Irrevocable Gift Trust Lawyer in California
Apple Valley, Beaumont, Hemet, Moreno Valley, Ontario, San Jacinto, Upland, West Covina
Because estate tax is levied on the estate of each decedent, one strategy taxpayers can use to avoid a level of estate tax is to place property into a trust which would benefit their children during their lifetime and then pass directly to their grandchildren, thereby avoiding the inclusion and taxation of property in the estate of their children. To neutralize the benefits of this “Generation-Skipping” strategy, Congress enacted the Generation-Skipping Transfer (“GST”) Tax, imposed on “direct skips” of property from parents to their grandchildren. When the GST tax applies, it eliminates the estate tax benefits of Generation-Skipping transfers.
Securing the benefits of the GST exemption can be accomplished in several ways. One method would be to create a stand-alone irrevocable trust to be funded during the Trustor’s lifetime with gifts from the Trustor. Each transfer to this trust would use a portion of the Trustor’s GST Exemption. In addition, the Trustor could send his or her remaining unused GST Exemption upon death through a “pour-over” provision in his or her revocable trust. In this way, none of the Trustor’s GST Exemption would be wasted.
Irrevocable Trusts: Ideal Tools for Strategic Gift Planning
Upon death, the irrevocable trust would give maximum control to the Trustor’s children over principal and income, yet sufficiently restrict access to avoid inclusion of the trust in their respective estates. The trust corpus would subsequently pass to the Trustor’s issue (grandchildren), or to others as the Trustor’s children choose, completely free of estate tax.