Most Hawaii County families need testamentary trusts. These estate planning vehicles preserve privacy and avoid some taxes. When wills go to probate, as they all must, the contents of the estate become public record. In many cases, that disclosure is embarrassing at best and dangerous at worst. Additionally, the corpus (property in the trust) does not legally belong to the settlor (person that created the trust).
Testamentary trusts are usually revocable or irrevocable. As the name implies, settlers can add to or delete from a revocable trust’s corpus during their lifetimes. These vehicles are quite flexible but do not offer quite as much protection as irrevocable trusts.
However, some people need advanced trusts for advanced estate planning purposes. A Kamuela estate planning lawyer can offer several different options. Some of the most popular advanced trusts we handle are outlined below.
Asset Protection Trusts
Generally, these vehicles are offshore irrevocable trusts. They combine the flexibility of a revocable trust with the protection of an irrevocable trust.
Most Kamuela estate planning lawyers set up these trusts in foreign countries. A handful of places do not have CRS (Common Reporting Standards) agreements with the United States Treasury. So, their bank secrecy laws are still intact. It’s even harder for creditors to find assets in places such as Egypt, Bangladesh, and other non-CRS countries.
Occasionally, asset protection trusts are temporarily irrevocable, and then they become revocable after a few years.
Kamuela estate planning lawyers do not “set up” constructive trusts. Instead, they argue in court that a trust was created, and therefore, the property legally belongs to the trust and not to the settlor. Judges often imply these trusts if the parties agreed to some, but not all, key provisions. Or, some people draw up trust paperwork but do not place property into the trust until after the deadline passes.
Many people like to leave money or property to churches or other charitable organizations. But if such property passes through probate, the organization might be responsible for estate or gift taxes. Charitable trusts lower or eliminate these transfer fees.
The CRT (charitable remainder trust) is a popular option, especially if the corpus contains real or personal property. Settlors use the property as long as they are alive, even though the charity technically has the right of possession. When settlors die, both title and possession pass to the named charity.
Some settlors hesitate to pass large sums of money or property to some beneficiaries. Perhaps the beneficiaries are immature or there are family or other issues, like a substance abuse problem. Spendthrift trusts limit access to the corpus until certain events transpire. As a bonus, spendthrift trusts also shield assets from the beneficiary’s creditors.
Tax Bypass Trusts
If one spouse leaves property to the other spouse, that transfer is usually tax-free. But when the surviving spouse transfers that property to an heir, the taxes could be as much as 55 percent. The tax exemption is generally high, but it’s subject to change at any time. Tax bypass trusts avoid this problem.
Kamuela Estate Planning Lawyers and Special Needs Trusts
These estate planning vehicles transfer property to people who receive government benefits, like Medicaid or Social Security Disability, without affecting their eligibility for such benefits. These trusts are government-approved so long as a Kamuela estate planning lawyer drafts the documents carefully. The beneficiary must have no control over distributions and must have no power to revoke the trust.
In this way, beneficiaries can have some luxury items and still have their basic needs met. To make sure that happens, most Kamuela estate planning attorneys insert provisions that terminate special needs trust if the distributions would wreck benefit eligibility.
Special needs trusts generally limit trust disbursements to happiness and comfort items that the government benefits do not provide. This definition is quite expansive. It includes things like:
· Medical and dental expenses,
· Electronic and computer equipment,
· Transportation (including vehicle purchase),
· Insurance (including payment of premiums of insurance on the life of the beneficiary),
· Essential dietary needs,
· Spending money,
· Athletic contests,
· Money for gifts, and
· Payments for companions.
Disabled people who expect large inheritances often establish special needs trusts themselves, naming another person or entity as trustee.
Joint ownership is the most convenient way to pass financial accounts from one person to the other, but it’s not always the safest way. Totten trusts are revocable trusts that are incomplete until the settlor dies or unequivocally gives the property to the other person. These trusts are not available for real property.
These trusts are relatively easy to set up. Often, Kamuela estate planning lawyers just point settlers in the right direction. When owners set up accounts, they must simply add identifying languages, like ITF (in trust for), POD (payable on death), or ATF (as trustee for).
Why Hire Our Kamuela Estate Planning Lawyers
Trusts often allow people to pass property without financial penalties or public scrutiny. For a confidential consultation with an experienced Kamuela estate planning lawyer, contact Olson & Sons, L.C. at our Kamuela office at (808) 885-8533. We routinely handle matters in Hawaii County and nearby jurisdictions.