Ferguson Cohen LLPFerguson Cohen LLP2024-03-07T17:20:23Zhttps://www.fahwlaw.com/feed/atom/WordPress/wp-content/uploads/sites/1401634/2021/01/cropped-ferguson-site-icon-32x32.pngOn Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=492272024-03-05T17:20:30Z2024-03-07T17:20:23ZBenefits
One of the key benefits of the ABLE Act is that it allows individuals to save up to $100,000 in an ABLE account without affecting their eligibility for Supplemental Security Income benefits. Additionally, any funds in the account do not count as a resource for Medicaid eligibility purposes. This provides individuals with the opportunity to save for future expenses while maintaining access to important government benefits.
One note to make for anyone using this type of account is that funds remaining in the account upon the owner's death may be subject to Medicaid reimbursement.
Qualification
To qualify for an ABLE account, individuals must have a disability diagnosis before the age of 26. After creating an account, the account owner, family members, or friends can make contributions up to the annual gift tax exclusion amount.
Usage
The funds are available for a wide range of qualified expenses. These might include employment training and support, assistive technology and personal support services. It also includes health care and other expenses that improve the quality of life for the individual.
By allowing individuals to save for qualified disability expenses in a tax-advantaged account, the ABLE Act ensures that they have the financial resources they need to lead independent and fulfilling lives.]]>On Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=492142024-02-23T16:18:04Z2024-02-23T16:18:04ZBasics
If properly designed, a dynasty trust will last multiple generations, providing ongoing financial benefits for your descendants. Connecticut law permits dynasty trusts to exist for up to 800 years.
Transferring assets into this kind of trust ensures that your wealth remains intact and supports your family members long after you are gone. A trustee (typically a bank or other financial institution) that you appoint controls the trust's operation.
Tax benefits
In Connecticut, assets held within the trust are generally not subject to state inheritance or generation-skipping transfer taxes, allowing your wealth to grow more effectively over time. They can be subject to these taxes when you transfer if the assets exceed federal tax exemptions.
Income taxes do apply if the assets produce income. Individuals often transfer assets to these trusts that do not produce taxable income, such as non-dividend-paying stocks and tax-free municipal bonds. These transfers minimize the income tax burden.
Asset protection
When you place your holdings in a dynasty trust, you shield them from creditors, lawsuits and other potential threats. Once transferred, you are no longer the legal owner of the assets. They become the legal property of the trust. Creditors can not attempt to attach those assets to collect outstanding debts.
Long-term wealth preservation
Unlike other trusts with limited durations, a dynasty trust can span multiple generations, providing ongoing financial support for your descendants. As each generation of beneficiaries passes, the trust splits into sub trusts - one for each living heir. This process allows you to preserve and grow wealth over a long period.
Creating a dynasty trust is a powerful tool for preserving wealth for future generations. You can provide your family financial security and stability with careful planning and foresight.]]>On Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=492122024-02-22T22:16:52Z2024-02-22T22:16:52Zup to $18,000 in cash or resources annually without needing to pay a federal gift tax. Spread across multiple different beneficiaries, that amount could help diminish the value of an estate and bring it down below the threshold for estate taxes. However, gifts can actually factor into the value of an estate for the purposes of federal taxes. Testators need to be aware of how gifts affect estate tax liability to better protect themselves and their beneficiaries.
Prior gifts become part of the estate
An individual cannot simply make a few sizable gifts before their death to avoid probate court and estate tax obligations. There are rules in place to avoid obvious attempts at sidestepping tax liabilities. Gifts can actually contribute to the full value of an estate.
An individual's personal representative managing their estate does not need to account for a lifetime of gifts to others. However, the process of calculating the value of the estate to determine if paying estate taxes is necessary includes calculating the gifts made to others within the last three years. Therefore, strategic gifting is most effective when it begins as early as possible and when the annual amounts gifted aren't enough to push the remainder of the estate over the federal estate tax exemption threshold.
Currently, an estate must be worth more than $13.61 million for federal and Connecticut estate taxes to apply. Those with personal property at or close to that value may want to plan carefully to minimize estate tax liability and maximize what they're chosen beneficiaries receive from their estates.]]>On Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=492102024-02-07T20:11:29Z2024-02-07T20:11:29ZThe payment of a CRUT
In a CRUT, the annual payments to beneficiaries fluctuate based on the value of the trust assets. This allows payments to increase if the trust investments grow.
Each year, the CRUT must distribute a fixed percentage of the value of the trust as revalued annually. For example, a 5% CRUT would pay out 5% of the total value of the trust each year, even if the principal increases.
The payment of a CRAT
In contrast, a CRAT provides fixed payments that do not change. The CRAT pays out a set dollar amount annually, based on a fixed percentage of the initial trust assets. This creates reliable income flow, but it also means payments do not rise if assets appreciate.
Upon the death of the trust beneficiaries, any remainder in the trust passes to the charity. With a CRUT, the remainder depends on the fluctuating trust value. For a CRAT, the charity may receive more or less than the initial principal depending on investment performance.
Generally, those seeking variable, growth-oriented payments may prefer a CRUT, while a CRAT provides stable income. When structured properly, both of these trusts achieve philanthropic legacy goals. The key is understanding how the payout mechanics align with your financial objectives and the needs of your preferred charity.]]>On Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=492082024-02-03T22:06:55Z2024-02-03T22:06:55ZClearly define conditions
The American Bar Association defines a living trust, or revocable trust, as a trust that you create during your lifetime to help you manage your assets. For all types of assets you include in this type of trust, it is important to clearly define conditions.
When leaving conditional gifts in your living trust, outline the conditions for when your beneficiaries may receive their share. This might include reaching a certain age or fulfilling specific responsibilities.
Regularly review and update
Life is dynamic, and circumstances may change over time. Regularly reviewing and updating your living trust allows you to adapt to evolving situations. This ensures that your conditional gifts align with your current intentions. Births, deaths, marriages or changes in financial status are all factors that may necessitate adjustments to your living trust.
Communicate clearly with beneficiaries
Open communication with your beneficiaries is a must. Clearly explain your expectations and the conditions attached to their inheritance. This transparency helps prevent misunderstandings and potential conflicts among family members. The result is a smoother transition of assets according to your wishes.
Leaving conditional gifts in your living trust requires thoughtful consideration and careful planning. By being mindful of what goes into the gifting process, you can create a comprehensive plan that reflects your values and ensures the well-being of your loved ones.]]>On Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=492062024-01-18T21:00:29Z2024-01-18T21:00:29ZSet up a living trust
A living trust lets you maintain control over your assets while providing clear instructions on their distribution. It secures a seamless transition of wealth without the need for probate court. Having this document in place can save time and costs.
Knowing how to create this legal document helps you protect your holdings.
Identify assets: Make a comprehensive list that includes real estate, bank accounts, investments and personal property to serve as the foundation of your asset management plan
Designate a trustee: Select an individual you implicitly trust who possesses the financial acumen to handle the responsibilities of managing your trust according to your wishes
Establish beneficiaries: Clearly define who will benefit from your trust, whether family members, friends or charitable organizations.
Life is dynamic, and your financial situation may evolve. Regularly review and revise your trust to reflect any changes in assets, family circumstances, or financial goals.
Understand tax implications
A living trust can provide certain tax benefits. While Connecticut does not impose an estate tax on smaller estates, larger estates may face federal estate taxes. Consider consulting a tax professional to navigate these complexities.
Transfer ownership
Transfer asset ownership to the trust to maximize the benefits of a living trust. This process, known as funding, ensures seamless management and distribution per your wishes.
Creating a living trust in Connecticut is a strategic step for those with substantial wealth. With this legal plan in place, you can safeguard your financial legacy for future generations.]]>On Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=492042024-01-04T05:11:20Z2024-01-04T05:11:20Z1. Lifetime gifting
One strategy to consider is lifetime gifting. By transferring assets to your heirs while you are still alive, you can reduce the overall value of your estate subject to taxation. The IRS allows individuals to make tax-free gifts of up to $13.61 million for 2024. Any amount exceeding this may be subject to gift taxes. However, gifting can be a powerful tool when done strategically, allowing you to gradually pass on assets and minimize tax liabilities.
2. Establishing irrevocable trusts
Irrevocable trusts can be another effective tool in estate planning. By transferring assets into these trusts, you relinquish ownership and control, but in turn, reduce the taxable value of your estate. In Connecticut, certain irrevocable trusts may provide tax advantages, such as the ability to remove assets from your estate and potentially lower your estate tax liability.
3. Taking advantage of marital deductions
Connecticut allows for a marital deduction, enabling spouses to transfer an unlimited amount of assets to each other tax-free. Using this deduction effectively can help defer taxes until the second spouse passes away. This strategy allows for the preservation of wealth within the family unit, minimizing the immediate tax impact and providing financial security for the surviving spouse.
Strategic estate planning involves a combination of methods to minimize the impact of taxes. By understanding the options available and tailoring your plan to your specific circumstances, you can protect your wealth and provide a more secure financial future for your loved ones.]]>On Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=492022023-12-23T17:35:58Z2023-12-23T17:35:58ZPour-over wills involve probate oversight
Funding a trust years before someone dies can be inconvenient. They may lose certain tax benefits or direct control over valuable property. Some people would rather retain sole ownership of assets throughout their life and then transfer their belongings to a trust after their death.
The issue with this approach is that the property included in a pour-over will to fund a trust posthumously passes through probate court. These assets could be subject to creditor claims, and they could also contribute to the total value of the estate for the purpose of calculating estate tax obligations.
Therefore, testators may need to quantify the value of their residual estates or the assets they specifically include in their pour-over wills to better address tax risks and other probate complications. Many testators use a pour-over will to address the personal property not specifically included in other documents or already transferred to a trust.
A testator's personal goals, the extent of their property and their family relationships can all influence the best strategy for passing their wealth to the next generation. Understanding the benefits and drawbacks of different estate planning tools, and seeking legal guidance accordingly, can help people create the most effective and comprehensive estate plan given their circumstances.]]>On Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=491992023-12-20T16:54:15Z2023-12-20T16:54:15Z1. Clear beneficiary provisions
In crafting a Special Needs Trust, it is important to clearly outline the intended beneficiary. Specify the individual's name, date of birth and any other pertinent details to avoid any ambiguity regarding the trust's purpose and the intended recipient.
2. Trustee selection
Selecting a trustworthy and responsible trustee is paramount. The trustee manages the trust assets and ensures that the provided care meets the beneficiary's needs. Consider a family member, close friend or professional advisor who possesses financial acumen and empathy for the beneficiary's unique circumstances.
3. Detailed distribution guidelines
Define the guidelines for distributing trust funds with precision. Clearly outline the types of expenses the trust will cover, such as medical care, education and quality of life enhancements. These guidelines provide the trustee with a roadmap for making decisions that align with the beneficiary's best interests.
4. Future planning for changing circumstances
Life is unpredictable, and circumstances may change. The Special Needs Trust should include provisions for adjusting to unforeseen events, such as changes in government assistance programs, shifts in the beneficiary's needs or unexpected financial challenges. Flexibility is key to ensuring the trust remains effective over time.
5. Personalized letter of intent
Include a Letter of Intent alongside the trust document. This non-binding letter provides important insights into the beneficiary's preferences, routines and specific care requirements. It helps guide the trustee in making decisions that align with the beneficiary's unique lifestyle and aspirations.
6. Professional guidance
Seeking guidance from professionals such as financial advisors and social workers can be invaluable. Their expertise can provide clarity on financial strategies, government benefit implications and the overall impact on the beneficiary's quality of life.
A meticulously crafted Special Needs Trust is a powerful tool for securing the financial future of individuals with disabilities. By incorporating these important components, families can ensure the trust effectively meets the unique needs of their loved ones, fostering peace of mind for both the present and the future.]]>On Behalf of Ferguson Cohen LLPhttps://www.fahwlaw.com/?p=491972023-12-13T02:23:45Z2023-12-13T02:23:45Z1. Third-party
A third-party special needs trust allows relatives and friends to establish a trust using their assets, ensuring financial support for the individual without affecting eligibility for government assistance programs. This thoughtful approach enables families to extend their support and uphold the individual's quality of life.
2. Pooled
Pooled trusts offer a collective approach to managing assets for individuals with special needs. Many beneficiaries pool their resources, allowing for more effective investment management. Administered by nonprofit organizations, these trusts cater to those who may not have large individual funds but can benefit from a shared financial strategy.
3. Testamentary
Parents can establish a testamentary special needs trust within their wills, to go into effect upon their death. This type of trust ensures that the legacy of care and support continues after the parents pass, providing a secure financial future for the loved one with special needs.
4. Living
Financial guardians can also establish living special needs trusts while they are still alive. This proactive approach allows for real-time management of assets, ensuring ongoing financial support and a high standard of living.
5. Self-settled
Individuals with special needs may have a sudden windfall, such as an inheritance or a legal settlement. A self-settled special needs trust allows them to preserve these assets while still qualifying for benefits such as Medicaid and Supplemental Security Income. In this way, individuals can maintain financial stability by safeguarding their newfound resources without sacrificing essential support.
When setting up a trust, it is important to remember that benefactors can name the special needs trust as a beneficiary in a retirement plan or IRA, not just in a will.]]>