Planning Potpourri

Trusts, LLCs and Tax ID Numbers: Every trust or entity has to have a tax identification. Every time you open a bank account, or engage in almost any transaction, you're going to be asked for a tax identification number. Make life easier for everyone. Have the tax identification number typed on the front page of the trust and the front page of any operating agreement when the documents are originally drafted. This simple step will save hours of time and aggravation of having to look for the right tax ID number since it will always be readily available.


Help Grankids and Charity:

Combine charitable planning with planning for your grandchildren to avoid the harsh impact of the GST tax, while providing for education and medical expenses for your descendants. If you intended to make charitable gifts anyhow, there is no real incremental cost to this planning. You'd be leveraging your charitable gift to help avoid tax on transfers to benefit your grandkids. Assume you have a large taxable estate and want to pass wealth to grandkids, and in particular provide for the medical care of a grandchild struggling with multiple sclerosis and benefit the National Multiple Sclerosis Society (NMSS) under your will. If you combine charitable and GST planning techniques together you can accomplish both of your goals better, and without allocating GST exemption.  Direct payments of tuition or medical expenses are not subject to gift tax (IRC 2503(e)) and are not treated as taxable distribution from a trust for GST purposes (IRC 2611(b)). If these are the only distributions you make from the trust, then there are no taxable distributions. You cannot just set up a trust to fund education and medical costs of your grandkids, because if you do the trust itself will be characterized as a "skip persons" for GST tax purposes and a GST tax may be triggered when you transfer assets to the trust initially (fund). This transfer would be a direct skip for GST purposes.  Instead, give an interest in the trust to your favorite charity (which is a non-skip person that won't ever die). Thus, there is no GST tax on funding the trust. Name a specified charity (don't leave it open for the trustee to name a charity). After your death 25% of trust income would be distributed to your favorite charitable, say the NMSS. Your trustee has the discretion to pay medical and tuition expenses for your descendants forever.

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