Are Trusts Still Useful After the 2018 Tax Reform

There’s nothing in life more certain than death and taxes. Good estate planning is designed to think about and provide a plan that will deal with both of these things for an individual. In fact, the purpose of estate planning is to look down the road of the future and consider all the worst things that could happen and provide a plan that will either avoid those things or lessen their negative impact. Because life never stays the same, including tax laws, the need for good estate planning always exists. This has never been more true than with the 2018 tax reform which just took place.

As a premier Idaho estate planning law firm, the Racine office has provided exceptional Idaho estate planning services to clients for more than 70 years. Our team of Idaho estate planning lawyers includes partners Randy Budge and Lane Erickson and attorneys Nate Palmer and Dave Bagley. With our team approach we are confident that we can assist you with all of your estate planning needs.

One of the estate planning tools that is often used in creating a customized Idaho estate plan for a client is a trust. With the recent tax changes one of the most common questions we receive is whether a trust is still useful as an estate planning tool. This is because with the 2018 tax reform, an individual would need more than $11 million worth of assets in their estate before the federal estate tax would apply. For a couple this amount is double that or $22 million. Where in previous decades trusts were often used to avoid estate tax, this really appears to be much less of an issue now for most couples and individuals. However, here are four questions you should still ask yourself to determine whether a trust could be a useful part of your personal estate plan.

The costs of probate in Idaho are relatively low. For most individuals the cost of creating a trust and the cost of completing a probate or about the same. For this reason, there usually needs to be another purpose in avoiding probate. For some individuals probate means exposing your lives to the public. as a result, some individuals use a trust as a way of keeping their estate and personal affairs private.

Alternatively, an elderly couple may benefit from having a trust. This is because the costs of completing 2 probates is more than the cost of completing a trust. So, when an elderly couple will come in to review their estate planning we will often discuss whether having a trust at this point in their lives makes sense and may save their family money.

The next important question that should be asked is whether you have minor aged children. If you do, a testamentary trust is often recommended as a way of providing for your children financially and yet protecting them from themselves. In Idaho, a person is considered an adult when they reach the age of 18. If you have several minor age children and you passed away this property would be held for them until they reach the age of 18. When they reached the age of 18 the property or money would be given directly to them because they are now considered to be a legal adult.

However, if you have a testamentary trust setup in your last will and testament as part of your estate planning you get to determine the age or ages of your children when distributions would be made to them. You could create a plan that staggers distributions over the course of several different points in their lives such as the ages of 25, 30 and 35. Alternatively, you could make an outright distribution to them when they reach a certain age. Before the distribution is made you can provide specific instructions to the trustee about how the property and money can be used to benefit your children without giving the money directly to them.

For example, you could have language in your testamentary trust that says that it will provide and pay for a college education. In this instance, the trustee would make a payment of tuition directly to the college without giving the money specifically to your child. In this way, your child gets the benefit of the education without having the money placed into their hands.

The next question you should ask is whether you have any family members who have special needs. This usually means the individual has a physical or mental handicap or a disability. When this occurs, these family members often qualify for and receive many types of governmental benefits, assistance, and programs. If this is the case and you name the child as a direct beneficiary in your last will and testament they may lose their governmental benefits when they receive a distribution from your estate.

By creating a Special Needs Trust, or a Supplemental Needs Trust you may be able to supplement the governmental benefits and programs that you are family member receives. This gives you the ability to provide some assistance to that child without eliminating the programs that they are currently enjoying and making use of. This does take some planning in some work to make sure that it is setup correctly. In this instance, a trust can be very useful.

Another situation that often arises within a family is when you have a child suffering from addictions or who has creditors. In this instance if you were to leave an outright distribution to this child that could cause them a great deal of harm. Or if we’re talking about creditors, it could simply mean that whatever you distribute to your child could be immediately taken away.

In this situation a trust is also helpful because it gives you the ability to provide a portion of your estate to this family member without jeopardizing the way it will be used after it is distributed. If your child has addictions, you can provide specific instructions to the trustee about how and when distributions will be made to the child so that these distributions do not encourage addictive behaviors. Likewise, if your child has creditors, your trust can contain language that will protect the distribution from those creditors and yet allow assistance to be provided to your child.

The bottom line is that even with the 2018 tax reform, trusts are still a useful estate planning tool in many situations. We have assisted numerous clients in using trusts as a part of their basic estate plan. If you have need of any type of a trust as part of your estate plan, we can help you too!

Our experienced Estate Planning team of attorneys can help you and your family with your Idaho estate plan or with your probate needs. Whether you are seeking your own customized Estate Plan or need a Probate for a loved one who has passed, we are available to discuss your options and answer your questions at an initial consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a consultation with the Racine Olson team. You can also email us directly at racine@racinelaw.net. We will answer your questions and will help you solve your Idaho Estate Planning and Probate problems.