Special Estate Planning Strategies

Deferring Capital Gains Penalties Through Trust Planning

Deferring Capital Gains through trust planning can provide a very powerful alternative to the typical 1031 exchange or real estate installment sale.     

This powerful technique provides owners of highly appreciated assets such as residential or commercial real estate the following benefits:

• Capital Gains Tax Deferment
• Lifetime Income Stream
• Investment Flexibility
• Disciplined Retirement Savings
• Continued Family Control
• Tax Free Estate/Inheritance Transfer to one's Heirs

Dynasty Trusts

A Dynasty Trust is a trust that continues for approximately 100 years or longer and provides payments to future generations without any additional estate or generation-skipping transfer taxes.

This is different from the standard estate plan whereby the husband and wife usually leave all of their assets outright to their children equally upon their passing.

A Dynasty Trust continues for the children's lifetimes with the children receiving income or principal from the trust each year. As each child dies, the trust then continues for the deceased child's children with income or principal available for the grandchildren during their respective lifetimes. Depending on a number of factors, the trust may continue for great grandchildren and even longer if desired.

A Dynasty Trust ensures that your assets will stay in your generational line after you pass away. Although the beneficiary may eventually have investment control over the trust, he or she will not legally own the assets which means that the trust will not be subjected to claims of the beneficiary's creditors, not subject to division upon a beneficiary's divorce and not subject to a child leaving the assets to a second or third spouse outside your blood line. 

Special Needs Trusts

A Supplemental Needs Trust (sometimes called a Special Needs Trust) is a specialized legal document designed to benefit an individual who has a disability. A Supplemental Needs Trust is most often a “stand alone” document, but it can form part of a Last Will and Testament or Revocable Living Trust after the parent of a special needs trust child passes away. Supplemental Needs Trusts have been in use for many years and were given an “official” legal status by the United States Congress in 1993.

A Supplemental Needs Trust enables a person under a physical or mental disability, or an individual with a chronic or acquired illness, to have, held in Trust for his or her benefit, an unlimited amount of assets. In a properly-drafted Supplemental Needs Trust, those assets are not considered countable assets for purposes of qualification for certain governmental benefits.

Such benefits may include Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, subsidized housing, and other benefits based upon need. For purposes of a Supplemental Needs Trust, an individual is typically considered impoverished if his or her personal assets are less than $2,000.00.

A Supplemental Needs Trust provides for supplemental and extra care over and above that which the government provides.  The law firm of J.S. Burton can assist you with your unique special needs trust issue.

Charitable Giving and Trusts

Charitable Remainder Trusts (CRTs), are lifetime gifts of assets which receive a charitable deduction for a portion of the transfer. In addition, you or a beneficiary receives income for the rest of your life or a fixed period of time. Therefore, both you and charities benefit from life income gifts such as these.

You can also set up a CRT in your Will or Revocable Living Trust to be established upon your passing. Although you will not receive a charitable deduction during your lifetime, your estate will after your death.

            How It Works:

            With a CRT, you irrevocably put assets (real estate, cash, securities, etc.) in a trust. The trust then provides income payments of at least 5% annually to you or a named beneficiary. Depending on how you set up the trust, the payments will continue for a fixed period of time, or upon your death or other beneficiary. When the trust ends, the remaining assets are transferred from the trust to the various charities that you have selected in your trust document. When you first set up your CRT, you can designate how you would like these charitable entities to receive those funds. The amount of income paid out each year during the life of the trust depends on whether it is a charitable remainder annuity trust or a charitable remainder uni trust.

          Charitable Remainder Annuity Trust:

          A charitable remainder annuity trust provides a fixed dollar amount with each payment to the beneficiary. This amount corresponds to a percentage of the original investment paid out annually. For example, a $100,000 charitable remainder annuity trust might pay out 7.5% annually. In this situation, the beneficiary would receive $7,500 each year for the lifetime of the beneficiary or a fixed period of years. The $7,500 may be paid in one sum each year, or in several installments throughout the year.

          Charitable Remainder Unitrust:

          The amount paid annually to the beneficiary of a charitable remainder unitrust is a fixed percentage of the fair market value of the assets, as determined each year. For example, a charitable remainder unitrust might pay out 5.5% annually. If the assets were valued at $100,000, the beneficiary would receive $5,500 that year (5.5% of $100,000). If the assets were valued at $125,000 the next year, the beneficiary would receive $6,875 (5.5% of $125,000). As with a charitable remainder annuity trust, the payments may be made in one lump sum each year, or in several installments throughout the year.

Education Calculator

Use the Charitable Deduction Calculator to estimate income projections or tax deductions available when you make a planned gift, such as a charitable remainder trust or charitable gift annuity. These calculations are confidential.