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irrevocable grantor trust

Irrevocable Trust

Irrevocable Grantor Trust: 8 Advantages of Choosing it as Your Family Trust

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“What is the origin of an Irrevocable Grantor Trust being used as a Family Trust, and how can it help me?”   We get many calls every week asking “what is a family trust, where did they originate, how could they help me?” There are many types of “family trusts.” Some are specifically for the purposes of holding real estate such as a real estate family trust, and some designed to hold only life insurance like an irrevocable life insurance trust (ILIT) and others are for more general purposes. In general, although the use of a family trust dates back a few centuries, lawyers and estate planning firms have mostly overlooked the irrevocable grantor trust as a preferred instrument for this purpose. While most ill-advised attorneys tend to promote the revocable living trust, we, along with most asset protection attorneys are of the opinion that an irrevocable grantor trust makes the best family trust in most circumstances, and the following eight reasons explain why.   Benefits of a Family Trust #1 – An Irrevocable Grantor Trust Protects Assets   King of British Empire creates feudal taxes in the likeness of estate taxes.   Creating a postmortem real estate family trust was one of the earliest purposes of trusts upon their establishment in the 15th century. The historically controversial King Henry VIII of England did not like the use of trusts too much; in those days, feudal taxation was excessive to the point that the Crown supported the appropriation of property as soon as knights passed away. In this case, early real estate family trusts were created upon the execution of wills, which meant that relatives could benefit from land that could not pass to the Crown. King Henry VIII was not in agreement with this practice and thus prohibited these real estate family trusts by royal decree; upon his passing due to health issues related to obesity, the English Court of Chancery reauthorized the use of trusts.     Learn the 3 key to uncompromising asset protection by clicking here   Although feudal taxation would be gone long before the fall of the British Empire, it survives in spirit in the form of estate taxes. This taxation standard is the basis of the idiom about there being nothing certain but death and taxes, for it is true that even the dead are required to pay tax in the absence of legal instruments such as an irrevocable grantor trust in today’s world.   Estate taxes are present at both the federal and in many states at the state level. Essentially, these are death taxes, a vestige of the Henry VIII days that seeks to collect revenue even after the taxpayer shuffles off this mortal coil. Modern statutes are not draconian in this regard; some exemptions and the use of an irrevocable grantor trust are allowed.   In situations like these irrevocable trust advantages are outstanding. An irrevocable grantor trust basically serves the same purpose as they did when real estate family trusts were created in the midst of the Renaissance period: to protect property and assets from the claims of third parties, including the tax authority. In the past, these third parties were the Crown, the feudal lords, the lenders, and potential usufructuary actors who would jump at the chance of claiming a piece of a knight’s property once he passed away. The modern versions of these third parties in the United States would be the Internal Revenue Service (IRS), the state revenue collection agencies, creditors, opportunistic or frivolous plaintiffs, and even gold diggers.   Irrevocable trust advantages go beyond the estate tax. A modern irrevocable grantor trust can do more than simply avoiding the payment of death taxes; they can provide individuals and their loved ones with guaranteed income while effectively transferring property and assets to heirs in a manner that is more efficient than traditional wills. Asset protection attorneys dedicated to estate planning and wealth management have been known to recommend about a dozen trust structures to families; however, only a properly written, executed, and funded irrevocable grantor trust is known to provide “bulletproof” protection if they are properly structured and managed. Any irrevocable grantor trust broken in the last 150 years of litigation, the only ones broken were ones that had issues with how they were written, executed, or funded.   Benefits of a Family Trust #2 – Irrevocable Trust Advantages Include Providing Ideal Ownership Situations   What are other examples of irrevocable trust advantages? It all boils downs to a legal theory known as the “burden of ownership.”   There is no question that we live in highly litigious times. Frivolous lawsuits that seek to establish a claim over property or assets are filed every day, and this is a situation that is often magnified after death. A good example in this regard would be legendary musician Prince, whose unfortunate death was followed by numerous siblings and half siblings coming forward to meet under contentious circumstances as they suspected that the late Minneapolis star did not leave do any estate planning what-so-ever, not even a will.   A graphic map of the number of torts per state. (click on image to see larger detail. 383KB)   Legal analysts and asset protection attorneys following the Prince case have commented that the burden of ownership is something that will haunt his estate for years to come as his survivors continue to fight in court. In the absence of an irrevocable grantor trust, Prince Roger Nelson’s estate will pay a huge estate tax with relatives ready to file claims for the remainder that establish his ownership of assets and their rights as heirs apparent.   The burden of ownership is what makes frivolous lawsuits happen in the first place. The first legal hurdle that a plaintiff must clear is that of establishing that the respondent actually owns the assets or property being claimed. The case cannot move forward and should be dismissed when the court finds that the lacks

Asset Protection, Irrevocable Trust

Compare chart Irrevocable Trust, Revocable Living Trust, Non-Grantor Trust, LLC

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 Watch the video on Compare chart Irrevocable Trust, Revocable Living Trust, Non-Grantor Trust, LLC Like this video? Subscribe to our channel. For those of you not familiar with the 2005 Tax Reduction Act, some of the provisions address specific transfers by seniors under the new Medicaid nursing home provisions. Under the new provisions, before seniors qualify for Medicare assistance into a nursing home, they must spend-down their assets. These new restriction have a 5-year look-back. The look-back used to be 3 years. By a vote of 216-214, the U.S. House of Representatives passed budget legislation that will impose punitive new restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care. Act of 2005, click on PDF: Deficit Reduction Act 2005. Search for “transfer of assets provision” in the pdf document. What’s Medicaid? What’s Medicaid? Medicaid is a government assistance program for people over the age of 65 or who are disabled. Medicaid assistance was designed for those who could not afford medical expenses (for the poor) but Medicaid has become the default for the middle class. The middle class has become the new poor. Medicaid estate planning and Medicaid rules are complicated. The government is mandating a 5-year look-back on any transfers you may have made to disqualify you from entering the nursing home. Before the 2005 Tax Reduction Act it was 3 years. The transfer of any assets by the elderly has taken a notation of a “fraudulent conveyance” or in government parlance “deprivation of resources.” These new rules are spousal impoverishment programs designed to punish the healthy spouse. If one of the spouses gets sick, all resources have to be spent before you can qualify for government assistance. These new restrictive rules punish the healthy spouse leaving the healthy spouse at the mercy of welfare or her children. It’s very humiliating when seniors have planned their retirement based on their ability to keep their home. Assets That You Must Spend Down Before You Can Qualify for Nursing Home Assistance: ANYTHING YOU OWN IN YOUR NAME OR TOGETHER WITH YOUR SPOUSE. Cash, savings, checking, certificate of deposits, U.S. Savings bonds, credit union shares, Individual Retirement Accounts (IRA), nursing home trust funds, annuities, living revocable trust assets, any revocable Medicaid estate planning trust, real property occupied as a home, other real estate you hold as investment property or income producing property, cash surrender value of your life insurance policy, face value of your life insurance policy, household goods and effects, artwork, burial spaces, burial funds, prepaid burial if they can be canceled, motor vehicles, land contracts, life estate in real property, trailer, mobile home, business and business property, ANYTHING IN YOUR NAME OR YOUR POSESSION. What is “Fraudulent Conveyance” in Medicaid Estate Planning? What do you mean by “fraudulent conveyance” or “deprivation of resources”? If you give away your assets and you do not receive an equal amount (value) in return, the transfer is a deprivation of resources and you have committed a fraudulent transfer, (you give your house to your children for $100.00 when the fair cash value of your home is i.e. $150,000). If you gave your house to your children for $100 sixty months (5 years) before you entered the nursing home, you “deprived your resources” from the nursing home expenses. Unwittingly, you also incurred a gift tax on the difference between the $100.00 and the $150,000 and in addition you may have cheated the government out of Estate Taxes. Federal Gift Tax Rules in Medicaid Asset Protection & Estate Planning: The federal gift tax rules apply to the transfer by gift of any property. You make a gift if you give property (including money), or give the use of property, or give the income from property without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift. The general gift tax rules are that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts: Gifts that are not more than the annual $12,000 $13,000 exclusion for the calendar year beginning in 2006 (This is called the Annual gift tax exclusion for any 12 month period, see below). Tuition or medical expenses you pay directly to a medical or educational institution for someone, Gifts to your spouse, Gifts to a political organization for its use, and Gifts to charities. Annual gift tax exclusion. A separate annual gift tax exclusion applies to each person to whom you make a gift. For 2007 2010, the annual gift tax exclusion is $12,000 $13,000. Therefore, you generally can give up to $12,000 $13,000 each to any number of people in 2007 2010 and none of the gifts will be taxable. However, gifts of future interests cannot be excluded under the annual exclusion provisions. A gift of a future interest is a gift that is limited so that its use, possession, or enjoyment will begin at some point in the future. A federal Gift Tax return is filed on form 709 for taxable gifts in excess of the annual exclusion.   Filing a Gift Tax Return: Generally, you must file a gift tax return on Form 709 if any of the following apply: You gave gifts to at least one person (other than your spouse) that have a fair “cash” value of more than the annual exclusion of $12,000 $13,000 for the tax year 2007 2010. You and your spouse are splitting a gift. You gave your spouse an interest in property that will be ended by some future event. Your entire interest in property, if no other interest has been transferred for less than adequate consideration (less than its fair “cash” value) or for other than a charitable use; or A qualified conservation contribution that is a restriction (granted forever) on the use of real property.   Estate Tax & Senior Medicaid Estate Planning: Estate tax may apply to your taxable estate at your

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