By Steven J. Oshins, Esq., AEP (Distinguished) An Irrevocable Life Insurance Trust (“ILIT”) is a trust that owns one or more life insurance policies and is designed to avoid estate taxes on the death benefit. The trust must be irrevocable in order to accomplish this. The general plan is to create the trust prior to the purchase of the life insurance and have the trustee of the ILIT purchase the insurance and elect to have the ILIT named as both the owner and the beneficiary of the policy. However, in the event that the life insurance policy is owned outside…
The Floating Spouse Provision and More: Designing a Spousal Lifetime Access Trust for Maximum Access and Maximum Divorce Protection
By Steven J. Oshins, Esq., AEP (Distinguished) A Spousal Lifetime Access Trust (“SLAT”) is an irrevocable trust for the benefit of the settlor’s spouse and descendants. The settlor makes transfers to the trust that must come from the settlor’s separate property. If drafted properly, the trust assets are protected from the creditors and divorcing spouses of the settlor and of the beneficiaries and aren’t subject to estate taxes (if using a completed gift version) when the settlor and settlor’s spouse pass away. THE KEY IS IN THE DRAFTING A general fear that many clients and advisors have is that they…
Top 10 E-mail Etiquette Rules for Estate Planning Professionals (and Their Assistants and Staff)
By Kristina Schneider, Practice Success Coach Electronic mail (otherwise known as e-mail) plays an important part in any business these days. It’s helped make communicating and doing business far more efficient and simpler. However, as with most things in business, there are certain rules that professionals should follow when it comes to using e-mail. If not done correctly, it can actually create unnecessary confusion, chaos, and an unnecessary amount of miscommunication (and maybe even legal liability!). Below, you will find what I consider to be the ten most important e-mail etiquette rules to live and work by. (NOTE: These are…
Poll Results: The New First-Tier Trust Jurisdictions
By Steven J. Oshins, Esq., AEP (Distinguished) In May of 2021, I conducted a LinkedIn poll asking, “[w]hich of the following are the first-tier trust jurisdictions?” The choices were (a) AK, DE, NV and SD, (b) NV and SD or (c) NV, SD and TN. The purpose of the poll was to see if the general public still believes that Alaska, Delaware, Nevada and South Dakota make up the first tier. Or have Nevada and South Dakota distanced themselves enough from Alaska and Delaware to deserve their own tier? Or has Tennessee improved enough to join Nevada and South Dakota…
NING Trusts for California Residents: “Rumors of My Death Have Been Greatly Exaggerated”
By Steven J. Oshins, Esq., AEP (Distinguished) Late last year, the California Franchise Tax Board announced that it was planning to bring legislation to abolish the use of Incomplete Gift Non-Grantor Trusts, otherwise known as “ING Trusts”. The two states where most of these trusts are established are Nevada (“NING Trusts”) and Delaware (“DING Trusts”). However, since these trusts are non-grantor Domestic Asset Protection Trusts, this article will assume that the draftsman would select Nevada which is generally considered the number one asset protection trust jurisdiction. The legislation was to be effective for any taxable income earned on or after…
Saving State Income Taxes: NING Trusts and Completed Gift Non-Grantor Options
By Steven J. Oshins, Esq., AEP (Distinguished) Prior to the Trump Tax Act, state income taxes paid were deductible against federal income tax. However, the Trump Tax Act limits the amount of the federal income tax deduction for state income taxes paid, real property taxes paid and sales taxes paid to a cumulative (yes, cumulative!) total of $10,000 per year. The $10,000 is used up for property taxes only for many of our clients. Therefore, state income taxes paid are essentially no longer deductible! This is why state income tax avoidance planning has arguably become the hottest area of estate…
Life Settlements Can Increase Policy’s Worth
By Richard E. Nottingham CLU, ChFC Recently, I helped a client sell a no-longer-needed life insurance policy for far more than its cash surrender value. The policy’s cash surrender value was $61,000. Instead, via life settlement, they received a check for $540,000. A life settlement is a transaction involving the sale of an existing life insurance policy by the policy’s owner to a life settlement company. The result of this strategy can net the policy owner a sum many times greater than the policy’s cash value and provide the policy owner substantially more than the total premiums paid for the…
The 2022 Biden Estate Tax Cliff: Preparing After the 1/1/2013 and 1/1/2021 Cliffs
By Steven J. Oshins, Esq., AEP (Distinguished) If you are an estate planner, you likely had your best revenue ever in 2012. Then you likely annihilated your previous revenue record in 2020. This happened because of the so-called “fear of missing out” with different tax “cliffs” expected to occur at the end of those two years, thereby causing a commotion among the wealthy. JANUARY 1, 2013 FISCAL CLIFF Rewind back to the year 2012. President Obama was in office and the $5 million estate and gift tax exemption was scheduled to expire and roll back to only $1 million at…
Protect Against Potential Retroactive Estate Tax Changes
By Martin M. Shenkman, CPA, MBA, PFS, AEP (Distinguished), J.D. The Biden Administration may reduce the exemption retroactively, perhaps even to January 1, 2021! It’s best to protect against a retroactive tax change. Retroactive tax changes sound unfair! Even Taylor Swift said: “It’s hard to fight when the fight ain’t fair.” But we’ll tell you how to fight that unfair tax fight! The law permits a retroactive tax change. See: Pension Benefit Guaranty Corporation v. R. A. Gray & Co., 467 U. S. 717 (1984); United States v. Carlton, 512 U.S. 26 (1994). The need for revenue, or the desire…
The Strange Case of Dr. Jekyll and Mr. Oshins: Staggered Distribution Trust versus Dynasty Trust
By Steven J. Oshins, Esq., AEP (Distinguished) Testing his theory that in every man dwells a good and an evil force, the reserved Dr. Jekyll develops a formula that separates the two, turning him into an argumentative estate planning attorney named Mr. Oshins who tells it like it is. Dr. Jekyll soon realizes he is becoming addicted to his darker self as he unleashes his opinions on the estate planning industry. In this article, Dr. Jekyll and Mr. Oshins tackle the differences between a Staggered Distribution Trust and a Dynasty Trust. As expected, Mr. Oshins will provide a different view…