Estate Planning

A Real Estate Investment Trust (REIT) invest in real estate or loans secured by real estate and issue shares in such investments. A Real Estate Investment Trust is similar to a closed-end mutual fund.

A Discretionary trust refers to a personal trust in which a trustee has the power of decision as to how much income or principal each beneficiary receives.

A Charitable Remainder Trust is an irrevocable trust that pays income to a designated person or persons until the grantor's death, when the income is passed on to a designated charity. A Charitable Lead Trust by contrast allows the charity to receive income during the grantor's life, and the remaining income to pass to designated family members upon the grantor's death.

An Alimony trust is a formal trust arangement where the beneficiary of the trust is the ex-spouse entitled to alimony payments. The settler or person who contributes property to the trust is the ex-spouse obligated to make the alimony payments. The taxpayer may establish a post death "testamentary" trust or a living "inter vivos" trust to provide for the alimony payments required by a divorce decree or an agreement between the parties.

Any transfer of assets to an Inter Vivos Irrevocable Trust will not automatically create a 60 month period of ineligibility for Medicaid. When a transfer to a trust is made the period of ineligibility will be calculated by taking the dollar value of the asset transferred and dividing it by the average monthly cost of a nursing home as determined by the Department of Social Services in your area. Not all transfers to a trust will automatically create a 60 month period. There can be transfers made to a trust which create periods of ineligibility of less than 36 months. Speak to your local CPA or an elder law attorney for more information on trust transfers and Medicaid.

A Revocable Trust ia an agreement that gives income producing property to an heir and that may be altered numerous times, as often as the creator pleases. The entire trust can be canceled or revoked.

A dynasty trust is a trust which avoids estate taxes because the rule of perpetuities does not apply. Most states limit trusts to 100 years. Thirteen states including New Jersey, Wisconsin, Idaho, Rhode Island now allow a trust to span beyond that period.

Note that in 2013 the federal estate tax exemption has been made transferable between spouses. This is referred to as "portability of the estate tax exemption" and means that if one spouse dies in 2013 and his or her entire $5,250,000 estate tax exemption is not needed to avoid estate taxes on his or her estate, then the unused portion of the deceased spouse's estate tax exemption can be added to the surviving spouse's estate tax exemption.
This, in essence, means that a married couple will be able to pass on up to $10,500,000 to their heirs free from federal estate taxes without the need to use AB Trust planning.
But keep in mind that if the married couple have different sets of final beneficiaries, such as in the case of a second or later marriage where each spouse has their own children that they want inherit their separate assets after both spouses are deceased, then the couple will want to make use of AB Trust planning in order to insure that their separate beneficiaries will be their ultimate beneficiaries.
An A-B Trust is a regular trust made during the lifetimes of a taxpayer and spouse. One of its characteristics is that upon the death of either a husband or wife, it splits into two separate trusts, an "A" trust and a "B" trust. By doing this, the trust takes advantage of the decedent's current year's exemption ($5,250,000) and the unlimited marital deduction. The surviving spouse becomes the trustee of both trusts and has access to the funds in both trusts. The purpose of the A-B trust is to eliminate all estate taxes upon the death of the first spouse. You will be able to use an A-B trust if you are married and have an estate tax. That means an estate in the year 2013 worth more than $5,250,000 Million. If you do have an estate worth more than $5,250,000 Million in 2013 an A-B trust can help you. Speak to your local CPA or attorney about this tax planning strategy.

A QTIP Trust is a Qualified Terminal Interest Property Trust. A QTIP Trust permits the spouse with all of the assets to "leave" the property to the surviving spouse, but the surviving spouse cannot touch the principal of the trust. He or she must hold on to the QTIP Trust's income (interest, dividends, royalties, etc.) for his or her lifetime. But, the spouse with all the assets gets an Unlimited Marital Deduction that makes his estate pay Zero Estate Tax upon his death and it can utilize the surviving spouse's exclusion when she dies. Speak to your local CPA or attorney about this tax planning strategy.