The Instruments

Spousal Access Trust

A Spousal Access Trust contains language like any other kind of irrevocable trust, but has one distinguishing feature: the trustee of a spousal access trust has the ability to distribute assets to the grantor’s spouse, even during the grantor’s lifetime. This feature can be very powerful because it introduces the concept that assets given away irrevocably by the grantor could, under specified circumstances, come back to the grantor’s spouse via trust distributions.

Credit Shelter Trust

At death, a decedent can give away an unlimited amount outright to a surviving spouse without incurring estate tax. In addition, each decedent can also give away an amount equal to the “applicable exclusion amount” (also called the “unified credit” against estate tax) outright to any one or more non-spouse beneficiaries the decedent chooses, free of federal estate tax. A Credit Shelter Trust is a vehicle used to preserve and utilize the fullest measure of a client’s applicable exclusion amount, so that the first spouse to die does not lose any of that tax-free gifting ability, and the couple maximizes the amount they pass on to their beneficiaries free of estate tax.

Special Needs Trust

A properly drafted Special Needs Trust (SNT) can be designed to round out the government benefits a special needs individual receives by providing for care and services not covered by those benefits. Simultaneously, SNTs strive to ensure that any distribution from the trust does not disqualify the special needs individual from receiving on-going governmental support.

However, SNTs are often used to provide on-going care for a special needs individual whose abilities are such that he or she will not need, or qualify for, government benefits. For such special needs individuals, these supplemental trusts are generally designed to supplement the income and/or care of the special needs beneficiary. Many times, the SNT is drafted in such a way that if the special needs individual’s abilities change the trust will not prevent the beneficiary from qualifying for government benefits.

Dynasty/Generation-Skipping Trusts

Dynasty/Generation-Skipping Trusts contain provisions designed to eliminate or minimize the effect of the special tax/penalty on transfers of property to individuals more than one generation younger than the donor of the property. (A trust with such provisions may also serve one or more other purposes where the goals are compatible, such as Special Needs, Spousal Access, etc.) The federal gift and estate tax laws are designed to tax transfers, either during life or at death, from one generation to the next generation. When a transfer “skips” to a generation lower than the next one down (e.g., grandparent to grandchild), then the “generation-skipping transfer tax” laws are implicated, in addition to any gift or estate tax due on the transfer.

End Your War With Money.

Financial language jargon creates dissonance accompanied by a feeling of powerlessness, which leads to financial paralysis. Finally, the language of money is singing a new song. Jaimie Blackman, Co-Founder & President, BH Wealth.

Get My Free Ebook

Have a Question?

Thank you!