A trust is a legal arrangement through which one person (s) (or an institution, such as a bank), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” Trusts fall into two basic categories: testamentary and inter vivos. A testamentary trust is one created by your will, and it does not come into existence until you die. In contrast, an inter vivos trust, starts during your lifetime. You create it now and it exists during your life. There are two kinds of inter vivos trusts: revocable and irrevocable. Revocable Trusts Revocable Trusts are often referred to…
A number of articles in The Voice have stressed the importance of being careful when choosing trustees to manage special needs trusts. Often the choices seem to come down to only two: a family member or a bank. However, family members are often problematic for reasons explained in a recent Voice article. On the other hand, banks and trust companies can be impersonal, often will not handle trusts with less than $1 million in assets, and may not have personnel who are knowledgeable about the multitude of unusual issues specific to serving a special needs beneficiary. There is sometimes a…
Who Will Be Subject to the New Surtax? One of the largest tax increases arising out of the President's health care reform initiatives is a new tax on the qualified unearned or passive income of individuals, trusts and estates. That tax begins January 1, 2013, will be imposed at a 3.8% rate and is designated as a Medicare contribution tax (the Medicare surtax). Initially advertised as applying only to high income individuals, the Medicare surtax also applies to estates and trusts once the taxable income reaches the top marginal tax rate. Estates and trusts reach the threshold for taxation at…
So, you’ve created a trust to protect your loved ones. Did you name the right person as trustee? Likewise, perhaps you’ve just been asked to serve as trustee without a firm appreciation for what that means, or perhaps you’ve just figured it out. Question: Should the trust have a professional trustee? Whether you’re parent who’s set up a trust or you’re a named trustee, Special Needs Answers recently offered a couple of tests to determine if the trust has the right trustee and if a professional may be in order. Their advice, as you would imagine, is especially poignant in…
With congress in post-election turmoil and heavy ideological difference at stake, there are many things that we simply can’t yet know and this makes planning both essential and baffling.
Do not name your special needs child directly as a beneficiary of a retirement plan if your child receives or may later need SSI, Medicaid, or other benefits such as Section 8 assistance or food stamps. The distributions from the retirement account will either reduce the entitlements or eliminate them entirely. Instead, if you want your child to receive your retirement benefits, the named beneficiary on the account can be the special needs trust for your child. Even so, this trust should contain special provisions not typically found in special needs trusts to insure the most favorable stretch-out and tax…
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