Bob and Judy, a married couple, have a lot of money and want to make sure their kids get as much of it as possible when they die. They have $13.5 million, $3.5 million of which is their house and $10 million is in a joint bank account. Their accountant suggests that they put $5 million each into separate trusts so that they can save money on taxes when one of them dies. This way, they can make sure their kids get more of their money instead of it going to the government. Bob and Judy want to keep their family’s wealth safe and make sure they have access to it until one of them passes away. They’re okay with putting some of the money in a trust for the surviving spouse, as long as the surviving spouse can control the money and use it for things like health and support. Their CPA suggested putting $10 million into separate trusts for each of them, but their estate planning attorney, Lauren, says this could make the money vulnerable to creditors. Bob and Judy are looking for options that will protect their money from creditors while also taking advantage of their estate tax exemptions. The new law in Florida allows Bob and Judy to divide their $10 million account and create separate trusts to protect their assets. They can use a special kind of trust to make sure that the money is protected from creditors and that it will be distributed according to their wishes. This can help them with their taxes and make sure their money is safe. When Judy dies, the assets in the trust will be put into a special trust for Bob’s benefit. This trust will protect the assets from Bob’s creditors. There used to be some confusion about whether the assets would be at risk, but a new law in Florida now makes it clear that the assets will be safe. It’s important to create the trust in a place where the assets will be protected, like in Florida. If both spouses create a trust for each other, the IRS might see it as being too similar and could cause problems. To avoid this, the trusts should be different and have some time between creating them. If the spouses get a divorce, the trust assets might still benefit the ex-spouse unless the trust was made so that the ex-spouse can only get income and not the principal. It’s important to think about how the trust might affect the rights of a surviving spouse or in case of a divorce. Creating separate trusts for each spouse could help with these issues. Inter vivos QTIP trusts in Florida are a good way to lower estate taxes and protect assets from creditors. A recent law change makes these trusts a strong option for anyone looking to take advantage of their estate tax exemption and keep their assets safe. It’s a smart choice for tax planning and keeping control of where your assets go after you pass away. In simple terms, the property in a revocable trust can be used to pay the debts of the person who set up the trust while they are alive. Bob and Judy should be careful if they have debts, because if they divide their assets and put them into separate trusts, those assets could be used to pay off their debts. They also need to be careful about setting up trusts that give each other power to control the assets, because it could affect who gets the money when they pass away. If Bob has kids from a previous marriage, it’s important to make sure that the assets go to the right people after he and Judy pass away. Spendthrift trusts may not fully protect assets from certain creditors like the IRS or for child support. Florida law allows creditors to access trust assets in some cases. It’s important to understand these laws when dealing with trusts. We want our members to learn about their responsibilities to the public and how to make the justice system better. We also want to make progress in the study of law.
Source: https://www.floridabar.org/the-florida-bar-journal/new-736-05053-assures-tax-asset-protection-of-inter-vivos-qtip-trusts/
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