a gift to an irrevocable trust where the giver, not the trust or trust beneficiaries, actually pays the taxes on any trust income. This type of a trust is called a defective grantor trust.
If a person owns life insurance with present cash value that is lower than the death benefit, another option is to transfer the policy to an irrevocable life insurance trust. The result would be that the larger death benefit would be outside of the estate. Note that three years would have to pass from the gift for this benefit to accrue. No three year problem exists if a new life insurance policy is bought in the trust.
There are many additional options such as irrevocable trusts that involve distributions to charity, for the benefit of spouses and for spouses in later marriages when the goal is to give the spouse support but not total control.
Because irrevocable trusts are, by their nature, difficult or impossible to change, no strategy should be taken without careful consideration and legal advice.
An experienced estate planning attorney can make sure you have the proper documents to fit your specific planning needs. Contact the Estate Planningattorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.