Numerous and often complicated issues are involved in estate planning for minor children, including taxation, education funding, insurance, and disability of a minor or a minor's caregiver. Tax, Estate, and Lifetime Planning for Minors focuses exclusively on the pertinent issues facing adults when planning for younger family members. Combining core legal concepts with practical wisdom, it is a handy desk reference not only for the seasoned practitioner but for the general or novice practitioner handling his or her first estate plan.
Tax, Estate, and Lifetime Planning for Minors brings together the knowledge and insights of fourteen experienced practitioners and law professors, including Jon J. Gallo, Christopher P. Cline, E. Paul Van Horn, Nancy E. Shurtz, Aen Walker Webster, Naomi R. Cahn and Cynthia L. Barrett. The book begins with a clearly written overview of pertinent Federal transfer and income tax principles. A separate chapter is dedicated to the increasingly significant death and gift taxes that may be imposed by the states. Subsequent chapters cover other important elements in planning for younger family members, including:
- Selection of life insurance policies and irrevocable life insurance trusts
- Funding education costs
- Planning options for the daily care of a minor in the event of a caregiver's incapacity
- Special needs trusts and planning for the disabled minor
- Transfer of retirement benefits to minors
- Special considerations for children born of assisted reproductive technologies
Relevant chapters categorize current state laws with the use of easy-to-read informational charts, whether covering state-by-state tax regimes, state-specific daily child care options for incapacitated caregivers, or state adopted provisions of the Uniform Transfers or Gifts to Minors Acts. Tax, Estate, and Lifetime Planning for Minors also examines the most significant non-tax considerations required when testamentary planning involves minor children.
This deskbook is written especially for the practitioner, and its discussion of the law is illustrated with helpful Practice Notes, sample language, and detailed notes and citations. The appendices include sample forms and disclaimers, tables, a Website resource listing, a client questionnaire, and drafting examples. The book's forms are also contained on an accompanying CD-ROM.
Includes an update on the Tax Increase Prevention and Reconcilation Act of 2006 and the Pension Protection Act of 2006
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The Irrevocable Life Insurance Trust
Proper ownership of the insurance policy is vital if the proceeds are to escape estate taxation at the parent’s death. The simplest way to avoid estate tax at the parent’s death is to have the beneficiary own the insurance policy. For example, insurance on the life of a parent might be owned by the children. There are, however, several drawbacks to having insurance proceeds paid outright to the child:
- Doing so may be inconsistent with the best interests of the beneficiary, who might be a minor or lacking in financial sophistication and unable to invest the proceeds wisely. If the child is a minor, a guardianship or custodian will be necessary to administer the insurance proceeds during minority. Of course, if a guardianship would be necessary for other assets, this is not a major issue.
- The insurance proceeds will be subject to claims of the child’s creditors and, depending on state law, possibly to the claims of an ex-spouse.
The solution to these drawbacks is usually an irrevocable life insurance trust. A life insurance trust is an irrevocable, nonamendable trust that is both the owner and beneficiary of one or more life insurance policies. Upon the death of the parent/insured, the trustee invests the insurance proceeds and administers the trust for the children.