There are Trusts that are designed to reduce income taxes and those used to reduce estate and probate taxes. Then there are Trusts with no tax advantages at all that are used to transfer control over property to another person. Then there are Land Trusts which act differently from all others.

Irrevocable Pure Grantor Trust

The Asset-Protection Trust You’ve Never Heard Of

What if  there was a fairly easy, legal way to protect your assets from lawsuits, nursing homes, creditors and divorce, while still having 100% access to all the income from those assets? Or, in the case of a home, still being able to live in the home? And, after a short period of time, your assets would become invisible to Medicaid and nursing homes. Sounds too good to be true, doesn’t it?
 
There is such a such a way, and it’s done using an irrevocable pure grantor trust.

The irrevocable pure grantor trust is different, but as a revocable living trust, you are the creator (grantor) and the person in control of the property (trustee). But you’re a lifetime beneficiary as to income only or living in a trust property. Other people you name – usually your children – are the lifetime beneficiaries of the assets, and they are usually also the death beneficiaries. Anything you transfer into an irrevocable pure grantor trust is immediately protected from creditors and predators.
 
Yes, it’s irrevocable – you can’t make changes to the trust document later on, but someone else you’ve named can. And you can’t take the assets out of the trust and give them back to you without jumping through some pretty serious hoops – but someone else you’ve named can. You can buy, sell, and trade the assets that are in the trust, just as you do now. If the trust is drafted properly, you can take income from the assets (investments, rental properties, businesses) and live in the home (and it would still qualify for the homestead property tax exemptions). And, if your children take any assets out of the trust, they can use them for any purpose – even for your benefit.
 
If you stay healthy for at least five years, the assets in the trust become invisible to Medicaid; if you need long-term care before that time, there’s a penalty period, but your children can use some of the assets to pay your expenses until Medicaid becomes available – still saving the bulk of your assets.
 
Because it’s a grantor trust, the income will flow through to your Social Security number and tax return just as it does now – no additional tax identification number or tax return is required. And, like assets held in a revocable living trust, any assets held in an irrevocable pure grantor trust at your death are included in your estate, so your beneficiaries will get the benefit of a stepped-up cost basis.
 
This is important to remember: Whatever you can get to, so can all one's creditors and predators. One must give up only that which one wishes to protect.
 
An irrevocable pure grantor trust is just part of a comprehensive estate and asset protection plan. You don’t have to be rich to use this tool – you just need to have some assets you’re not using to live on and want to protect for a spouse or children – it might be $100,000 or $1,000,000. Generally, an irrevocable pure grantor trust is used in addition to - not instead of - a revocable living trust.
 
If you’d like to learn more about irrevocable pure grantor trusts and see whether they’re suitable for your situation, please contact us.

What Is the LegacyChange Incentive Plan verses the Incentive Trust?

Incentive Trust

The incentive trust is a legal entity that holds and manages assets for the grantor or for the benefit of another person. It is typically established by a senior family member to provide innovative strategies for distributing wealth to younger generations; the grantor can use the incentive trust's provisions to reward a beneficiary for achieving a wide range of desired behaviors or goals. The trust can also set out specific requirements on how the money can be distributed and use certain techniques to ensure that the beneficiary will have financial independence beyond the inheritance monies.

As with any type of trust, there are costs associated with the development and ongoing administration of an incentive trust. The costs and the time involved in establishing this trust are just two factors you'll need to consider when deciding whether or not this arrangement is right for you. Next, you'll need to mull over some of the unique advantages and drawbacks of the incentive trust.

The Pros
Motivating Positive Behavior - An incentive trust allows you to reward the beneficiary for desired behaviors, while limiting access for undesirable behavior such as unproductive or immoral activity (of course, defining what is "immoral" can be quite subjective). Many trusts can be as restrictive as the grantor wants them to be, as long as the restrictions imposed are not illegal - for example, specifying that the beneficiary must divorce his/her current spouse to receive an inheritance.

Age Restrictions - Restrictions related to the beneficiary's age are often attached to trusts. You may not want your child to receive income or principal from the trust until he or she reaches a more mature age, such as 25, 30 or whatever you decide. You can also plan for distributions of funds to be staggered over time, at various "benchmark" ages, to help your child learn how to manage money responsibly. At the very least, this strategy eliminates the possibility of your child blowing his or her inheritance all at once.

Encouraging Education - Trust distributions can be contingent on the beneficiary graduating from high school, achieving certain grade point averages or obtaining a postsecondary degree. You could also decide to distribute a portion of funds after successful semesters or academic years as a positive motivating tool.

Promoting a Healthy Lifestyle - Some grantors will establish trusts that won't pay out money if the beneficiary indulges in destructive and/or illegal behavior such as smoking, using illegal drugs or abusing alcohol.

Family Business or Employment - Your incentive trust can include provisions that reward your beneficiary for assuming important responsibilities in a family business or simply maintaining gainful employment. As another way to promote employment, you can set up the incentive trust to pay out a matching amount for each dollar earned by the beneficiary. These are strategies that often appeal to wealthy parents, who may worry that their children lack a work ethic because they have grown up with money.

Endorsing Philanthropy - You can help your child develop an appreciation for volunteerism and community involvement by using matching charitable donations and other benefits that reward your child for teaching, doing community service and other charitable habits.

The Cons
Possible Resentment - You know the saying "The road to hell is paved with good intentions"? Despite your best intentions, your beneficiary may find that some of the requirements set out in the incentive trust (say, getting a college degree) are unattainable for him or her, and this may lead to resentment toward you as the grantor, or toward other beneficiaries who have met certain requirements contained in the trust.

Hindering Entrepreneurship - Using the incentive trust to encourage specific professional goals or to push your child into the family business may hinder your child's ability to pursue his or her own professional interests, such as starting a successful landscaping business or going into some other trade that you may have overlooked.

Setting Unrealistic Goals - Keep the goals and milestones realistic: some kids are not meant to run the family business or are not cut out for an Ivy-league school and a stellar academic career. Grantors should be sensitive to the unique personalities of beneficiaries and set goals that are attainable for all.

Overlooking Other Needs - Placing too much emphasis on business and academic achievements can lead to other matters, such as the health and overall personal well-being of the beneficiary, being overlooked.

"Controlling Life from the Grave" - The incentive trust may fail to work as the positive motivating tool you'd like it to be if the beneficiary feels that you are trying to control his or her life "from the grave", or to introduce values that should have been taught when the beneficiary was growing up.

Key Considerations
It is your prerogative and right to control your Legacy and gifts as you prefer. The LegacyChange Incentive Plan is a simple and economical path to control your gifting to your beneficiary.

The LegacyChange Incentive Plan is more simple than an Incentive Trust where your legacy is preserved by heirs receiving guaranteed payments with tax advantages over years of time verses a lump sum. Your legacy has control allowing for prudent heir spending.

Selling Assets To Settle Divorce Action?

LegacyChange Plans can take the sting out of Ordinary Income Tax as for Annuity & Retirement Plans

LegacyChange Plans can also take the sting out of Gain & Recapture Tax as Stocks, Mutual Funds, & Businesses

Guaranteed income stream  

We inform and can assist for efficient economical transfer of asset ownership.

A recent article from Kiplinger, “Pre-Election Estate Planning Moves for High Net-Worth Families,” describes an extensive selection of trusts that can are used to protect wealth, and despite the title, not all of these trusts are just for the wealthy.

The time to make these changes is now, since there have been many instances where tax changes are made retroactively—something to keep in mind. The biggest opportunity is the ability to gift up to $11.58 million to another person free of transfer tax. However, there are many more.

Spousal Lifetime Access Trust (SLAT) The SLAT is an irrevocable trust created to benefit a spouse funded by a gift of assets, while the grantor-spouse is still living. The goal is to move assets out of the grantor spouse’s name into a trust to provide financial assistance to the spouse, while sheltering property from the spouse’s future creditors and taxable estate.

Beneficiary Defective Inheritor’s Trust (BDIT) The BDIT is an irrevocable trust structured so the beneficiary can manage and use assets but the assets are not included in their taxable estate.

Grantor Retained Annuity Trust (GRAT) The GRAT is also an irrevocable trust. The GRAT lets the grantor freeze the value of appreciating assets and transfer the growth at a discount for federal gift tax purposes. The grantor contributes assets in the trust and retains the right to receive an annuity from the trust, while earning a rate of return as specified by the IRS. GRATs are best in a low interest-rate environment because the appreciation of assets over the rate goes to the beneficiaries and at the end of the term of the trust, any leftover assets pass to the designated beneficiaries with little or no tax impact.

Gift or Sale of Interest in Family Partnerships. Family Limited Partnerships are used to transfer assets through partnership interests from one generation to the next. Retaining control of the property is part of the appeal. The partnerships may also be transferred at a discount to net asset value, which can reduce gift and estate tax liability.

Charitable Lead Trust (CLT). The CLT lets a grantor make a gift to a charitable organization while they are alive, while creating tax benefits for the grantor or their heirs. An annuity is paid to a charity for a set term, and when the term expires, the balance of the trust is available for the trust beneficiary.

Charitable Remainder Trust (CRT) The CRT is kind of like a reverse CLT. In a CRT, the grantor receives an income stream from the trust for a certain number of years. At the end of the trust term, the charitable organization receives the remaining assets. The grantor gets an immediate income tax charitable deduction when the CRT is funded, based on the present value of the estimated assets remaining after the end of the term.

These are a sampling of the types of trusts used to protect family’s assets. Your estate planning attorney will be able to determine if one is right for you and your family, and which one will be most advantageous for your situation.

Reference: Kiplinger (Aug. 16, 2020) “Pre-Election Estate Planning Moves for High Net-Worth Families”

How Does One Plan for a Loved One with Special Needs?

Special Needs Trust: The gift is placed in the control of a trustee who manages the money, invests it, makes the appropriate tax filing and makes the decision about when to distribute funds.

Most family members don’t understand the web of complex regulations that dictate how public benefits work. Properly created and managed by a responsible trustee, the Special Needs Trust avoids putting the burden of financial care on other family members and lets money be wisely distributed.

Money and property in a Special Needs Trust is not considered to be an asset of the individual, as it is owned by the trust. However, the same restrictions apply to making direct distributions from the trust to the individual beneficiary for food and shelter.

ABLE Account: is created by the Achieving a Better Life Experience law. Anyone can contribute to it and money in the account is not considered income and not counted against the asset limitations. Contributions are currently capped at $15,000 per year, and the account cannot contain more than $100,000.

Distributions from the ABLE account can be used to pay for a wide array of expenses for a disabled person without impacting government benefits. That includes housing, transportation, assistive technology, health, education and other needs. Families need to be aware that the disabled individual owns the assets in the ABLE account. If they are unable to manage money or are susceptible to scams, the family will want to be cautious about putting funds into the account.

LegacyChange Plan: can spread tax advantaged monthly or quarterly guaranteed payments over years.

Your personal estate asset plan attorney or advisor is recommended.