Las Vegas residents with an interest in estate planning issues may be interested in an article detailing one method for updating a trust after it has become irrevocable. This method may have tax consequences, good or bad, so professional guidance should be sought.
Generally, it is recommended that estate planning vehicles, like trusts, be periodically reviewed by an attorney. This helps to ensure that the estate plan is up to date with current estate and tax laws. When a trust is out of date with the latest legal estate planning methods but has been made irrevocable, there may still be a way to make changes to it. Using a technique that attorneys call “decanting,” the old trust’s assets are poured into a new trust. This allows the old trust to take advantage of updated terms in the new trust.
This technique is only available in certain states, such as Nevada and Tennessee, so the new trust would have to be formed in one of those jurisdictions. State law may impose limitations on the decanting process, but some are very flexible in what they allow. Another thing to watch out for is the tax consequences of decanting a trust. One situation arises when the new trust is formed in a different jurisdiction. This could expose those assets to federal estate taxation a second time. However, these consequences may actually help the trust beneficiary’s tax situation in many cases. It is important to understand these implications before moving forward.
In order to do so, a trust planning attorney may be very helpful. The attorney may be able to examine the person’s estate plan and make recommendations accordingly. The attorney might then be able to draft or update the appropriate documents in order to minimize taxes and help ensure proper trust administration.