Chuhak Chats & Tecson Tips: National Estate Planning Awareness Week (Part 1)

Lindsey Paige Markus, author of A Gift For The Future, attorney and head of the team of 25 attorneys who concentrate in Estate Planning & Asset Protection at Chuhak & Tecson, P.C. discusses irrevocable trusts.

Thinking of making gifts to children or grandchildren outright? You might want to think again! The benefits of gifting to an irrevocable trust include:

• Asset protection from a beneficiary’s creditors;
• More likely to maintain status of “individual/non-marital property;” and
• Assets are excluded from the beneficiary’s estate (for special needs considerations, financial aid and the ability to maximize wealth transfer).

No one knows what the future has in store, but by gifting assets in trust, the gift can be asset protected from the beneficiary’s creditors, including a future ex-spouse. While assets gifted during a marriage are still considered individual or non-marital assets, if the recipient comingles the assets with marital funds or routinely uses the funds to benefit the marriage, the assets can quickly become tainted or transmuted into marital property.

Assets that are gifted outright to a beneficiary are also included in the beneficiary’s estate. This may pose issues if the beneficiary is later diagnosed with medical issues, has special needs considerations or if the beneficiary is struggling financially and wishes to apply for financial aid. In instances where the beneficiary has assets of his or her own or is expected to inherit more, by gifting assets in trust, the assets can be structured so they are excluded from the beneficiary’s taxable gross estate and that the maximum amount can pass estate tax-free from generation to generation. 

Assets that are gifted outright to a beneficiary are also included in the beneficiary’s estate. This may pose issues if the beneficiary is later diagnosed with medical issues, has special needs considerations or if the beneficiary is struggling financially and wishes to apply for financial aid. In instances where the beneficiary has assets of his or her own or is expected to inherit more, by gifting assets in trust, the assets can be structured so they are excluded from the beneficiary’s taxable gross estate and that the maximum amount can pass estate tax-free from generation to generation.