By Steven J. Oshins, Esq., AEP (Distinguished) A large part of estate planning involves using techniques to compress value to transfer assets of larger value to the next generation with minimal taxes. To do this, estate planners often use family limited liability companies and family limited partnerships to facilitate gifting and installment sales of minority interests or non-voting interests to family members or irrevocable trusts for the benefit of family members. Under Code Section 2704(b) and Treasury Regulations §25.2704-2(a), if an interest in an entity is transferred to or for the benefit of a member of the transferor’s family, any…
FOMO: How the Fear of Missing Out Will Cause Bad Estate Planning Decisions Before the 12/31/2025 Sunset
By Steven J. Oshins, Esq., AEP (Distinguished) When the clock strikes midnight the evening of December 31, 2025, the federal estate and gift exemption will drop in half and many wealthy people will kick themselves for failing to make their gifts and use their gift tax exemption in time. That is, assuming the incoming President and Congress don’t extend the current laws before they expire. What is FOMO? “FOMO” is the fear of missing out. Many wealthy people fear missing out on their large gifting prior to the end of end of 2025. If the federal estate and gift tax…
SLATs and the Reciprocal Trust Doctrine: Just Because Nearly Everyone Is Violating It Doesn’t Make It Okay
By Steven J. Oshins, Esq., AEP (Distinguished) What is a Spousal Lifetime Access Trust? A Spousal Lifetime Access Trust (“SLAT”) is an irrevocable trust set up by one spouse for the benefit of the other spouse and other beneficiaries. The most frequently used version is the completed gift SLAT although incomplete gift SLATs can be used as a creditor protection tool and should be used more often than it is. The completed gift SLAT is primarily used for estate tax reduction purposes, and secondarily as a creditor protection tool. Because of the estate tax reduction benefits, especially since the settlor…
Asset Protection Goals and Probabilities
By Steven J. Oshins, Esq., AEP (Distinguished) A Game of Probabilities Asset protection is a game of probabilities. Every legitimate wall that is placed around the assets should move the settlement number more in favor of the debtor. And every bad case that comes down the pike should move the settlement number more in favor of the creditor. Uncertainty over collectability causes most disputes to settle long before they get to that point. The creditor must assess the probability that he will be able to collect and the expenses that will be involved in trying to collect and then make…
It’s Time to Stop Using Health, Education, Maintenance and Support Trusts!
By Steven J. Oshins, Esq., AEP (Distinguished) Thanks to the generosity of Leimberg Information Services, we are pleased to provide you this recently published article on LISI. EXECUTIVE SUMMARY Nearly Everybody Nearly every estate planning attorney uses “health, education, maintenance and support” (“HEMS”) as a distribution standard in the trusts they draft. This language is probably found in more than 95% of the trusts that are drafted nowadays. Some trusts use it as the sole method of making trust distributions, whereas others have provisions giving an interested trustee the ability to distribute under this standard and also allow an independent trustee…
The Beneficiary Controlled Trust*
By Steven J. Oshins, Esq., AEP (Distinguished) The Beneficiary Controlled Trust name was first introduced to the estate planning industry by my father and me in our two-part article, “Protecting & Preserving Wealth into the Next Millennium,” published in the September and October 1998 issues of Trusts & Estates magazine. [Portions of this article were taken from the 1998 article.] Since that time, the Beneficiary Controlled Trust concept has been widely used by estate planners all over the country. This article describes this philosophy. Background Most trust scriveners draft trusts that make mandatory distributions to the beneficiaries upon reaching certain…
Heckerling 2024 Reports from the ABA
The 2024 Heckerling Institute was held in-person (and virtually) in Orlando on January 8-12 and marked the conference’s 58th year. The Phillip E. Heckerling Institute on Estate Planning is the nation’s premier conference for estate planning professionals, offering unparalleled educational and professional development opportunities for all members of the estate planning team. Over the course of the conference’s five days, numerous timely topics of interest to estate planners of all designations—including, but not limited to, attorneys, trust officers, accountants, charitable giving professionals, elder law specialists, wealth management professionals, and nonprofit advisors. As they have done for many years, the American…
Which Jurisdictions Are Best in 2024?
By Steven J. Oshins, Esq., AEP (Distinguished) It often makes sense to situs clients’ trusts in a trust jurisdiction where there is no state income tax, where the trust assets are protected from creditors and divorcing spouses, where estate taxes can be avoided forever or close to forever, and where there is flexibility to make changes to irrevocable trusts that are otherwise protected. But which jurisdictions are best? The First Tier Two trust jurisdictions stand above the rest, Nevada and South Dakota. Although one can argue for one or the other as #1, there is absolutely no believable argument that…
Domestic Asset Protection Trusts: Why the Huber Case is a Million Percent Wrong
By Steven J. Oshins, Esq., AEP (Distinguished) In Waldron v. Huber (In re Huber), Waldron v. Huber (In re Huber), Case No. 11-41013 (Bankr. W.D. Wash. Nov. 25, 2013), the court (in dicta) ruled that the law of the residency of the settlor of a Domestic Asset Protection Trust (“DAPT”) applies rather than the law chosen in the trust agreement for purposes of determining whether a DAPT is protected from the creditors of the settlor. [Dicta is a portion of the judge’s opinion that is not essential to the resolution of the case. Huber was a bankruptcy and fraudulent transfer…
Advisors Who Don’t Use Out-of-State Trusts: What Their Clients Get
By Steven J. Oshins, Esq., AEP (Distinguished) Most advisors stick to using their own home state’s trust laws and fail to take advantage of other states’ more favorable laws. This would be like forming business entities in your home state rather than going to traditional best states such as Nevada or Delaware. This analogy should put in perspective how much is lost for the client by failing to maximize the use of more favorable trust laws. What This Means for the Clients The clients of advisors who fail to use out-of-state trusts often can’t modify preexisting irrevocable trusts without going…