In nearly every discussion about estate planning, important questions and issues arise.
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The ownership and governance structure of a private family trust company (“PFTC”) is highly customizable. This is important because all families are different, with different goals, family dynamics, asset composition, family sizes, and family affiliates. With that in mind, there are some key considerations in structuring the entity ownership and governance of a PFTC, both tax-related and not tax-related.
For one reason or another, many families are reevaluating and modifying their fiduciary structures. To assist in these discussions, a reference summary of state laws is provided for consideration when establishing wealth transfer plans and structures, including taxation, trust laws, asset protection, and regulated and unregulated private trust companies. This updated summary includes a broader aggregation of top U.S. trust jurisdictions, including Wyoming, Alaska, Delaware, Nevada, New Hampshire, South Dakota, and Tennessee.
Estate planning is often part of a divorce settlement, and negotiation of these terms can be as integral to the divorce settlement as allocation of parental responsibilities, support issues, or division of marital estate. For example, even a relatively simple Marital Settlement Agreement may generally contain waivers of an ex-spouse’s right to make claims to the other party’s estate upon death, including rights to property and to act as a trustee or executor of the estate.
Continuing a trend of the past five years, exchange-traded funds (ETFs) grew in assets under management in 2020. However, the fact remains that the ETF continues to be a one-size-fits-all solution that isn’t optimal for everyone. The flexibility of a custom passive separately managed account (SMA) can beat an ETF in terms of tax efficiency in many cases. Three advantages of the SMA illustrate the benefits.
Originating in English common law, trusts have been used for centuries to manage holdings of the wealthy. Even though trusts are quite common, many people may find them hard to understand. Having an introduction to the trust basics is a good place to begin and learn how trusts are used in wealth management plans to help provide financial support for family members, protect family assets from a myriad of risks, and help mitigate taxes.
1031 Exchange, commonly known as like-kind exchange, can be a smart tax strategy for business owners who also own or invest in real estate.
Changes in the federal tax laws have provided a renewed focus on state income taxes and strategies available to minimize these taxes. While personal trusts have been used most commonly as estate and gift tax planning tools, they now have increased importance as vehicles for minimizing a family’s federal and state income tax liability. If you live in a high-tax state there may be opportunities to reduce or eliminate state taxes on some of your income by establishing a new trust in Delaware or moving an existing trust to the First State.
You have too much at stake to be caught unprepared, and your family is too important to be left in the lurch by an estate plan you didn’t realize that you had outgrown. If it has been a while since you have looked at your estate planning and settlement documents, it is time to perform a stress-test on your plan to ensure that none of the key components are missing or outdated. Performing this test regularly is time well-spent to protect your family from the unexpected, including an unanticipated incapacity and death.
One of the most important, yet most forgotten, parts of estate planning is keeping track of who will benefit from those assets, including life insurance, which are not governed by your will. Providing for your family includes knowing which types of assets are not governed by your will; ensuring your assets are going to where you want them to go; and keeping your beneficiary designations updated.