ACTEC Trust & Estate Talk Use of Asset Protection Trusts for Estate Tax Planning Purposes
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Jan 6, 2025 Daniel Rubin, an experienced estate planning attorney from New York City, shares insights on self-settled/asset protection trusts. He explains how these trusts can shield assets from creditors while addressing their estate tax implications. Rubin contrasts trusts for creditor protection with those for gift tax benefits. He highlights how to avoid trust asset inclusion in the settlor's estate, offering practical tips for administration. The conversation also explores client scenarios benefiting from these trusts, particularly for unmarried individuals and those with unique circumstances.
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Self-Settled Trusts Shield Future Creditors
- Self-settled discretionary trusts can shield assets from future creditors if structured under modern statutes.
- Such trusts are often used today more for estate tax planning than pure creditor protection.
Completed Gifts Still Risk Estate Inclusion
- For estate tax planning the settlor must make completed gifts by avoiding reservation of veto or testamentary powers.
- Yet completed gifts still risk estate inclusion under Sections 2036 and 2038 if certain retained rights or arrangements exist.
Creditor Reach Ties To Estate Inclusion
- Courts may treat discretionary beneficiary interests as retained if creditors can reach the trust, creating estate inclusion.
- Conversely, where creditors cannot reach trust assets, transfers have been consistently treated as completed gifts.