Morris Law Group created a concept trust, the Generation Spanning Trust, to benefit our clients’ beneficiaries. The Generation Spanning Trust is intricately designed and highly detailed. It allows individuals to set aside the maximum estate tax exempt amount in a trust for the benefit of their descendants. The trust will avoid estate taxes for 360 years in the state of Florida and be protected from the beneficiaries’ creditors, as well as from spouses in the event of a divorce. It also allows the individual establishing the trust to designate the beneficiary as a trustee of the trust and to determine the level of control the beneficiary has over the assets.
The generation skipping transfer tax (GST tax) is a tax imposed, in addition to estate tax, on transfers passing to grandchildren or more remote descendants. All taxpayers possess a GST tax exemption to be used during their lives, or at death, to exempt transfers outright or in trust. However, proper GST tax planning necessitates placing assets in trusts, as opposed to making outright distributions to beneficiaries, since the latter are subject to estate tax upon the beneficiary's’ death.
This technique can be described as follows...during a client’s life or at death, assets equaling the GST tax exemption are placed in a Generation Spanning Trust. The beneficiaries of the trust will receive the full benefit of the trust during their lifetime and the assets will not be included in the beneficiary’s estate. This means the assets will not be subject to estate or GST tax in the beneficiary’s estate for 360 years!
The trustee of each trust has the authority to distribute trust assets at any time for the beneficiary’s health, maintenance or education. Upon a beneficiary’s death, his or her share passes to his or her descendants, to be held in this trust for their benefit, pursuant to the foregoing provisions.
The beneficiary could also elect to modify the terms and conditions upon which his or her descendants receive the assets in trust. This enables the assets to remain in trust (and excluded from the beneficiary’s estate) until Florida law requires distribution, which is currently 360 years. Furthermore, the trust allows the trustees to change jurisdiction of each trust to allow a longer perpetuities period and prevent ultimate distribution. This flexible planning allows a significant reduction in estate taxes from generation to generation.
The professionals here at Morris Law Group have your family’s best interests in mind. Contact us for more information on or to set up a Generation Spanning Trust.
** Disclaimer Required by IRS Circular 230** Unless otherwise expressly approved in advance by the undersigned, any discussion of federal tax matters herein is not intended and cannot be used 1) to avoid penalties under the Federal tax laws, or 2) to promote, market or recommend to another party any transaction or tax-related matter addressed.