Use A Dynasty Trust to Protect Your Wealth – Annapolis and Towson Estate Planning

Using an irrevocable trust ensures a far smoother transition of assets than a will and also offers significant tax savings and far more privacy, control and asset protection, begins the article “Dynasty Trusts: Best Way to Protect Family Wealth” from NewsMax.

Just as their name implies, a dynasty trust is king of all trust types. It gives the family the most benefits in all of these areas. Still not convinced? Here are a few reasons why the dynasty trust is the best estate planning strategy for families who want to preserve an estate across many generations.

Most trusts provide for the transfer of assets from one benefactor to the next generation, at most two or three generations. A dynasty trust can last for hundreds of years. This offers tax advantages that are far superior than others.

Under the new tax laws, an individual can gift or bequeath up to $11.4 million during their lifetime, tax free. After that limit, any further transfer of assets are subject to gift and estate taxes. That same transfer limit applies whether assets are left directly via a will or indirectly through a trust. However, in a direct transfer or trust, these assets may be subject to estate taxes multiple times.

If a grantor transfers assets into a dynasty trust, those assets become the property of the trust, not of the grantor or the grantor’s heirs. Because the trust is designed to last many generations, the estate tax is only assessed once, even if the trust grows to be worth many times more than the lifetime exclusion.

Not all states permit the use of dynasty trusts. However, five states do allow them, while six others allow trusts with lifespans of 360 years or more. An experienced estate planning attorney will know if your state permits dynasty trusts and will help you set one up in a state that does allow them if yours does not. Nevada, Ohio and South Dakota provide especially strong asset protection for dynasty trusts.

Because dynasty trusts are passed down from generation to generation, trust assets are not subject to the generation-skipping transfer tax. This tax is notorious for complicating bequeathals to grandchildren and others who are not immediate heirs.

When the dynasty trust is created, the grantor designates a trustee who will manage trust funds. Usually the trustee is a banker or wealth manager, not a trust beneficiary. The grantor can exert as much control as desired over the future of the trust by giving specific instructions for distributions. The trustee may only give distributions for major life events, or each heir may have a lifetime limit on distributions.

With these kinds of safeguards in place, a benefactor can ensure that the family’s wealth extends to many generations. Speak with an estate planning attorney to learn about the laws concerning dynasty trusts in your state and see if your family can obtain the benefits it offers.

Reference: NewsMax (September 16, 2019) “Dynasty Trusts: Best Way to Protect Family Wealth”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What You Need to Know about Trusts for Estate Planning – Annapolis and Towson Estate Planning

There are many different kinds of trusts used to accomplish a wide variety of purposes in creating an estate plan. Some are created by the operation of a will, and they are known as testamentary trusts—meaning that they came to be via the last will and testament. That’s just the start of a thorough look at trusts offered in the article “ON THE MONEY: A look at different types of trusts” from the Aiken Standard.

Another way to view trusts is in two categories: revocable or irrevocable. As the names imply, the revocable trust can be changed, and the irrevocable trust usually cannot be changed.

A testamentary trust is a revocable trust, since it may be changed during the life of the grantor. However, upon the death of the grantor, it becomes irrevocable.

In most instances, a revocable trust is managed for the benefit of the grantor, although the grantor also retains important rights over the trust during her or his lifetime. The rights of the grantor include the ability to instruct the trustee to distribute any of the assets in the trust to someone, the right to make changes to the trust and the right to terminate the trust at any time.

If the grantor becomes incapacitated, however, and cannot manage her or his finances, then the provisions in the trust document usually give the trustee the power to make discretionary distributions of income and principal to the grantor and, depending upon how the trust is created, to the grantor’s family.

Note that distributions from a living trust to a beneficiary other than the grantor, may be subject to gift taxes. Those are paid by the grantor. In 2019, the annual gift tax exclusion is $15,000. Therefore, if the distribution is under that level, no gift taxes need to be filed or paid.

When the grantor dies, the trust property is distributed to beneficiaries, as directed by the trust agreement.

Irrevocable trusts are established by a grantor and cannot be amended without the approval of the trustee and the beneficiaries of the trust. The major reason for creating such a trust in the past was to create estate and income tax advantages. However, the increase in the federal estate tax exemption means that a single individual’s estate won’t have to pay taxes, if the value of their assets is less than $11.4 million ($22.8 million for a married couple).

Once an irrevocable trust is established and assets are placed in it, those assets are not part of the grantor’s taxable estate, and trust earnings are not reported as income to the grantor.

The downside of an irrevocable trust is that the transfer of assets into the trust may be subject to gift taxes, if the amount that is transferred is greater than $15,000 multiplied by the number of trust beneficiaries. However, depending upon the size of the grantor’s estate, larger amounts may be transferred into an irrevocable trust without any gift tax liability to the grantor, if the synchronization between gift taxes and estate taxes is properly done. This is a complex strategy that requires an experienced trust and estate attorney.

Trusts are also used to address charitable giving and generating current income. These trusts are known as Charitable Remainder Trusts and are irrevocable in nature. There is a current beneficiary who is either the donor or another named individual and a remainder beneficiary, which is a qualified charitable organization. The trust document provides that the named beneficiary receives an income stream from the income produced by the trust assets, and when the grantor dies, the remaining assets of the trust pass to the charity.

Speak with your estate planning attorney about how trusts might be a valuable part of your estate plan. If your estate plan has not been reviewed since the new tax law was passed, there may be certain opportunities that you are missing.

Reference: Aiken Standard (May 17, 2019) “ON THE MONEY: A look at different types of trusts”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys 

For Immediate Release

Contact: Jane Frankel Sims

410-828-7775

Contact: Frank Campbell

410-263-1667

Sims & Campbell Estates and Trusts

Frankel Sims Law and Holden & Campbell
Merge to Form Sims & Campbell

Firm will offer comprehensive Trusts & Estates services through offices in Towson and Annapolis

TOWSON, Md. (April 26,2019)  Frankel Sims Law and Holden & Campbell have jointly announced the merger of their firms to create a boutique Trusts & Estates law firm providing comprehensive services in the fields of Estate Planning, Estate Administration, Trust Administration and Charitable Giving. The combined firm will be named Sims & Campbell and have offices in Towson, Md. and Annapolis, Md.  Jane Frankel Sims and Frank Campbell will lead and hold equal ownership stakes in the firm.

Sims & Campbell will have 9 attorneys and 15 legal professionals that handle every facet of estate and wealth transfer planning, including wills, revocable living trusts, irrevocable trusts, estate and gift tax advice, and charitable giving strategies.  The firm will focus solely on Trusts & Estates but will serve a wide range of clients, from young families with modest resources to ultra-high net worth individuals.  This allows clients to remain with the firm as their level of wealth and the complexity of related estate and tax implications change over time. 

“By joining forces, we have expanded our footprint to conveniently serve clients in Maryland, D.C. and Virginia” said Jane Frankel Sims.  We are seeing some of the greatest wealth transfer in our country’s history, and we want to continue to be on the leading edge of helping our clients maintain and enhance their family’s wealth.  In addition, we aim to serve our clients for years to come, and the new firm structure will allow Sims & Campbell to thrive even after Frank and I have retired.”    

“Jane and I have always admired each other’s firms and recognized the need to provide even greater depth and breadth of focused expertise to help families amass and protect their wealth from generation to generation,” said Frank Campbell.  “Now we have even greater capabilities to make a real difference for our clients.” 

The Sims & Campbell Towson office is located at 500 York Road, on the corner of York Road and Pennsylvania Avenue in the heart of Towson.  The Annapolis office is currently located at 716 Melvin Avenue, and is moving to 181 Truman Parkway in August, 2019.  For more information, visit www.simscampbell.law.