Estate Planning for Blended Families – Part Two

Estate Planning for Blended Families – Part Two

INTRO: In Part One of this series, we talked about the importance of blended families to engage in careful estate planning. In today’s post, we talk more about alternative options.

One such rule is that up to $14,000 per calendar year can be gifted to each of your children without the donor being subject to any Gift Tax and without causing the donor to use up any of his or her Federal Estate Tax exemption (i.e. without reducing the amount that the donor is able to give away Estate Tax free on death). Besides these $14,000 “annual exclusion” gifts, a donor may donate an unlimited amount to your child’s education by paying the tuition bill directly to the educational institution. Specific rules and qualifications apply to the tax aspects of these educational gifts (and to mirror rules for health care-related gifts).

Finally, the manner in which you or others make gifts to your children for educational and/or other purposes, has important implications. The most popular and simplest method is to gift funds into a custodial (UTMA) account. But many donors fear the child may not eventually use the funds for the intended purpose or handle the money responsibly. Upon opening an UTMA account, the minor owns and is automatically entitled to all of the account funds when the child turns 18 (or up to 21 if the custodian so affirmatively designates on the account). Accordingly, people sometimes look for an alternative way to gift with “strings attached.”

Fortunately, a special kind of irrevocable trust known as a “Crummey Trust”, can be established and custom-designed in whatever way you wish, enabling your young loved one to receive income and/or principal starting and continuing at certain ages or defined benchmarks, and for certain purposes (e.g. health, education, buying a home, etc.). Crummey Trusts, as with all advanced estate planning strategies and many of the aforementioned planning strategies, should only be considered and implemented with the advice and assistance of an experienced estate planning attorney and possibly other applicable professional advisors.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

ESTATE & TRUST ADMINISTRATION: Need to find an experienced estate & trust administrator in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on a Revocable Living Trust, “Summary” Estate Administration, Trust/Estate Beneficiary Representation and Will & Trust Disputes.

Previous Estate Planning for Blended Families – Part One.

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