Category Archives: Gift Taxes

Wealth Gifts to Children and Crummey Trusts

trusts-for-grandchildrenLeaving gifts of money to minor children may sound simple, but it is full of pitfalls that could prevent your intended gift from ever reaching the recipient. An elder attorney can help you set up a Crummey Trust for your gift of wealth. Cash or wealth gifts made with this kind of trust will pass down to the minor without incurring any unified gift or estate taxes. A short term window of opportunity is used to prevent taxes from affecting the total amount given to the minor when they reach a specified age.

An elder law attorney can help you understand the limits on wealth gifts as well. Adults can give gifts of up to $13,000 to their children or grandchildren each year without having to pay taxes on the gifts. The gift must be made immediately available to the recipient to avoid taxes. This is known as a present interest, as opposed to a future interest. In order to make a gift to a minor a present interest, the Crummey Trust uses a 30 day window. Within that month the child can withdraw the gift from the trust and use it. After this window closes, the money is not available until the age specificed in the trust paper work.

A Massachusetts elder attorney can help you determine the perfect age for releasing your wealth gift. A living trust attorney can also act as the administrator for the trust and manage it after the gift giver is gone. Learn more about the Crummey Trust to help your children and grandchildren make the most of your legacy of wealth.

How To Prepare Estate Planning After Having a Baby

Estate planning after having children.

After having a baby, your estate planning strategy completely changes because you need to account for some important decisions that will affect your child, both now and as he transitions into adulthood. It is important to add your child to your will right away and make several other decisions related to your child in the coming years.

First, specify in your will how your assets will be divided between your heirs, including the new baby. An estate planning lawyer can walk you through the process to ensure your wishes get carried out.

Second, get a Massachusetts estate planning attorney to add a clause to your will that specifies who will care for your child if you and the child’s other parent are both unable to. Including this in your will may seem silly if you’re healthy, but it never hurts to have it there in case something happens to you.

Third, consider setting up a living trust. This is a way to protect your assets from being tied up when you die, while still allowing you full control while you are living. A living trust attorney can walk you through the specifics of this process.

Fourth, start transferring your assets to your child if you have a large estate. Tax laws allow you to make tax-free gifts of up to $13,000 per year for each child, which adds up significantly over the child’s lifetime.

Of course, there are several other things you will need to consider as well, especially if you have a large estate or if your existing will is a complicated one. Get in touch with your Massachusetts estate planning lawyer before your baby arrives so you can discuss your plans and be ready to put them in place.

Ten Reasons to Consult an Estate Planning Attorney

Helping your elderly parents face the financial and health-related challenges that come with growing older can put quite a strain on your other responsibilities. Enlisting the help of the right professionals leaves you with more time to spend with your family. Since there are complex state and federal regulations regarding wills and other paperwork necessary for settling an estate, it is best to consult an experienced estate planning attorney. There are ten specific benefits to working with an elder lawyer.

1. Ensure the last will and testament of your parent or relative is legally binding and properly designated.

2. Designate a power of attorney contract to ensure the right person is responsible for making medical and financial decisions if the person becomes incapacitated.

3. Create a living will. Living wills help your elderly relatives make their wishes clear and save you a lot of stress when the time comes for difficult decisions.

4. Avoid mistakes. A practicing estate planning lawyer can craft a strong will that covers all the bases, while most packages designed to help you do it yourself lack coverage of crucial areas.

5. Handle any business or investment transfers smoothly and without delays.

6. Address complex situations where blended or extended families are involved. Planning the estate is much more complicated if your elderly relatives have had more than one marriage.

7. Minimize the taxes heirs will need to pay by choosing the right type of trust.

8. Update and change any existing wills and estate paperwork. Changing laws and family structures make old agreements insufficient very quickly.

9. Take care of disabled family members for their rest of their life. A good probate lawyer can help craft a plan that ensures that the people in your family with special needs never go without support.

10. Make the process easier. Planning an estate is stressful for both the elderly and their helpers, but an experienced professional helps.

Reasons to Create an Irrevocable Trust


An Irrevocable Trust is a trust that cannot be changed once it is created, and once you transfer an asset into that Trust, you usually cannot remove it. They are used for very specific reasons for the most part, and some of these reasons are:

You want to protect assets from having to be spent on long-term care costs.

The average cost of nursing home care in MA is about $10,000 per month with three ways to pay for it: 1)long-term care insurance; 2)private pay (writing a check each month); or 3)Medicaid, the state and federally-funded program that pays for long-term nursing home care if a person is both medically and financially eligible. In order to be considered financially eligible, a person cannot have more than $2,000 in so-called countable assets, and to prevent people from giving away their assets in order to qualify for benefits, Medicaid imposes a period of ineligibility following the gratuitous transfer of an asset. The ineligibility period for giving away assets is normally five years from the date of the gift. For those who feel confident that nursing home care will not be needed for more than five years, transferring assets to an Irrevocable Trust can be an effective way to preserve assets for children.

You want to keep life insurance proceeds from being taxable in your estate.

Although the new federal tax law enacted on December 17, 2010 exempts estates valued at less than $5 million from federal estate tax, Massachusetts imposes an estate tax on estates valued at $1 million or more. One common estate tax planning strategy is to buy life insurance so the surviving family members don’t have to liquidate real estate or borrow money to pay the estate tax. While life insurance proceeds are not taxable income to the person who receives them, life insurance is a taxable asset in the estate of the insured if that person is also the owner of the policy. If instead an Irrevocable Life Insurances Trust (otherwise known as an ILIT) owns the life insurance policy, the proceeds are not part of the insured’s estate.

You want to make qualifying annual exclusion gifts to minors.

Many people know they can make annual gifts of a certain amount each calendar year to any number of people without estate or gift tax consequences. Currently, the annual exclusions gift is $13,000 per calendar year per person. To qualify as an annual exclusion gift, it must be a “present interest” gift, meaning the recipient must have immediate access to and control over said gift. Parents and grandparents may want to give gifts to minor children and grandchildren, but don’t necessarily want the child to have access to funds at a young age. There is a special type of Irrevocable Trust allowed under the Internal Revenue Code that addresses this issue, which means if the Trust is properly drafted; the gifts to the Trust will qualify for the annual gift tax exclusion. However, the beneficiary’s right to gain access to the funds is restricted until the beneficiary reaches the age of 21.

You want to protect governmental benefits for a person with disabilities.

Individuals with disabilities may be eligible for a variety of governmental benefits that provide income and medical care; many of these benefits are needs-based, which means that a person may not have assets in excess of the program limit in order to qualify.

These are just a few specific reasons why using an Irrevocable trust may be appropriate for a certain situation. Everyone’s circumstances are different, and in every case, it is important to consult with a qualified estate planning or elder law attorney to develop a plan that works.

Protect Your Assets!

The time to protect your assets is now! While the estate tax may have lapsed this past year, many are convinced it will come back in full force in 2011.  According to this Wall Street Journal article, Congress is now attempting to place limits on a type of trust (called a GRAT) that many families use to avoid the tax.  A GRAT (grantor-retained annuity trust) allows the trust creator to allocate a portion of an asset’s future profits (e.g. a small business, real estate, or other money-generating assets) to heirs tax-free.  This kind of trust is the perfect way to ensure that any assets with profit potential will be protected.

This type of trust is most productive in an economic climate just like the one we are living in now – low interest rates and depressed asset values.  Because of this, and because Congress is trying to impose guidelines that impeded their success, right now is the time to set up your GRAT.  Working with an estate planning attorney as soon as possible will ensure that you will benefit the most from your future GRAT.

According to the article, Congress is attempting to impose restrictions on GRATS to raise revenue.  The restrictions could take the form of an increased time limit on the trust’s lifespan (making them much less useful for people with shorter life expectancies and less profitable to investors) or a higher percentage rate on minimum interest paid to the GRAT funder.

So with GRATs staying as they are for an uncertain time frame, estate planners are urging their clients with assets to take advantage of a GRAT before next year’s estate tax return.  As for now, until Congress acts, clients can still have short term, low interest GRATs.

To learn more about grantor-retained annuity trusts, set up a free consultation with Estate Planning Attorney Adam J. Tobin.

Source Article

Power of Attorney Tips

One of the most important estate planning documents is a durable Power of Attorney.  If you were to become incapacitated, a durable Power of Attorney will allow someone you trust to make decisions on your behalf.  A principal (the creator of the Power of Attorney document) is guaranteed that their wishes will be carried out as they had planned.  Having a durable Power of Attorney document will keep the principal from needing any sort of court-appointed guardian.  The attorney-in-fact (the person designated to act for the principal) is usually someone that is close to and trusted by the principal.  When creating a Power of Attorney document, there are a few things you need to know, and a few you should consider with an Elder Care Attorney.

1. To Spring or Not to Spring? There are two types of Power of Attorney documents – springing and non-springing.  A springing Power of attorney means that the attorney-in-fact (the person you designate) has no power to act on behalf of the principle until some event occurs – that event is up to you.  Most commonly principles choose incapacity as the event where the principal is to “spring” into action.  A non-springing Power of Attorney is effective immediately upon its creation.  It does not require incapacity or a similar event for the attorney-in-fact to act on behalf of the principal.  While a non-springing document may seem like the better choice, they are often not accepted by financial institutions due to liability.  Also, if you can’t trust your attorney-in-effect not to abuse their power, they probably shouldn’t be your choice.

2. Durability is Key. A Power of Attorney that is not “durable” will essentially become void if the principal becomes incapacitated.  Make sure that you work with an Elder Lawyer with Power of Attorney experience to ensure that they language in the document specifically states that it is durable (not affected by the disability or incapacity of the principal) and strong.

3. One is a Lonely Number. Being the sole attorney-in-effect can be a large burden to bear, but you can solve that by appointing more than one co-attorneys-in-fact to share the responsibilities.  This is a good choice for many situations, but if your co-attorney-in-fact cannot agree or get along, it will be your estate that will suffer. 

4. Be Specific about Gifts. If you intend that your attorney-in-fact should be given the power to make gifts on your behalf, then you must make sure the document includes specific authorization instructions.  If you do not, the courts may rule that the gifts are void and enact significant estate taxes.

Click here to learn more about Power of Attorney.  If you are considering a Power of Attorney, or if you have any inquiries as to the process, contact us or arrange a free consultation with Massachusetts Estate Planning Attorney Adam Tobin.

Wealth Gifts to Children: How a “Crummey Trust” May be Right for You

Massachusetts Elder Law information on Crumney Trust.While still alive, many parents and grandparents wish to pass their wealth on to their children or grandchildren: these gifts are also a good way to decrease a taxable estate. In 2010, you can give a child or grandchild $13,000 a year without the subsequent incurring taxes, but you may not want the child directly receiving the gift just yet. (You can read the full law about giving to grandchildren here) Utilization of a “Crummey” trust (named for the court case that approved this type of trust) allows for you to take advantage of the gift tax exclusion while keeping the gift in a trust until the minor comes of age. However, similar “custodial accounts” for these minors entail parents or legal guardians retaining custody of this large account until the child turns 18, and you may not want an 18 year old receiving that large of a gift.

Instead, placing the money into a “Crummey” trust permits you to decide when the gift will be given to the minor and how much they will be given. Using a regular trust can cause one large complication: to avoid being taxed, the minor must have a “present interest” in the gift. An elder attorney will explain that due to the fact that promise of giving the child the gift later does not count as “present” interest, many gifts to regular trusts are not excluded from the tax. Click here for additional trust information.

A Crummey trust is structured to allow your gift to be placed into the trust while also getting the gift tax exclusion. One provision allows for the beneficiary to withdraw cash after approximately 30 days, where the money then becomes part of the trust. This is a critical aspect of the Crummey trust, as the beneficiary must be aware of this capability so that the IRS does not apply the gift tax exclusion. The risk with this is that the beneficiary will take out cash immediately, in which case you must make a verbal agreement that continued withdrawals will result in no more gifts. As the gift giver, you can control how much the beneficiary can receive and when they can receive it once the gift is in a Crummey trust.

(Source article here)

Possible Social Security Benefit Changes

Social Security seems to be moving toward its day of reckoning. According to a recent article by Philip Moeller, efforts to put Social Security on a sound long-term footing included higher tax rates for payments into the system, raising retirement ages, and treating some Social Security payments as taxable income.

U.S. Senator Herb Kohl (D-WI), Chairman of the Senate Special Committee on Aging, asked the U.S. Government Accountability Office (GAO) to review benefit options affecting lower-income beneficiaries, who traditionally are the core focus of the program. This group, and particularly older widows, depends almost exclusively on Social Security. The GAO report reviewed eight areas where, it said, benefit changes were most commonly proposed. The report looked at how effectively each proposal would help lower-income beneficiaries, whether it would have much of a financial impact on Social Security, and on how difficult it would be to administer. Here are summary excerpts of some of their findings, which will be part of a larger Social Security report due soon from the Kohl committee.
Guaranteeing a Minimum Benefit. Guaranteeing a minimum benefit by increasing Social Security retirement benefits for those who have worked in low-wage jobs throughout their careers addresses concerns about benefit adequacy. One option would provide a minimum benefit equal to 120 percent of the poverty line for a minimum wage earner who had worked for 30 years. Another option would provide a minimum benefit equal to 100 percent of the poverty line for a 30-year worker and 111 percent of the poverty line for a 40-year worker. Social Security Administration officials said that, depending on how this option is designed, it could work well, but it is difficult to target lifetime low earners effectively.

Reducing the Marriage Duration Required for Spousal Benefits. Reducing the marriage duration required for spousal benefits is an option that targets divorced spouses. However, experts also said they do not expect this option to effectively target economically vulnerable groups. This option would not benefit women who were never married but could benefit higher-income women who are not economically vulnerable.dependent children or elderly relatives. Time spent out of covered employment as a caregiver may reduce benefits for workers, and others may not work enough to earn the required 40 credits to be eligible for benefits. One caregiver credit option would allow a specified amount of care giving time, such as three or four years, to count as covered

Providing Caregiver Credits.
Providing caregiver credits increases benefits for those who spend time out of the workforce to care for employment, and assign a wage to that time. Another design excludes a limited number of care giving years from the benefit calculation so that instead of averaging earnings over 35 years, earnings are averaged over fewer years. A third design supplements caregivers’ retired worker benefits directly, regardless of whether they took time out of the workforce for care giving. For example, an income-tested supplement could be given to increase retired worker benefits by 75 percent for those who have one child and 80 percent for those with two or more children. Both parents of a child would be eligible for this supplement, as long as the total household income did not exceed 125 percent of the federal poverty line. Retirement security experts said this option recognizes the societal value of care giving, but experts also said that, for various reasons, it may not reach its target population. For example, low-income people are less likely to be able to take time off from work. Therefore, people who have relatively higher incomes may benefit more from the creation of caregiver credits. Retirement security experts and SSA officials told us that caregiver credits would be complex to administer. A key issue is how to verify that care was provided to a qualifying person.

Read the rest of the changes here.

Have a question about social security, taxes, or other information for you or a loved one? Make sure to contact Adam Tobin to get your questions answered!

How to find an estate planning attorney

Tips to finding an estate planning attorney in Massachusetts.Finding an estate planning lawyer is an important step to make sure your family is guided in the right direction and is prepared after your death. Having a knowledgeable estate planning attorney on your side is crucial whether you would like to draft a basic will to provide for your family, revise an existing will,  or complete a comprehensive estate plan–including Trusts, Wills, Estate Taxes, Power of Attorney, Heath Care Proxy, Living Wills and
Gift Taxes.

To find a skilled estate planning attorney in your area, you can use online resources such as  If you are located in Massachusetts, please contact us to arrange a free estate planning consultation with Massachusetts Estate Planning Attorney Adam J. Tobin or to learn more about estate planning.

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How does the Gift Tax work?

Gift Taxes work in conjunction with the Estate Tax. Essentially, the government makes little distinction for gifts made during ones life (gift tax) and gifts made after ones life (estate tax).

Although Gift Taxes are placed on gifts given away to any person while you are still living, one may still give up to $13,000 as of January 2009 in cash or assets to an unlimited number of people each year without incurring Gift Tax liability. Married couples can give as a couple $26,000 per year to as many people as they want.

But remember, if someone (or a couple jointly) gives more than the limit annually, the excess is applied toward their lifetime gift-tax exclusion, which reduces their estate tax credit at death. Moreover, if at any point the gifts they gave you during their life exceed this unified credit then they must pay a gift tax on the excess amounts over the credit.

As an aside, any gift transferred between spouses (where both are US citizens) of any size is 100% Gift Tax-Free.  This fact may make it tempting to transfer assets between spouses but must be analyzed in conjunction with an estate plan and a professional estate planning attorney.   This simple gift may result in your family paying a tremendous amount of unnecessary gift/estate taxes.

I would be more than happy to look at your situation and determine the most effective way to help your family transfer their assets.  Contact me for a free consultation at 978-725-9083.