Reducing Tax Exposure
January 27, 2012 By Augulis Law Firm
The estate tax can have an enormous impact on the family members that you will be leaving behind and it is something to be very aware of when you are making preparations for the future. A single imposition of this federal levy is a big deal because it carries a 35% rate at the present time, and in fact this rate is scheduled to rise to 55% at the beginning of next year. But imagine having to pay this twice.
This is exactly what can happen if your children were to try to pass their inheritances on intact to their children, your grandchildren. This can go on and on for generations unless you take steps to cut your losses as it were. One way of doing this would be to execute a generation-skipping trust.
The name of the trust provides a basic explanation. When you are creating the trust the beneficiary must be someone who is at least 37.5 years younger than you. For most people this would be their grandchildren.
If you name your grandchildren as the beneficiaries they inherit the resources after the death of your children. This does not mean that your children do not benefit at all. They can receive distributions from the trust and use property that is owned by the trust, perhaps living in a home that has been placed in the trust.
But your children didn't technically inherit these assets so there is no estate tax imposed. When the time comes for your grandchildren to assume ownership of the resources the generation-skipping transfer tax will be applicable. In the end both generations benefited but only one tax bill was presented.
Should you be interested in the possibility of including a generation-skipping trust in your estate plan, don't hesitate to get in touch with a good central New Jersey estate planning lawyer to arrange for an informative consultation.
ABOUT THE AUTHOR: Alan Augulis
Experienced estate planning attorneys Warren NJ of the Augulis Law Firm offers estate planning and business planning resources to residents of Warren, NJ.
Copyright Augulis Law Firm
More information about Augulis Law Firm
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
The name of the trust provides a basic explanation. When you are creating the trust the beneficiary must be someone who is at least 37.5 years younger than you. For most people this would be their grandchildren.
If you name your grandchildren as the beneficiaries they inherit the resources after the death of your children. This does not mean that your children do not benefit at all. They can receive distributions from the trust and use property that is owned by the trust, perhaps living in a home that has been placed in the trust.
But your children didn't technically inherit these assets so there is no estate tax imposed. When the time comes for your grandchildren to assume ownership of the resources the generation-skipping transfer tax will be applicable. In the end both generations benefited but only one tax bill was presented.
Should you be interested in the possibility of including a generation-skipping trust in your estate plan, don't hesitate to get in touch with a good central New Jersey estate planning lawyer to arrange for an informative consultation.
ABOUT THE AUTHOR: Alan Augulis
Experienced estate planning attorneys Warren NJ of the Augulis Law Firm offers estate planning and business planning resources to residents of Warren, NJ.
Copyright Augulis Law Firm
More information about Augulis Law Firm
View all articles published by Augulis Law Firm
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
