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How Can an Irrevocable “Gifting” Trust Benefit You and Your Loved Ones?

Estate planning serves many functions, including helping your loved ones receive the funds you wish in the way you want to give them. It also protects your estate from gift and estate taxes. An irrevocable gift trust, or IGT, is an excellent tool that provides flexibility in passing on your wealth to future generations while simultaneously shielding your beneficiaries from paying too many taxes. You may even be able to access trust funds during your lifetime if your trust is set up properly.

Please reach out to our talented legal team for help understanding whether an IGT is suitable for you. We can look at your unique situation and help you determine whether you should create an IGT for the most benefits in leaving behind your legacy. Reach out to us right away for a free consultation at (516) 253-1366.

What is an Irrevocable Gift Trust?

An irrevocable gifting trust allows you to retain some control of your assets while gifting them to someone else during your lifetime. Your trust account will be managed by your chosen trustee, which could be a spouse, sibling, adult child, or close friend.

With an irrevocable gifting trust, your beneficiaries can enjoy the assets in the trust while you are still living. For example, they can reside in a house you give to them or use the funds in the trust. The trustee carries out the terms under which assets can be accessed according to your instructions. If your gift is made to your spouse, you can easily use the assets yourself.

Gifting money directly to your heirs without setting up a trust is the most straightforward method of transferring money, but it can lead to hefty taxes if you wish to make a large distribution. The IRS’s annual exclusion for gifts in 2023 is $17,000 per donee. This exclusion may be used to your advantage by properly structuring your IGT. You may transfer your desired amount of assets to the IGT, then grant each of the trust’s beneficiaries the temporary power to withdraw the maximum gift exclusion amount each year.

With careful planning, you may reduce or even eliminate the gift tax you must pay on transferring these funds, optimizing your estate’s value to your heirs.

What Are the Advantages of an Irrevocable Gift Trust?

Irrevocable gift trusts offer several advantages, including:

• Tax advantages – IGTs offer estate tax advantages because they are excluded from the grantor’s estate. They are also protected from being depleted due to income taxes since you can directly pay any taxes owed with your yearly tax payment at your personal tax rate, rather than paying them out of the trust itself at the compressed trust rate.
• Protection for beneficiaries – These trusts offer protection for your beneficiaries against creditors, divorce, and lack of financial management skills.
• Access to trust assets –The grantor may indirectly access the funds, especially if the account is gifted to a spouse. 

How Can a Gifting Trust Protect Your Beneficiaries?

Trusts are often used as a structured and safe way to pass money to people who may have difficulties managing assets on their own. If you have concerns about the capabilities of your beneficiaries to handle a large influx of cash due to their age or life situation, controlling asset distribution through an IGT may be a good choice. Because the trust owns the assets, they are protected from the beneficiaries’ creditors, court judgments, and divorce proceedings.

Your legal team can also help you structure the terms of your IGT to meet your needs. You can provide specific instructions to the trustee who is in charge of distributing the trust’s assets. These instructions may restrict what the funds can be used for or place age limits on the distribution so you can ensure the maturity of the individual before they receive funds. An experienced estate planning lawyer can help you determine what protections may be necessary to ensure the financial stability of your beneficiaries now and in the future.

What Role Can an IGT Play in Medicaid Planning?

With the costs of long-term care for older Americans rising rapidly, it is wise to begin planning for these expenses early. Without a detailed strategy in place, the price of getting quality medical care and living in a nursing home could unnecessarily and unexpectedly deplete your estate and cause financial distress for your loved ones.

Medicaid is a means-tested government benefits program that may help individuals pay for the care they require in their golden years. However, the program has very low asset and income limits.

Medicaid prevents potential applicants from giving away their assets to qualify by enforcing a “lookback” period of several years and imposing penalties and waiting periods on individuals who improperly transferred assets. Your lawyer can help you decide whether an IGT may be a better method of gifting assets to reduce the value of your estate to qualify for Medicaid without incurring these costly penalties. However, early action is crucial if you wish to build the most robust plan possible.

Can You Retain Indirect Access to The Trust’s Assets?

Irrevocable trusts have many advantages, but it is important to remember that you can no longer directly make changes to the trust or maintain control of the assets it contains. However, you can designate a trusted individual to be the trustee of the IGT. The trustee manages the trust’s assets and their distribution.

You may be able to retain some indirect influence over the IGT through your trustee and the instructions you’ve put in place for the trust. You could also make your spouse a beneficiary of the trust, so they could receive distributions of funds that could then be used for any purposes you decide as a couple.

Should You Hire Our Trusts Attorneys?

Creating a trust is an excellent way to protect your wealth, and irrevocable gift trusts are no exception. However, these documents can be complicated and should be entered into only with excellent legal counsel and representation.

Contact our law firm right away if making an IGT is a good move for your estate plan. We can help you determine the right trust for your family and will create legally sound documents that protect you and your loved ones for years to come. Contact us today to speak with our talented legal team at (516) 253-1366.

Setting up an irrevocable trust is a big decision. Unlike revocable trusts, which can be changed or amended at any time, it is difficult, if not impossible, to change the terms of an irrevocable trust once it is created. However, these documents can be highly beneficial for many individuals because of the tax benefits and asset protection they offer.

If you aren’t sure whether an irrevocable trust is right for you, please contact our legal team immediately. We can discuss your goals and analyze your situation to offer the legal counsel you need when making such important decisions. Call today for a consultation at (516) 253-1366.

What Are Some Important “Do’s” When it Comes to Irrevocable Trusts?

Some actions that are important when using an irrevocable trust are:

• Transfer assets to the trust according to the counsel from your lawyer
• Use trust funds to repair, maintain, and improve the property in the trust
• Use trust funds to pay real estate taxes and insurance
• Contact your lawyer immediately if your circumstances have changed
• Call your law firm if you want to change trustees
• Choose your trustee carefully to avoid problems with changing trustees in the future
• Reach out to your law firm immediately if the grantor of an irrevocable trust dies or becomes incapacitated

What Should I Avoid with My Irrevocable Trust?

When you have an irrevocable trust, you should NOT:

• Use trust funds to pay for personal expenses
• Use trust funds to pay for monthly bills, such as phone bills or utilities
• Use trust assets to purchase vehicles
• Gift assets from the trust to beneficiaries
• Transfer assets into the trust without consulting your lawyer
• Take gains or profits from trust assets

Should You Hire Our Irrevocable Trusts Attorneys?

Irrevocable trusts are not only for the ultra-wealthy. People from many financial backgrounds can benefit from the tax protections and flexibility that trusts offer. However, setting up an irrevocable trust can be complex, requiring much legal knowledge and experience. Making a mistake with an irrevocable trust can be costly and time-consuming as these trusts are extremely difficult to change once they are created.

If you are considering creating an irrevocable trust, please get in touch with our law firm immediately. We can help you decide if this is the right course of action for you. If you want an irrevocable trust as part of your estate plan, we will craft the document so that it represents your best interests and offers the greatest protection for your surviving family members.

Don’t delay the critical process of planning for your future by creating an estate plan. Take the simple step today of calling and setting up a consultation to speak with our talented legal team. Call (516) 253-1366 now!

There are various physical changes that happen as a person ages. Our hearing, vision, and reflexes worsen leading to an increased risk of injuries among the elderly. Not only are senior citizens more prone to injury, they are at higher risk of injury-related complications from which they will not recover.

Common Injury Scenarios

Slip and Falls are the most common injuries in people over the age of 65. They are the leading cause of hospitalizations among senior citizens. Over 90% of hip fractures are caused by a slip and fall accident whether at home or outside.

Motor Vehicle Accidents are the second most common among senior citizens. While all drivers and pedestrians are at risk of injury as a result of a motor vehicle, the percentage is significantly higher in those over 65 years of age. Motor Vehicle Accidents also come with a high risk of injury complications as older people react differently to accident trauma than a younger person.

Settlements

Plaintiffs over 65 years of age are typically receiving benefits such as Supplemental Security Income (SSI), Medicaid Assistance, Supplemental Nutrition Assistance (SNAP), Federally Assisted-Housing, Temporary Assistance for Needy Families (TANF), and Low-Income Home Energy-Assistance. Large Personal Injury settlements can disqualify senior citizens from receiving such assistance and put a stop to Medicaid and SSI.

What Are the Options

Accept the Settlement – The quickest option is to accept the offered settlement and use that money to improve the quality of care above what Medicare would provide.

Spend Down – Rather than spend the settlement money on the quality of care, it could also be spent on goods and services that benefit the plaintiff. The funds may be put towards the purchase of a house, home improvements, a vehicle, a vacation, or pre-payment for funeral arrangements.

Set up a Trust – Having too many assets disqualifies a Medicaid applicant from receiving benefits. Another option when it comes to receiving an injury settlement is to put that money into a trust to ensure the applicant qualifies for Medicaid.

Contact our estate planning attorneys to determine your best course of action when it comes to your personal injury settlement.

The terms “estate plan” or “trust funding” are typically associated with wealthy families that own large homes and larger stock portfolios. The reality, however, is that estate planning is not just for the super wealthy. In fact, estate planning is an important part of anyone’s personal and financial plan, regardless of wealth or age.

So, why is it important to have an estate plan?

Each state has its own laws regarding how a person’s assets are distributed after their death. Still, it is often the case that a decedent’s family must go through the courts to gain access to their assets. Court proceedings are time consuming and likely will not have the same outcome as the decedent may have wanted for their family. Creating an estate plan provides the ability to be clear about how to distribute assets, finances, and personal belongings.

There are a variety of options when it comes to creating your estate plan. While trusts are not the only type of option, for many people it is the best course of action to best protect their assets. Estate plans typically include a durable power of attorney, a healthcare proxy, HIPAA authorizations, and a living will. These documents authorize a person of your choosing to make medical and financial decisions should you become unable to do so. Without such documents, the courts may become involved to appoint a legal guardian.

Having an estate plan also does not necessarily mean that nothing will change. We advise that our clients review their estate plans every three at least and when there has been a major life change.

What are some of the most common reasons to review your estate?

1. Is there a new member of the family that you want to add to your estate plan?
2. Is there someone you want to remove from the estate plan?
3. Have you received an inheritance?
4. Are there new tax laws in place?
5. Are they any changes in your health?
6. Have you recently gotten married or divorced?

Creating an estate plan with the right attorney is a worthwhile investment for the future.

Throughout the past year, there have been many discussions and numerous proposals released for review regarding potentially changing current Federal tax law. Recently, the House Ways and Means committee¹ submitted a proposal that clarifies some of the content. The proposal submitted by the committee is still subject to change at any time but it gives us some indication as to what the final tax law may look like.

A new tax law means you might need to make some changes to your current estate planning documents. Some of the provisions put forth in the new proposal are set to take effect upon enactment should the bill be passed into law.

What can you do? Take action – review your situation and sit down with our attorneys to determine how these new laws may affect you and how you can stay protected for your future.

Here a few key points most relevant to estate planning:

1. The new proposal includes a reduction to the federal estate tax exemption from $11.7M back down to the 2010 level of $5M per individual, adjusted to inflation
2. With the new plan, any transfers to a “Grantor” trust that are designed to exclude assets from an estate at the time of death for tax purposes, would be included in the grantor’s taxable estate. Additionally, any “sales” to a grantor trust would trigger a capital gain that may have a dramatic effect on traditional estate tax freezing techniques.
3. Also included is a provision that would remove valuation discounts for transfer tax purposes for ‘passive assets’ held for the production of income and not used in any active trades or businesses.
4. Mega IRAs in the area of $10M and over will have limitations on Roth Conversions as well as required minimum distributions.
5. The highest federal income tax bracket will go back to 39.6% and there will be an increase of 25% for capital gain rates for high income individuals.

Missing from this bill, however, is the current administration’s proposal to get rid of step-up in basis on death and the realization of a capital gains tax on an inherited property.

We have already seen discussions for further clarification of the committee’s proposal. Though all of the provisions are subject to change, we have a better understanding of the updates we might see in the upcoming tax law.

These changes will affect you sooner than you think. In order to take advantage of the techniques used for estate planning over the past several decades, now is the time to call and schedule a consultation.

It could be only a matter of weeks before the new bill is passed. Act now to make sure these changes don’t affect your estate.

Already have an estate plan? Schedule a meeting with our attorneys to review your documents and make sure everything is up to date and in order. Don’t have an estate plan? Schedule a meeting with one of our attorneys to get your estate planning started.

Most people have the best of intentions; that includes establishing an estate plan. People seem to never have time to address this issue. The present situation has most of us working from home and, as a result, having more available time. Why not use the opportunity to set up a plan to protect your family, preserve your assets and ease your mind about the future?

During this unprecedented health crisis, it is essential to have an estate plan in place. Having a valid power of attorney, health care proxy, and a last will and testament ensures that you and your loved ones will be well prepared. A thorough estate plan may also include a trust to provide further protection.

If you have already planned your estate, it is important to review your plan documents to be certain they express your wishes and address your needs, as these may change over time, and conform to the current law.

Until recently, to prepare an estate plan, an attorney and client would meet in the traditional manner, face-to-face, for an initial consultation and again later for the document signing. Given the current circumstances, this is not advisable.

By executive order, New York has allowed estate planning attorneys to facilitate remote signing of all estate planning documents. Utilizing the latest technologies, consultations are being legally conducted by video conference, allowing us to virtually meet with our clients in their homes. Further, all estate planning documents, including powers of attorney, health care proxies, living wills, last wills and testaments, deeds, and trusts can be validly signed, witnessed, and notarized by video conference; all without ever meeting in person.

It is important to act now to ensure your important documents are in place to protect your family now and in the future. Don’t delay in ensuring your estate plan is up-to-date. The estate planning attorneys at Davidov Law Group are experienced in navigating the technical requirements of the remote signing of estate planning documents so you can be confident in their use. Call us at 516-587-5555 or click here to schedule your consultation.

Beginning October 1, 2020, New York will impose a new requirement regarding community Medicaid, those Medicaid services provided in an individual’s home such as homecare. The state will start to use a new “look-back” period of 30 months or 2 ½ years of an individual’s financial records. This means a person applying for community Medicaid must submit financial information for the 2 ½ years prior to their application. The current law has no such condition or a look-back period.

Under the present law, if you were to apply for community Medicaid today, your application would show your finances only as of today, like a snapshot of your present situation. There would be no examination by the Medicaid agency of any transfers of assets made up until that point. If you met the requirements for Medicaid, your application would be approved for those services.

Under the new law, your application must be submitted with your financial records of the preceding 30 months. If you were found to have gifted your assets or placed them into a trust, for example, to protect that property during the last 30 months prior to the filing of the Medicaid application, the value of those assets would start a penalty period which would delay coverage by Medicaid.

The need to protect your assets has never been greater. The new law does not go into effect until the fall, so there is still time to plan. Any arrangement to qualify for Medicaid services at home and retain your assets by placing them in a trust, should be made soon. Without it, under new law, long term health care services could cost you $60,000 per year or more. Planning now will bring you peace of mind.

For those who presently need home health care, it is especially important to apply before October when the “look-back” period will be implemented. It could mean the difference between qualifying immediately for Medicaid benefits or having to wait up to 2 ½ years.

If you have already established a Medicaid asset protection trust, a review of the trust and the assets it contains is in order. Any assets not in the trust are not protected.

You may already have a revocable living trust. A revocable trust does not offer protection from long term care expenses and may need to be restated to address long term care asset protection.

We can review your specific situation to determine if an asset protection trust is needed, or if your existing estate plan needs to be updated. While the State has issued directives for social distancing, we are making appointments available to new and old clients remotely by phone or video conference. Since New York allows for estate planning documents to be signed remotely, we can get this prepared and completed remotely.

To set up a consultation with one of our attorneys, please call us at 516-587-5555 or schedule a meeting through our website at www.davidovlaw.com.

When a person passes away, no matter how much estate planning they accomplished, probate to some degree will be necessary to sort through their assets and interpret their will or trust. In most cases, somewhere in their estate plan, there is named an estate administrator. This person is now formally in charge of overseeing the management of the estate as it moves through probate.

For many estate administrators, they have no idea what their newfound duties entail, probably because they never knew they had been given the title in the first place. If you are in the same situation and scratching your head about what to do next, check out this list of some of the basic duties of an estate administrator.

1. Notify others: If you didn’t know you were going to be an estate administrator for your loved one’s estate, probably no one else did, either. You will need to notify interested parties that you are now the administrator, as appointed by the estate and confirmed by the court. Heirs, beneficiaries, family members, and creditors should be told first and foremost.
2. Arrange the funeral: It is not uncommon for an estate administrator to be tasked with arranging the funeral and burial of the decedent. Sometimes close family members are willing to assume this duty, so it might be worth checking with them if you feel your plate is already full enough.
3. Catalogue assets: Before an estate can be distributed, you need to know what’s in it. The estate administrator has to collect and inventory all assets of the estate. Additionally, appraisals should be completed while the catalogue is created so the true value of items can also be known.
4. Repay debts: It might seem fairly harsh but creditors often get first dibs to estate assets before friends and family members do. An estate administrator has to identify all valid debts and sell off appropriate pieces of the estate to satisfy those debts as much as possible. If your loved one passed away with a considerable amount of debt, it could be likely that no one but creditors get anything.
5. Distribute inheritances: When the debts are paid and the estate is completely catalogue, beneficiaries can start collecting their inheritances. The estate administrator oversees this process to make certain no one is cheated by another, or that nothing is left in the end without an inheritor.

Your Fiduciary Duty & Legal Assistance

In addition to the aforementioned checklist of tasks, an estate administrator automatically has a fiduciary duty to the estate. In basic legal terms, the fiduciary duty is the administrator’s duty to always act with honesty and good intentions, and to always do what they can within reason to follow the estate plan as close as possible. Do you promise to do your best and be a good person? Perfect – you have accomplished your fiduciary duty.

If you are feeling overwhelmed by all of the duties of an estate administrator, know that there is no law that says you have to go through this on your own. You always have the option of hiring legal help, and it is recommended that you do so as soon as you know you’re an administrator. If you live in New York, contact our Nassau County estate planning attorneys from Davidov Law Group for all the assistance you need. We have more than 25 years of total legal experience we can put to use for you, providing the know-how and comfort you require.