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October 01, 2019
This is the fourth blog in a four-part series that focuses on estate planning strategies.
When the Tax Cut and Jobs Act of 2017 (TCJA) was passed, it included a doubling of the federal estate, gift, and GST tax exemption amounts to $10 million, adjusted for inflation. As a result, in 2019, those exemptions are $11.4 million per individual. While the increased exemptions provide a significant incentive to review existing estate planning and consider implementing new planning strategies, it’s critical to consider the need for flexibility so that trusts can adapt to changing times, circumstances and tax laws. Maximum flexibility can help the next time the law or family circumstances change – and they will.
In a fully discretionary trust, no beneficiary is entitled to any distribution. They must wait for the trustee to exercise its distribution powers. Full discretion differs from more restrictive trustee responsibility in several ways, including:
Decanting is a relatively easy and cost-effective way to modify a trust by distributing assets from an existing trust to a new trust. It is allowed in many states and provides flexibility in a number of ways, including:
A trust protector is a person who has powers over the trust but is not the trustee. Trust protectors are growing in popularity for several reasons, including:
Just as your family circumstances can change over time, so can your wealth. Without the right provisions, court involvement may be required to make changes to an existing trust. Therefore, it’s important to think about what flexibility you may want to incorporate into your estate planning documents before they become irrevocable. For more information, visit our Lifetime Gift Planning resource page.
Theresa Marx is a senior wealth strategist for CIBC Private Wealth Management in Chicago, with 15 years of industry experience. In this role, she is responsible for developing integrated wealth management solutions and providing comprehensive estate and financial planning services to high net worth clients.
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