Virginia Beach Trusts Attorneys

Irrevocable Life Insurance Trusts

People are often under the assumption that life insurance proceeds are not subject to Federal Estate Taxes. Although the proceeds loved ones receive are free of income taxes, they are countable as part of the decedent's taxable estate. Therefore, the loved ones who receive the life insurance funds can end up losing as much as half of the policy's value to estate taxes. 
However, if you create an Irrevocable Life Insurance Trust (ILIT), you can own your life insurance policy. A properly established and administered trust holds the policy outside of your estate and keeps the proceeds from being taxable to your estate.

The proceeds from the insurance policy can then be used to provide your estate with the liquidity to:

• Pay estate taxes
• Pay off debts
• Pay final expenses
• Provide income to a surviving spouse or children

The ILIT will be the policy owner and beneficiary. After you establish the trust, you can use your annual gift tax exclusion to make cash gifts to your trust. With this strategy, beneficiaries forgo the present gift, and the trustee uses the remaining gift to pay the premium on the life insurance policy. ILITs can also be structured to provide income to a surviving spouse, with the remainder going to children from a previous marriage. You can even set up an ILIT to distribute a limited amount of the insurance proceeds over some time if you are worried your child might be financially irresponsible.

Special Needs Trusts

Special needs trusts are set up to provide financial support to a beneficiary with special needs while still preserving eligibility for government assistance programs such as Social Security and Medicaid.

Do you have a special needs individual in your life? If so, you should contact our legal team to discuss adding a special needs trust so that you can leave property to this individual. If the special individual receives government benefits and suddenly inherits money, they would likely be disqualified from those benefits until the inheritance is spent. Special needs trusts protect those individuals’ government benefits while allowing them to have money for any extras they may need.

Qualified Personal Residence Trusts

A Qualified Personal Residence Trust (QPRT) allows you to give away your house or vacation home at a significant discount, freeze its value for estate tax purposes, and continue to live in it.

With a QPRT, You transfer the title to your house to the trust while reserving the right to live in the house for a specified number of years. After you live in the home for a set amount, it will pass on to your children or other beneficiaries without incurring additional estate or gift taxes.

You can continue living in the home at the end of the specified period. Still, you will have to pay rent to your family or designated beneficiary to avoid including the residence in your estate. The benefit of this trust is that it can reduce the value of your taxable estate, though the rent income does have income tax consequences for your family.

Another benefit of the QPRT is that it also serves as an excellent asset/creditor protection vehicle since you no longer technically own the property once the trust is established. Your residence is transferred to the QPRT.

Trusts for Minors

Clients throughout Virginia Beach turn to our skilled attorneys to devise comprehensive strategies to leave money to their children or grandchildren in a trust. This is typically done to ensure the money will be there for the children’s benefit, such as support, education, medical expenses, etc. Once the children reach a certain age or achievement level (such as obtaining a bachelor’s degree), they can take money out of the trust to do as they please.

Spendthrift Trusts

Finally, spendthrift trusts are designed to protect the beneficiary's inheritance from creditors by providing limits on how much money they can access at any given time. This type of trust is often used to provide financial security for those who are unable to manage their own finances. Spendthrift beliefs have an independent trustee who has complete control over the distribution of assets held in the trust.

Do I Need a Trust If I Have a Will?

While a trust can provide extensive protection, it is still a good idea to include a will as a part of your estate plan.

A will can cover things not included in a trust, such as designating guardians for minor children. Your will can specify someone you trust to raise your children.

Another reason to have a will is to cover any property not under a trust. You may have yet to transfer all property into a trust or may have acquired property shortly before you pass away - a will can cover all your bases to ensure that property is transferred to your rightful beneficiaries.