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Irrevocable Trusts for Estate Planning

My friend Steve Oshins was quoted in the Wall Street Journal article on Irrevocable Trusts. The article discusses the importance of Crummey Notices when using an irrevocable gift trust for estate planning. It’s a good overview on the subject.

[using one’s annual gift exclusion] make sense now, advisers say, despite the fact that Congress raised the lifetime threshold for tax-free giving to $5 million in 2011 and 2012 from $1 million last year. The ceiling could fall back down again in 2013, they say, or the government could decide to “claw back” gift- and estate-tax savings from this year and next.

Here is how a family can use a Crummey trust: Have your estate planner set up one to buy a life-insurance policy, and fund the premiums with annual gifts. (Each year, a person can give unlimited separate gifts of up to $13,000—the current annual ceiling for gifts to individuals.) That gets money out of the estate while skirting the gift tax. Since the trust owns the policy, the death benefit ultimately goes to the trust, shielding it from federal estate taxes.

We almost always recommend our clients use irrevocable trusts when making gifts to their children. Using trusts significantly protects the gifted assets from the children’s creditors and divorcing spouses. And the trust can leverage the annual gift exclusion by including all the donor’s descendants as lifetime gift beneficiaries thereby increasing the annual gift exclusion.


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