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5 Tips For Non-Traditional Families When Creating an Estate Plan

Web Admin - Friday, June 28, 2019
Barrington estate planning lawyer same sex couplesToday’s families come in many forms. In fact, there are fewer “traditional” families than ever in which two opposite-sex parents are married for the first time and have children together. Since divorce is common, and couples often choose to live together and have children without getting married, many families include step-parents and step-children. In addition, the legalization of same-sex marriage has resulted in complex family arrangements involving biological children and adoptive children. Regardless of how a family is configured, it is important to plan for the future and ensure that all family members’ needs will be met. For non-traditional families, it is important to consider the following during the estate planning process:

1. Update your will - Your last will and testament specifies how you want your assets to be distributed to your heirs after your death and any other last wishes. You will want to be sure that your will addresses your partner, your children, your step-children, and any other family members.

2. Create a trust - In addition to your will, a trust can provide more control and flexibility for how you would like your assets to be distributed to your beneficiaries. A living trust can be changed or modified if necessary, and it can also be used to provide for your and your partner’s needs during your life.

3. Use power of attorney - While married spouses have the right to make decisions for each other, this is not always true for unmarried couples. A power of attorney agreement can be used to ensure that partners will be able to make medical or financial decisions for each other if one of them becomes incapacitated.

4. Consider a prenuptial or postnuptial agreement - When you get remarried, your new spouse will typically be entitled to receive half of your estate following your death. A prenup or postnup can ensure that certain assets will be set aside for any children you may have from a previous marriage or relationship.

5. Address plans for retirement - If you have any retirement funds saved in an account such as a 401(k) or IRA, you will want to be sure to name beneficiaries who will receive these funds following your death. You can name your spouse or partner as a beneficiary, as well as any children or step-children.

Contact a Kenilworth Estate Planning Attorney


When creating a comprehensive estate plan, you will want to be sure all of your family members will be provided for. Determining how to do so when you are in a non-traditional family can be a complex matter, and an experienced attorney can help you address issues involving same-sex partners, children from previous marriages, adoptive children, or other family members. Contact our Riverwoods estate planning lawyer today at 847-934-6000 to schedule a free consultation.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources:
https://digitalcommons.law.seattleu.edu/cgi/viewcontent.cgi?article=1773&context=sulr

What Types of Charitable Trusts Can I Use in My Estate Plan?

Web Admin - Friday, May 31, 2019
Kenilworth charitable trusts attorneyA trust is a legal agreement created by the owner of assets or property that designates an individual (a trustee) to manage the assets and distribute them to the beneficiaries named in the trust. Assets can be distributed either during the life of the person who creates the trust (known as the grantor) or after their death. In many cases, a grantor chooses to pass their assets to relatives or close friends; however, some may also wish to support a cause they believe in by naming a charity as a beneficiary. In these cases, charitable trusts can be used, and they typically fall into one of two categories: charitable lead trusts and charitable remainder trusts.

Charitable Lead Trusts


This type of charitable trust has a time limit tied to the funding that is provided to one or more charities. Once the time period ends, the rest of the assets are given to non-charitable beneficiaries. The process begins with an initial donation to fund the trust. Charitable lead trusts do not require a minimum or maximum charitable payment amount, and a grantor may prefer to make a cash contribution to be eligible for immediate tax deductions. The payments will then be sent to at least one charity of the grantor’s choosing. This must be done at least once a year for a specific number of years or for the remainder of the lifespan of the grantor. Once the trust’s term has ended, the rest of the funds are given to the beneficiaries chosen by the grantor.

Charitable Remainder Trusts


Many will choose charitable remainder trusts because they can provide regular income for the grantor or their beneficiaries in addition to donating assets to charity. This type of trust is almost the exact opposite of a lead trust, with assets being distributed to beneficiaries during the term of the trust, and any remaining assets being donated to charity after the grantor’s death. 

The first step in creating a charitable remainder trust is making a partially tax-deductible donation. This can include cash, stocks, real estate, or private business interests. During the term of the trust or the remainder of the grantor’s life, assets held in the trust may be distributed to beneficiaries, such as the grantor’s loved ones or even the grantor themselves. Beneficiaries can receive income only once per year or as frequently as every month. After the grantor’s death, the selected charity or charities will receive the remainder of the assets. 

Contact an Arlington Heights Charitable Trusts Lawyer


Estate planning is an extremely complicated process that requires extensive attention to detail. While charitable trusts can provide a number of benefits, it is important to ensure that the correct steps are followed when creating this type of trust. At Drost, Gilbert, Andrew & Apicella, LLC, we can help you determine which trusts will be best for you and your beneficiaries. Contact a Long Grove estate planning attorney at 847-934-6000 for a free consultation.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources: 
https://www.fidelitycharitable.org/philanthropy/charitable-lead-trusts.shtml
https://www.fidelitycharitable.org/philanthropy/charitable-remainder-trusts.shtml 


3 Reasons Why a Living Trust Is More Beneficial Than Just a Will

Web Admin - Wednesday, January 23, 2019
Des Plaines living trust lawyerIf you wish to leave a legacy to your children or other beneficiaries after your death, it is imperative that you have an estate plan that will ensure prompt and accurate distribution of your assets. Many people think that writing a will is the best way to do this. However, while a will is important, putting your assets into a revocable living trust can provide several additional benefits.

Avoid the Illinois Probate Process 


In order to distribute assets according to the terms of a will, the will must go through the probate process. This involves filing various court documents required by law to establish the value of each asset and to re-title each asset from the deceased’s name to the recipient’s name. This can be a long, drawn-out process.

Secure Adult Heirs’ Immediate Access to the Estate


One of probate’s most serious drawbacks is the freezing of assets. Specifically, any assets that are held solely in the name of the deceased are frozen upon their death. Imagine a married couple who amassed several large investment and retirement accounts and multiple pieces of real estate during their lifetime. Upon the death of both spouses, their children cannot touch any of the assets until a probate court judge approves the will and appoints a Personal Representative to handle the estate. Leaving large investment accounts without active management can be risky.

By comparison, imagine that all of the couple’s assets had been placed in a living trust, meaning that the assets are titled in the name of the trust rather than in the name of any individual. Upon the death of the trust-maker, their designated successor has immediate access to the assets of the trust.

Secure Assets for the Long-Term Benefit of the Family


Imagine our married couple has three children and has a will. Upon the death of both spouses and probate action, the assets of the estate must be divided amongst the named heirs. Assuming the estate is to be divided equally among the three children, the inherited assets are now at risk to creditors, bankruptcy, a lawsuit, or a divorce. 

Creditors. If the married couple had all of their assets in a trust, ownership of those assets can remain titled in the name of the trust indefinitely. Because the assets are not titled in the individual children’s names, the assets are protected from creditors, even if one child files for bankruptcy or gets divorced. The beneficiaries named in the trust will have access to the assets in accordance with the directions specified in the trust documents. 

Heirs with disabilities. Upon the death of the spouses, one child (or an objective third party such as a bank) could be named as the successor trustee with directions to manage the trust in a certain way. This approach can be used to ensure that the use of the assets is prioritized in some way, such as to meet the basic needs of a child or grandchild with a disability. Keeping the assets in the trust can also serve to protect the right of a disabled heir to receive needs-based government benefits.

Underage heirs. Keeping the trust open with a successor trustee can also be beneficial for heirs who have not yet reached adulthood. When a will leaves assets to a minor, the probate court must appoint a conservator to manage the minor’s assets. Once our fictional married couple has died, there is no telling who that conservator might be and what decisions they might make. In contrast, assets left in a trust can be managed according to specific directions written into the trust. Thus, the maker of the trust can dictate when and for what purposes a youthful (or even as-yet unborn) heir can access their inheritance.

Consult a Palatine Revocable Living Trust Lawyer


A well-thought-out living trust can give you greater peace of mind and benefit your heirs in the long run. To discuss options for writing or updating a living trust, call an experienced Schaumburg living trust attorney at Drost, Gilbert, Andrew & Apicella, LLC. We have prepared living trusts for many high-asset families with complex issues of inheritance. To set up a free initial consultation, call 847-934-6000.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources:
https://www.isba.org/public/guide/livingtrust

Using a Special Needs Trust to Assist a Disabled Family Member

Web Admin - Friday, August 10, 2018
Inverness estate planning trust attorneyPeople who have saved money or accumulated assets over the course of their lifetime will often want to pass these assets on to their loved ones, either before or after their death. This is especially true when family members have disabilities or other special needs. However, when providing financial assistance to these family members, it is important to make sure that doing so will not make them ineligible for the public benefits they need to meet their needs. An experienced estate planning attorney can help you protect your loved ones’ interests by establishing a special needs trust.

Benefits of a Special Needs Trust

People with mental or physical disabilities are usually able to receive government benefits such as Supplemental Security Income (SSI) or Medicaid. However, eligibility for these benefits is based on the income earned and assets owned by the recipient; in most cases, a recipient must own no more than $2,000 in assets, and there are also limits on the amount of income they can earn. This means that if a well-meaning family member gives them money or other assets, either through a direct gift or an inheritance, it may make them ineligible for the benefits they need. 

To avoid jeopardizing a disabled person’s ability to receive public benefits, their family members can use a special needs trust (sometimes called a supplemental needs trust). This is a type of irrevocable trust in which the assets will be placed under the control of a trustee, which could be another family member or a financial institution. The trustee will then ensure that the assets are used to provide for the beneficiary’s needs.

There are specific rules that must be followed in special needs trusts. For instance, the trust can only be used to pay for certain expenses related to the beneficiary’s care, such as the costs of medical equipment, caretakers, transportation, or educational expenses. Using funds from a trust to pay for food or housing may make a beneficiary ineligible for public aid. 

Contact a Schaumburg Trust Attorney

Since a disabled person will often need assistance throughout their entire life, it is important to ensure that trusts are set up in a way that will provide them with the resources they need for many years to come. An Arlington Heights estate planning lawyer at Drost, Gilbert, Andrew & Apicella, LLC can help you create a special needs trust that meets your loved one’s needs, and we can help you address any other estate planning needs, ensuring that you can provide for your family both before and after your death. Contact us at 847-934-6000 to arrange a personalized consultation.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Sources:
https://www.investopedia.com/terms/s/special-needs-trust.asp
https://money.usnews.com/money/personal-finance/articles/2015/11/04/how-to-draw-up-a-special-needs-trust-for-a-child-with-disabilities
https://www.cnbc.com/2017/10/25/how-to-set-up-a-special-needs-trust.html

Two Important Benefits Provided By a Living Trust

Web Admin - Tuesday, August 07, 2018
Arlington Heights trust lawyerThe thought of planning for what should happen after one’s death is often too morbid for many people to want to consider. However, doing so is incredibly important, since you want to be sure that your wishes will be followed correctly and that your heirs will be able to receive the assets you plan to pass on to them with minimal complications. While you may think that the estate planning process begins and ends with the creation of a last will and testament, another tool that can be very powerful is a living trust. 

Trusts allow you to protect certain assets, placing them in the control of a trustee and passing them to your beneficiaries once certain requirements are met. With a living trust, you can serve as the trustee while you are still living and mentally competent, giving you control over your assets and allowing you to revoke or change the terms of the trust to meet your and your family’s needs. There are a number of benefits to using a living trust, but two of the primary advantages are:

1. Avoiding Probate

When a person dies, the executor of their estate will enter their will into probate court, which is a process that can be lengthy and expensive as the court reviews the will and approves the paying of debts and taxes and the passing of assets to beneficiaries. The will is entered into public court records, meaning that the family’s personal business is available to be viewed by anyone who wants to examine the court documents. 

A trust, on the other hand, does not have to go through the probate process. This will allow assets to be passed to beneficiaries much more quickly and with fewer complications, and it will also ensure that the details about the estate are kept private.

2. Planning for Illness or Incapacitation

In many cases, when a person becomes ill or incapacitated or is no longer able to manage their own affairs, a friend or family member is named as their legal guardian. Guardianship will often not only give a guardian control of a person’s health and personal care, but also their financial affairs. This type of situation is not ideal, but a living trust can help you avoid losing control of your finances by addressing how things should be handled if you are incapacitated. 

Your trust can specify what conditions should exist for you to be declared incapacitated or mentally incompetent, and it can name a successor trustee who will manage the trust in this situation. The trustee can ensure that you have the financial resources you need to provide for your own care, while preserving your assets to pass on to your beneficiaries after your death.

Contact a Palatine Estate Planning Attorney

If you want to know more about how to use a living trust to protect your assets and pass them to your heirs, the attorneys of Drost, Gilbert, Andrew & Apicella, LLC can answer your questions and work with you to create a comprehensive estate plan. Contact a Schaumburg living trust lawyer today at 847-934-6000 to schedule a personalized consultation.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Sources:
https://www.thebalance.com/the-benefits-of-a-revocable-living-trust-vs-a-will-3505405
https://www.thebalance.com/pros-and-cons-of-revocable-living-trusts-3505384

When Can a Trustee Be Held Personally Liable for Acts Done While Acting As a Trustee?

Web Admin - Tuesday, February 23, 2016

trustee held personally liable, Illinois Trust AttorneysAs a trustee, you are responsible for managing the trust and working with the beneficiaries. You have a fiduciary duty, or a legal obligation, to act solely in the interest of the beneficiaries by fulfilling the instructions of the trust as the trustor has required. A trustee must be respectful and careful, loyal, and impartial when serving as the trustee, and cannot take advantage of his or her trusted position to self-deal or glean benefits for him or herself from the trust. Developing a full understanding of what the legal obligations are as a trustee can be confusing, especially if you have limited legal experience dealing with trusts. An experienced estate planning and trusts lawyer at can assist you. 

A Breach of Fiduciary Duty Opens Trustees Up To Personal Liability

Trustees can be held personally liable for acts, or failures to act, as a trustee when the trustee does not carefully and diligently adhere to the trustee’s duties. When a trustee commits a breach of his or her fiduciary duty, the trustee opens him or herself up to liability for his or her actions taken while acting as the trustee. Examples where a trustee can be held personally liable for acts done while acting as a trustee include the following:

- A trustee may be held personally liable if there is a conflict of interest biasing the trustee’s judgment when it comes to the interests of the trust. Self-dealing, or making decisions or investments using the trust’s funds that in some way benefit the trustee either directly or indirectly will expose the trustee to liability;

- A trustee can be held personally liable for any interest and/or penalties that accrue for taxes filings that are made late. Liability exists because filing the appropriate tax forms on behalf of the trust is a responsibility that lies with the trustee. 

- A trustee could be held financially liable for losses on stock diversifications on behalf of the trust, or a failure to diversify, if losses are substantial. The trustee has an obligation to serve in the best interests of the trust beneficiaries, and failing to diversify when stocks are concentrated in a single company can lead to a significant loss in value of the trust. 

- A trustee can be held liable for commingling personal finances and the trust finances, especially in situations where the trustee is a family member to the beneficiaries. A trustee can avoid the appearance of impropriety by maintaining clear and thorough accounting records of the finances of the trust, and clear documentation regarding his or her personal finances. 

Speak with an Illinois Estate Planning Lawyer Today

If you have concerns that your trustee is in breach of his or her fiduciary duties, or if you are a trustee with concerns about a course of action for the trust you manage, please feel free to contact one of our experienced Illinois estate planning attorneys today. Our firm serves the communities of Inverness, Palatine, Schaumburg, Arlington Heights, Long Grove, Kenilworth, Riverwoods, Barrington, South Barrington, and Mount Prospect.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Source: http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2129&ChapterID=61




VA Benefits and the Transfer of Assets to an Irrevocable Trust

Web Admin - Friday, November 27, 2015

VA benefits and irrevocable trust, Illinois employment lawThe Department of Veterans Affairs (VA) provides our nation’s veterans with important benefits after they have been discharged from service. In order to qualify for those benefits, veterans must meet certain requirements. For some veterans, it may be necessary to transfer assets into an irrevocable trust to lower his or her net worth. 

Qualifying for Pension 

The Veterans Pension benefit is a tax-free, monetary benefit for low-income veterans. In order to qualify, the following requirements must be met: 

1. Veteran must be 65 years of age or older or permanently and totally disabled;

2. He or he must have been discharged under conditions other than dishonorable;

3. He or she must have served, which generally involves a minimum period of active duty service, one day of which was during wartime;

4. Net worth must not be considered too substantial; and

5. Countable family income must be below the yearly limit as set by law. 

Veterans who are concerned about their level of net worth may consider forming an irrevocable trust. By creating an irrevocable trust, net worth can be reduced in order to qualify for the Veterans Pension. The VA does not assess a penalty for transferring assets as long as that transfer occurs prior to filing a claim or notifying the VA of an intent to file a claim. The determination of net worth is subjective—the VA has discretion in determining whether a veteran’s assets are too large to qualify for the Veterans Pension. 

An irrevocable trust can be used to hold assets that are provided by a veteran in order to reduce net worth. Importantly, a veteran claiming benefits (as well as his or her spouse) cannot be an income or principal beneficiary of the trust established in order to obtain VA benefits. This is because the VA requires that the rights to property and income from that property be actually relinquished to be considered a reduction of net worth. 

A second issue relates to whether to form the trust as a grantor trust or a non-grantor trust. The VA compares income reported to it with Supplemental Security Income (SSI) and Internal Revenue Service (IRS) income records through a process called Income Verification Match (IVM). Due to the nature of a grantor trust, there may be a discrepancy between income reported to the VA and income that appears with IRS filings. 

Under a grantor trust, all items within the trust are taxed to the grantor on his or her personal income tax return. Ordinarily, the grantor is the person who funds the trust, which, in this case, is the veteran claiming benefits. The VA may assume that the tax reported on the veteran’s tax return is based on income of the veteran, which may lead to lower (or complete denial of) benefits. Therefore, a non-grantor trust, in which the trust is responsible for any tax, is likely more desirable, in an attempt to avoid this potential issue. 

Forming a Trust 

If you would like more information on the formation of a trust, reach out to a skilled Illinois estate planning attorney today. Our firm proudly helps individuals in the communities of Inverness, Schaumburg, Palatine, Arlington Heights, Kenilworth, Long Grove, Riverwoods, Barrington, South Barrington, and Mount Prospect. We look forward to hearing from you. 

About the Author:

Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Source:
http://www.benefits.va.gov/pension/







5 Benefits to Using an Institutional Trustee

Web Admin - Tuesday, April 08, 2014

illinois trusts and estate planning attorneyTrusts are versatile, useful legal instruments that allow the grantor (the person who sets up the trust) to set aside certain money or other assets for the use of another person (the beneficiary). However, the beneficiary does not have direct access to the assets. Instead, the trust is managed by a trustee whose job it is to control the assets and use them in the beneficiary’s best interest. This makes choosing the trustee one of the most important parts of setting up a trust.

Although most individuals can serve as a trustee, Illinois law also allows for the use of an “institutional trustee.” Institutional trustees are companies, often banks, who professionally manage the trust’s assets. These companies usually do charge a fee for the services, but the companies come with several benefits:

  • - They are skilled at managing trusts;
  • - They have the ability to handle complex paperwork and recordkeeping;
  • - They provide continuity to the management of the trust;
  • - They operate free of bias; and
  • - They are regulated to prevent fraud.

Reasons to Use an Institutional Trustee

  1. 1. Experienced Administrators: Institutional trustees have experience managing trusts. This allows them to easily navigate the legal requirements for trustees. Furthermore, many trustees are responsible for investing the trust’s assets. Banks and other institutional trustees are often professional investors who will be able to handle the task better than friends or family.

  1. 2. Strong Recordkeeping: Trusts also have fairly extensive recordkeeping requirements to prevent fraud on the part of the trustee. Institutional trustees have the infrastructure in place to make sure that important documents, like tax returns, are filed on time and do not get misplaced. Furthermore, the use of an institutional trustee prevents this complex work from being pushed onto a friend or family member.

  1. 3. Management Continuity: The corporate nature of institutional trustees also allows for continuity in the trust’s management. Trusts can last for decades and decades. An individual trustee may not be physically or mentally capable of managing a trust for its entire duration. Conversely, institutional trustees have the ability to smoothly transfer trust administration from one employee to the next, allowing for steady management of the assets.

  1. 4. Unbiased Distribution: Additionally, institutional trustees can eliminate the possibility of bias that might exist with trustees who are friends or family. The company would not have any prior history with particular beneficiaries that might interfere with the fair and evenhanded use of the trust’s assets.

  1. 5. Fraud Protection: Finally, institutional trustees have fraud prevention mechanisms in place. Although everyone would like to think that their friends or family members are above reproach, cases of theft on the part of the trustee do happen. Many institutional trustees are subject to government regulation and auditing requirements that can reduce the risk of fraud on their parts.

If you are interested in setting up a trust, consult with an Illinois estate planning lawyer to tailor one to your specific situation. Our attorneys lend their experience to clients across the northwest suburban area, including in Long Grove, Riverwoods, and Kenilworth.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

The Dynasty Trust: A New Method of Creating an Inheritance

Web Admin - Thursday, March 20, 2014

illinois trusts estate planning attorneyDynasty trusts are a new type of trust that can be used to minimize the burden of certain taxes that the government levies on inheritance by holding the inheritance in a trust for many generations. These trusts have become more popular in recent years as states have begun to relax or abolish a legal doctrine known as the rule against perpetuities. The rule is a complex legal doctrine that limited the length of trusts and other legal instruments to only lasting a certain period of time, usually about two or three generations, depending on a variety of factors. Now that the rule is being relaxed, it has made dynasty trusts a more viable option.

What is a Dynasty Trust?

Simply put, a dynasty trust is a trust that holds assets from which future generations will benefit. This has important tax consequences because assets placed into a dynasty trust are subject to the federal estate/gift tax only once. This means that the assets can flow down to further generations without future estate taxes. For instance, if a person left $10,000,000 to their child without using a trust, this would exceed the gift/estate tax exemption, so it would be subject to the tax. Then, if that inheritance appreciated in value and the child passed it on to a grandchild, it would be subject to another round of taxes. If, instead of simply passing the money down in the first place, the person had placed it into a dynasty trust, then the original $10,000,000 would be taxed at that point, but it the appreciated amount would not be subject to another estate tax when it went to the grandchild.

Another benefit of the dynasty trust is that it can help reduce the effects of the generation skipping transfer tax (GST). The GST exists because people used to leave money directly to their grandchildren in an effort to avoid the double estate tax of the previous example. The GST can take as much as 55 percent of the money passed down to grandchildren in excess of $1,000,000. If the dynasty trust is created using that $1,000,000 dollar exemption, then it can sizably reduce the burden of transfer taxes on future generations.

This means that the dynasty trust can be a very useful estate planning tool for people with large families, or those who have enough assets that the estate tax and GST are serious concerns. Additionally, dynasty trusts are also useful for people who would like to have some say as to how their money is spent after their deaths because dynasty trusts can sometimes be used to control such things.

If you believe that your estate planning could benefit from the use of a dynasty trust, contact a Long Grove estate planning attorney today. Our firm helps handle tax planning issues for clients across the northwest suburbs, including towns like Riverwoods, Barrington, and Kenilworth.

About the Author: Attorney Jay Andrew is founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


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