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REVOCABLE LIVING TRUST

Cape Coral, FL |

can i open a revocable living trust for my grand daughter age 2 and I be the trustee and then my wife takes advantage of this years generation skipping tax feature ($5,000,000 allowed which may expire at the end of this year.)... she funds it with life insurance SHE owns ..... QUESTION ....will this now be counted as a gift and out of her estate for estate tax purposes.

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Posted

1-yes you can open trust for grand daughter
2-the cash value would be considered a gift and 709 tax return must be filed.
3-you can use your lifetime exemption on 709 instead of paying tax.
4-transferring life insurance is subject to a three year look back period for estate tax purposes

The answer given does not imply that an attorney-client relationship has been established and your best course of action is to have legal representation in this matter.

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Posted

you should sit with an estate planning expert. there are several vehicles that could assist you in establishing transfers to grandchildren that you and your spouse may employ. without knowledge of the extent of your assets and the beneficiaries you wish to provide for and the amounts giving you advice could result in greater taxes not less. speak with a lawyer that understands the complexities of your assets, tax concerns and how to take advantage of generations skipping trusts, crummey trusts other estate planning tools including irrevocable insurance trusts.

without a detailed review by a lawyer can all the issues raised in your question be appropriately addressed...nothing in this response should be construed as establishing a lawyer client relationship..the answers herein are for informational purposes and not to be construed as advice

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You need to see an estate planning attorney. Revocable trusts will not remove assets from a taxable estate. If you are talking about GST implications and GST trusts you must see an estates attorney who knows about this area of tax law.
As for the life insurance, an irrevocable trust needs to be drafted with certain key provisions and needs to be operated in certain ways to exclude life insurance from the taxable estate. Additionally, there is a 3 year rule involved where current life insurance is being transferred.
There are other implications that also need to be explored with an estates attorney.

Do not even attempt to do this on your own. For the reasons why please read my legal guide entitled Estate Planning Mistakes: 5 Not So Easy Pieces at http://www.sjfpc.com/estate_planning_drafting_wills_trusts.html. After you read this you may gain an understanding of what is involved in this process. Be sure to hit the like button at the end of this article if you found it helpful.

Hope this helps.

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Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net , his website for more tax, estate and business articles is www.sjfpc.com. and his blog is

LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.

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You are confusing the generation skipping transfer tax with the estate tax. It is the estate tax that has a $5,120,000 exclusion, for this year. If Congress does not do anything before then, the exclusion from estate tax will be $1,000,000 as of January 1, 2013.

If properly set up, an irrevocable life insurance trust can shelter assets from estate tax and/or provide an easier way to pay any tax that applies. This is more complicated estate planning and should only be contemplated with the advice of a skilled estate planning attorney. You should find one, because it is clear that you have significant resources and options available to you.

James Frederick

*** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state.

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