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Trusts and Estate Planning Strategies

Irrevocable Trusts or Asset Protection Trusts

Estate Planning
Estate Planning Strategies

In most instances, when a person is speaking about a trust they are usually referring to a "Revocable Living Trust." As discussed on the Estate Planning Page, revocable trusts are typically the best way to allow someone to manage your assets if you become incapacitated. Moreover, the revocable trust avoids the associated costs, hassles and public record process that basic Wills often incur.

However, revocable living trusts provide no asset protection against lawsuits, creditor claims and Medicaid spend-downs. The reason that these types of trusts do not protect assets is because the creator (i.e. Grantor) of the trust can change, alter, revoke the trust whenever he or she wants. In addition, the Grantor maintains all control over trust-held assets and income. In sum, because the Grantor has full control, they own it, and, if they own it, then it is part of their estate and subject to creditors and the like.

Irrevocable Trusts are different. By its name sake, the term irrevocable means that there is some aspect of the trust that the Grantor cannot change. Perhaps it is a limitation on accessing the income or principal of the trust by the Grantor directly whenever they desire.

Irrevocable trusts have become much more flexible and user friendly over the past few years based upon their prevalent practical uses and changes to the law. These type of trusts come in a wide variety of flavors these days so it is important to seek legal counsel to determine which type of irrevocable trust would be the perfect fit for protecting and preserving your assets from estate taxes, lawsuits and the catastrophic expenses of long-term nursing home care.

Dynasty Trusts

A Dynasty Trust is a trust that continues for approximately 100 years or longer and provides payments to future generations without any additional estate or generation-skipping transfer taxes.

The Dynasty Trust strategy is different from the standard estate plan whereby the husband and wife usually leave all of their assets outright to their children equally upon their passing.

A Dynasty Trust continues for the children's lifetimes with the children receiving income or principal from the trust each year. As each child dies, the trust then continues for the deceased child's surviving children with income or principal available for the grandchildren during their respective lifetimes. Depending on a number of factors, the trust may continue for great grandchildren and even longer if desired.

A Dynasty Trust ensures that your assets will stay in your generational line after you pass away. Although the beneficiary may eventually have investment control over the trust, he or she will not legally own the assets which means that the trust will not be subjected to claims of the beneficiary's creditors, not subject to division upon a beneficiary's divorce and not subject to a child leaving the assets to a second or third spouse outside your blood line.

Special Needs Trusts

A Supplemental Needs Trust (sometimes called a Special Needs or Disability Trust) is a specialized legal document designed to benefit an individual who has a disability. A Supplemental Needs Trust is most often a “stand alone” document, but it can form part of a Last Will and Testament or Living Trust after the parent of a special needs trust child passes away. Supplemental Needs Trusts have been in use for many years and were given an “official” legal status by the United States Congress in 1993.

A Supplemental Needs Trust enables a person under a physical or mental disability, or an individual with a chronic or acquired illness, to have, held in Trust for his or her benefit, an unlimited amount of assets. In a properly-drafted Supplemental Needs Trust, those assets are not considered countable assets for purposes of qualification for certain governmental benefits.

Governmental benefits which Supplemental Needs Trusts are designed to preserve may include Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, subsidized housing, and other benefits based upon need. For purposes of a Supplemental Needs Trust, an individual is typically considered impoverished if his or her personal assets are less than $2,000.00.

A Supplemental Needs Trust provides for supplemental and extra care over and above that which the government provides. The law firm of J.S. Burton can assist you with your unique special needs trust issue.

Charitable Giving and Trusts

Charitable Remainder Trusts (CRTs), are lifetime gifts of assets which receive a charitable deduction for a portion of the transfer. In addition, you or a beneficiary receives income for the rest of your life or a fixed period of time. Therefore, both you and charities benefit from life income gifts such as these.
You can also set up a CRT in your Will or Revocable Living Trust to be established upon your passing. Although you will not receive a charitable deduction during your lifetime, your estate will after your death.

Irrevocable Life Insurance Trusts

An Irrevocable Life Insurance Trust (ILIT) can effectively eliminate the death proceeds from your life insurance policy (along with any accumulated cash value) from being included for estate taxes due at your death. An ILIT can provide tax free liquidity to your estate to pay debts and expenses but also can provide tax free wealth to your beneficiaries.

Private Foundations

Private foundations maintain or aid charitable, educational, religious, or other activities serving the public good, primarily through the making of grants to other nonprofit organizations. Foundations can be established during your lifetime or after your death through your estate planning documents. The private foundation can have personal income and estate tax savings benefits. In addition, this unique structure can also be designed to allow family members and future children to work for the foundation which allows you to pass on the spirit of philanthropy to one generation to the next.

Deferring Capital Gains Penalties Through Trust Planning

Deferring Capital Gains through trust planning can provide a very powerful alternative to the typical 1031 exchange or real estate installment sale.

This powerful technique provides owners of highly appreciated assets such as residential or commercial real estate the following benefits:

  • Capital Gains Tax Deferment
  • Lifetime Income Stream
  • Investment Flexibility
  • Disciplined Retirement Savings
  • Continued Family Control
  • Tax Free Estate/Inheritance Transfer to one's Heirs


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575 Lynnhaven Parkway, Suite 278, Virginia Beach, VA 23452
| Phone: (757) 215-4051
104 N. Henry Street, Suite 202, Williamsburg, VA 23185
| Phone: (757) 215-4051

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© J.S. Burton, P.L.C. | Disclaimer | Law Firm Website Design by Amicus Creative
575 Lynnhaven Parkway, Suite 278 , Virginia Beach, VA 23452 | Phone: 757-215-4051
104 N. Henry Street, Suite 202, Williamsburg, VA 23185 | Phone: 757-215-4051