For many families in Michigan, a summer home on the lake holds memories of swimming, laughter, bonfires and boat rides. Keeping this home in the family for the enjoyment of future generations can be challenging. At Hubbard Snitchler & Parzianello, PLC, we often help clients protect their assets with the appropriate estate planning tools.
According to Forbes, many families gift assets to younger generations via trust. It offers tax planning, asset protection and the ability to maintain control until the beneficiary reaches adulthood. For those who wish to keep property in the family, dynasty trusts are often a preferred wealth transfer strategy. These trusts can last for multiple generations and offer unique benefits.
The Generation Skipping Transfer tax ensures that your grandchildren and later descendants cannot avoid transfer taxes. They must make the payments in addition to gift and estate taxes. However, a dynasty trust removes family assets from the transfer tax system for as long as it exists. The principal and income benefits each succeeding generation.
You can add another layer of tax benefit by structuring it as a grantor trust. It boosts the estate planning perks of the asset transfer as the grantor makes income tax payments, not the trust. There are two advantages to this addition. First, it reduces the benefactor’s overall estate, lowering estate taxes. Second, as the payments come from the estate, it preserves the trust assets.
There are many strategies available when implementing dynasty trusts. An estate planning attorney experienced in trusts and other tools can help you determine which option suits your specific needs. Visit our webpage for more information on this topic.