For decades, it was very common for trusts to be set up like this: “The trust income will go to the first beneficiary, and when the first beneficiary dies, the trust assets will go to a second beneficiary.” Here are some common examples: A couple sets up a trust with the income going to a child, and when the child dies, the assets go to their grandchildren. A wife’s will creates a trust that pays income

If you have a whole-life or universal-life insurance policy that you don’t need, you might want to consider donating it to charity rather than cashing it in. There are two ways to make such a donation, each of which has its advantages: (1) Name the charity as the policy’s beneficiary. The key advantage to this method is that you retain control of the policy. Thus, you can always change your mind if you decide that your

Andrew Reitz set up a trust to benefit his sons, with an independent trustee. The trust document said that if there was a dispute between his sons and the trustee, it would be decided by a private arbitrator rather than a court. When John Reitz, one of the sons, became unhappy with the trustee, he sued to have the trustee removed. The trustee argued that the suit should be thrown out of court, and decided by

One of the most important things people can do after a divorce is to update their beneficiary designations, and indicate who should get the assets in various accounts if they should unexpectedly pass away. Most married people name their spouse as the beneficiary of their accounts, but in the stress following a divorce, they often forget to update these designations. And even when people make an effort, they might not remember every account. Pensions, 401(k) plans,

A year ago, Congress dramatically raised the federal estate tax exemption, which for 2013 was $5.25 million (or $10.5 million for a married couple). And that caused some people to mistakenly believe that they no longer need to think about estate planning if their assets are less than $5 or $10 million. However, nothing could be further from the truth. And people who don’t keep their estate plan up-to-date are making a big mistake that could

IRAs can be an important part of estate planning, especially for savvy investors and business owners. But be careful – mixing your IRA and your business interests too closely can cause big tax problems. The IRS can “revoke” an IRA, and deny you all its tax benefits, if you use the funds for certain improper purposes. This rule applies not only to you, but also to actions by your family members and any business or trust

If you’re donating assets to a charity, don’t scrimp when it comes to an appraisal and don’t try to file the tax forms yourself. That’s the lesson of a recent case from the U.S. Tax Court. The case involved Joe Mohamed, an extremely successful real estate investor in Sacramento, California. Joe donated real estate he valued at $18.5 million to a charitable trust. Because Joe was a qualified appraiser, he valued the properties himself. He also

If you or someone you know has an older estate plan that doesn’t carefully take into consideration the role of stepchildren, it’s a good idea to have it reviewed. If you have stepchildren – or if your children have stepchildren – it’s critical to make clear whether they’re included in your plans. Take the case of Bill and Pat Clairmont. This North Dakota couple had a daughter, Cindy; a son-in-law, Greg; and several grandchildren including a

Same-sex couples should review their estate plans in light of the Supreme Court’s decision striking down part of the federal Defense of Marriage Act. The Supreme Court said that the federal law, which refused to recognize same-sex marriages with regard to federal taxes and benefits, was unconstitutional. The law had made estate planning especially difficult for same-sex couples, because they couldn’t take advantage of techniques that were available to other married couples. For instance, under federal

Widows and widowers who are considering remarriage should be aware that a law recently passed by Congress could make a huge difference in how much of their assets they are able to leave to their heirs after taxes. In general, anyone who is considering remarriage later in life should talk to an estate planner first in order to avoid possible tax problems. But the new law gives added urgency to this advice. Typically, when a person