Taking Advantage of the Gift Exemption in 2012

How does the UltraTrust irrevocable trust protect your assets? The importance of creating a solid irrevocable trust versus other irrevocable trusts.

 

You cringe every time that you give your child the keys to the car because you know they don’t always make the best decisions, so what makes your financial advisor think that you could trust them with $5.12 million dollars? You’ve heard about the Lifetime Gift Tax Exemption (GTE) of $5,120,000 ($10,240,000 for a couple) that turns into a pumpkin at midnight on December 31st, 2012; exemption moves to $1,000,000 in 2013 ($2,000,000 for a couple). You have read articles about giving away your money this year or the gift tax and estate tax will eat up a significant portion that you wanted to be there for your children and grandchildren.

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You would gladly take advantage of this situation, but images of your son in a Ferrari and your daughter living in a 4 bedroom loft in Paris are running through your head. Really, “these tax accountants and attorneys should look up from their spreadsheets once in a while and realize that these are real families out there, not just numbers,” you think to yourself. Of course, transferring all those assets tax free makes sense on paper, but could you trust your child to resist the temptation to spend it while struggling through college and entry level character building positions? Even great kids can get themselves in a world of trouble with that kind of access to money.

Thankfully, there is another option. “You can transfer your assets for the benefit of your children, control how they spend it and still qualify for the Lifetime Gift Tax Exemption,” states Rocco Beatrice, Sr. of Estate Street Partners, LLC, “If there is one thing you should do this year, take advantage of the Lifetime Gift Tax Exemption, because this level of exemption will not come around again, and if it does, by that time $5 million dollars won’t be worth $5 million dollars anymore.”

Transfer Assets with all the Tax Benefits and Asset Protection but Still Keep Control

 

How can you transfer your assets and still keep control? The UltraTrust irrevocable trust will do just that. Irrevocable sounds a little scary, but irrevocable is where the advantages exist. Think of the UltraTrust irrevocable trust as a vault and the trustee as a teller behind bulletproof glass. You put your assets in the vault and write specific instructions to the teller as to whom, when and for what reason to give those assets out. Here are some examples of how it works. One of your beneficiaries (persons who benefit from the trust) goes to the teller and says that they need money for college. The teller looks at his instructions and sees that he can give money for college, but only directly to the college and cuts a check to the university for the amount of tuition. The same beneficiary returns and says, I need money for a Ferrari. The teller looks at his instructions and sees that he can give money for moderately priced transportation and offers to purchase a Honda Accord owned by the trust for the child’s benefit to use.

This trust can also protect the assets even if things go badly. For example, your daughter comes to the teller and says that she invested in Ostrich’s, that they all passed away because of the unusually long winter and now the bank is foreclosing on the farm wanting $40,000. The teller looks at his instructions, sees a “spendthrift clause” that says he cannot pay debts under duress. He says no to your daughter and when the bank comes knocking on the window, he says no to them too. Here is another example. Your son gets married and several years later, his wife decides she wants to “find herself” and files for divorce. She asks the court to force the teller to give her half of the trust. The teller gives the judge his instructions which say that spouses are entitled to nothing from the vault and the judge rules that the teller not only doesn’t have to give her anything, but can’t give her anything even if he wanted to. You just saved over 2 million dollars that might have gone to the daughter-in-law you never wanted.

The UltraTrust Irrevocable Trust Compared to Other Irrevocable Trusts

 

Understand how it works now? Now you need to find someone who has experience setting up these irrevocable trusts. “Not every trust is the same. Some trusts say they are irrevocable, but creditors can still get into them. Some leave out spendthrift clauses. If you are going put a million dollars in a trust, you want to make sure it is done right,” urges Mr. Beatrice, “Trusts such as the UltraTrust® irrevocable trust are very sophisticated instruments designed to make sure your assets are safe and used the way you want them to be used. Good trusts have various levels of protection such as spendthrift clauses, trust protectors and precise instructions.”

So, take advantage of the current $5.12M dollar gift tax exemption without worrying about what your kids are going to do with all that money. You get to control your money even if something happens to you. A will doesn’t offer that kind of control and safety. You can only get that kind of bulletproof protection and control with a solid Ultra Trust irrevocable trust. So, instead of thinking you can’t transfer anything without risking disaster, you should be thinking the UltraTrust irrevocable trust will not only give you that tax relief, but will also take care of your children if something should happen to you.