Tag 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.

Estate Taxes – Are there ways to avoid estate taxes?

YES.  Does this sound too good to be true? I counsel clients to reduce and often eliminate estate taxes through various techniques, including but not limited to:

  • Drafting Credit Shelter Trust Provisions; whereby spouses leave some of their property in trust for their children, but give the surviving spouse the ability to access some or all of it for the remainder of their life. This keeps the second spouse’s taxable estate half the size it would be if the property were left entirely to the spouse.
  • Drafting “QTIP” Trust Provisions; whereby couples can postpone estate taxes until the second spouse dies.  This allows for additional gifts qualifying for the annual exclusion.
  • Drafting Charitable Remainder Annuity Trusts; whereby a tax free gift is made to to a tax-exempt charity and the surviving spouse and/or children receive perpetual income from the transfer.
  • Drafting Irrevocable Life Insurance Trusts; whereby the value of life insurance proceeds is removed from the client’s estate.

What are the rates for federal estate taxes?

In actuality it really depends on your date of death. The federal government imposes a hefty estate tax when your property is worth more than a certain amount. In determining your gross estate, the government values all of your assets including, but not limited to bank accounts, stock, bonds, annuities, mutual funds, real estate, retirement plans, Individual Retirement Accounts (IRA’s), and life insurance.  It is important to note that property left to a spouse is exempt from the tax, as long as the spouse is a U.S. citizen. However, in many cases this merely defers the tax due until the surviving spouse’s death. In addition, Massachusetts has its own estate tax which provides a much smaller $1,000,000.00 exemption. With the escalation of real estate values in the last twenty years many retirees have become vulnerable to Massachusetts estate tax and/or federal estate tax.

Year of Death    Exempt Amount

2001                    $675,000
2002-03            $1 million
2004-05            $1.5 million
2006-08            $2 million
2009                   $3.5 million
2010                   No estate tax
2011                    $1 million unless Congress extends repeal

The rates are steep, starting at 37%. The maximum is 55% for property worth over $3 million. The maximum rate is scheduled to decline gradually to 45% in 2009. There will be no estate tax in 2010, if the current tax law (passed in 2001) is not amended. Unfortunately, in 2011 the exemption is scheduled to drop back to $1,000,000.00 unless congress extends the repeal.

Adam Tobin – Elder Law Attorney

I offer estate planning for estates of all sizes, planning to minimize Gift Taxes and Estate Taxes, the use of Trusts to protect assets, Business Planning for small business owners, and Retirement Planning for individuals of all income levels. As an Elder Law Attorney,  I help guide you through the complexities of Medicaid laws, explain the options available to pay for home health care, assisted living and nursing home costs, assist you in qualifying for these benefits, and implement a plan to protect your assets from nursing home costs. My probate representation practice includes guardianships and other protective proceedings, the probate of Wills, and the administration of Trusts.

Contact me via email or call 978.725.9083 to arrange a free consultation. My office is located at 809 Turnpike Street, North Andover, MA 01845.