How To Create An Property Plan That Can Be Rapidly Modified – New York Property Planning Lawyer Weblog – Dec 18, 2020

People who own an estate of various assets often need to be prepared to deal with sudden changes in both market valuation and tax laws. During the COVID-19 pandemic and a time of political uncertainty and rapidly changing markets, deciding which assets to transfer to a trust can be especially difficult. This article describes some tips and strategies you can follow to add flexibility to your inheritance plan so that you can make decisions quickly to take advantage of the most discounting opportunities in the changing marketplace.

# 1 – Use “intentionally flawed” irrevocable grantor trusts

Deliberately Defective Grantor Trusts are best viewed as grantor trusts with a purposeful flaw in ensuring that the trust creator continues to pay income taxes. A deliberately defective grantor trust can be used to reduce estate taxes. A founder creates the trust, transfers the assets to the trust while retaining the ability to recover assets in the trust by replacing other assets of equal value, pays gift tax on the transfer, and income tax on any increase in the value of the trust.

Grants are not recognized when a grantor trust purchases an estimated asset. When a grantor lends money to a grantor trust, the interest repaid by the trust to the grantor is also not taxed. These trusts are most commonly used when the trust beneficiaries are children or grandchildren and the grantor has paid income tax on the growth of assets that the loved ones will inherit.

# 2 – Choose a jurisdiction with favorable change rules

When a person’s estate has multiple state ties, it is important to examine which jurisdiction contains the most opportunistic trust change regulations. New York Estates, Powers and Trusts Law Section 7-1.9 provides a way of changing or changing an irrevocable trust. This section of estate planning in New York enables the founder of a trust to change or revoke part of a trust with the written consent of all trust beneficiaries. In situations where a beneficiary refuses to agree to a change, a person cannot change or change a trust relationship. Trusts can also not be changed if one of the beneficiaries is a minor of the creator of the trust who has died or has become incompetent.

# 3 – Put the right to a substitution clause in the trust terms

If a trust contains a clause that allows the creator to replace assets of equal value, the trust is automatically classified as a grantor trust as long as the grantor or trust creator is still alive. The swap power allows the grantor to make changes to the trust without the need for approval from another party. Being able to make such decisions quickly can be ideal for owning real estate as well as controlling other low-base assets.

Get advice from an experienced estate planning attorney

The estate planning process is complex but critical, especially if you have specific requests about the type of end-of-life care you will receive or how your wealth will be transferred. To achieve these goals, one of the best steps you can take is with the assistance of a qualified lawyer. Contact Law firm Ettinger today to schedule a free case assessment.