Besides being female celebrities, what do the late Jacqueline Kennedy Onassis and Amy Winehouse have in common? They both could be commended for their estate planning.
Why should Jackie O be commended for her estate planning? As an article in the NY Times (HERE) points out, her will, especially its use of the “charitable lead trust” stands tall in the world of estate planning.
A charitable lead trust distributes money to some charity annually for a set number of years (Jackie O’s charitable lead trust will last a total of 24 years, ending in 2018). As time goes along, the trust’s principal also accumulates income. So, at the end of the trust’s term, there may be leftover money to distribute to heirs.
Therein resides the beauty of a charitable lead trust. You get to give a lot of money to some charity that you love AND to your loved ones. AND, if structured properly, this can all be accomplished with no estate tax consequence.
So, how does money in the charitable lead trust make it to your loved ones tax free? Each year, the IRS sets a “hurdle” rate. The hurdle rate is the percentage at which the IRS expects assets to grow. Anything over the hurdle rate can generally be passed to heirs tax-free. Right now, because the economy is not doing so well, the IRS has set the hurdle rate exceptionally low, which means there’s great potential for giving a sizable tax-free gift to your hers.
All trusts have pros and cons. The charitable lead trust is no exception. The biggest problem with the charitable lead trust is that it is irrevocable. Generally speaking, every trust is either revocable or irrevocable. With a revocable trust, the person creating the trust (the “grantor”) can amend the trust while he/she is alive. Conversely, irrevocable trust’s can’t be altered. This can be a problem for many grantors because, as life goes on, you may want to change the trust beneficiaries, etc.
Another problem with the charitable lead trust is that they are very complex, so it can be difficult to get your charitable lead trust to do exactly what you want it to do.
Why should Amy Winehouse be commended for her estate plan? Because she had one! She was only 27 years old when she died in London, and she had a will. Amy’s will splits her $16 million estate among her mother, father, and brother. Click HERE for more information on Amy Winehouse’s will.
Most Americans die without a will. And, of those individuals who are wise enough to get a will before passing away, many would tell you that they should have gotten one much sooner. You will sleep better with a will because you don’t know exactly how long you’ll live. Getting a will is probably easier and less expensive than you think. You’ll probably live for years to come, so why not live out all those years sleeping better at night?
Isaac Shutt is the Attorney/Owner at Shutt Law Firm PLLC. Visit http://www.shuttlawfirm.com or email firstname.lastname@example.org. You can also call Mr. Shutt at (214) 302-8197 for more information on the topic discussed in this blog or to discuss a different legal matter. Phone-calls and quick e-mails are always free at Shutt Law Firm PLLC. Please consider the Shutt Law Firm if you’re looking for a Richardson probate lawyer, Richardson wills lawyer, Richardson estate planning attorney, or Richardson guardianship lawyer.
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