What Taxes are Due if I Gift My Home to my Child?

It’s not unusual for a senior to consider gifting their home to a married child or to a grandchild. However, there are tax consequences to consider before you do this.

nj.com’s recent article on this subject asks “What should I know about taxes before I gift my home?” The article explains that you can gift your home or any other asset to anyone, provided that person is capable of receiving the gift and takes delivery or ownership of it. However, if the grandchild is a minor, the gift would have to be made either in trust with a trustee or through a Uniform Transfers to Minors Act (UTMA) account that has a custodian, until they attain the age of majority.

The federal government has a gift tax, but not everyone will be subject to the tax. That’s because each year, you can give anyone up to a $15,000 gift tax-free. If you’re married, you and your spouse could each make those gifts, totaling $30,000 per year, per recipient without any gift tax.

Gifts to an individual more than $15,000 per year that aren’t under an exclusion or exemption are subject to federal gift tax. As a result, you must file a federal gift tax return on IRS Form 709. However, it’s not likely that you’ll actually have to pay any gift tax, even though you have to file a return. The reason is that under the federal unified estate and gift tax system, each person has a lifetime exclusion from gift and estate taxes of $11.4 million, over and above the annual $15,000 per person gift tax exclusion. That number is doubled for married couples ($22.8 million). So, you can transfer up to $11.4 million, whether as a gift during your lifetime or as a bequest after your death, before any gift or estate taxes are actually due. Keep in mind, though, that if you make gifts that use up your $11.4 million exemption, that your exemption is reduced by that amount when your estate tax is calculated on your death.

In addition, you can make unlimited gifts to qualified charities without any gift tax consequences. The same is true for gifts to spouses, as long as both spouses are U.S. citizens. Payments of tuition or medical expenses for someone else are also gift tax-free if they’re made directly to the school or the medical care provider.

As far as whether and how to gift your home, there are income tax considerations to consider. If you sell your home and have a capital gain, you may qualify to exclude up to $250,000 of that gain from your income. The exclusion is up to $500,000 if you’re married and file a joint return with your spouse. To qualify for the capital gains exclusion on the sale of your home, you are required to have owned the home and also used it as your principal residence for at least two of the previous five years.

For example, say that you purchased a home for $200,000 and made capital improvements in the amount of $50,000. Your basis in the home is now $250,000. If you sell that home for $500,000, then you will have a capital gain of $250,000 ($500,000 sale price minus $250,000 basis). However, as long as you qualify under IRS principal residence rules, you could exclude the entire $250,000 gain when you sell the residence and therefore have no tax bill to pay.

If you gift the house to a child or anyone else, in most instances, your $250,000 basis would carry over to the recipient. Your child and their spouse would then have a $250,000 basis in the house. If they live in it for two years, then they could have a capital gains exclusion of up to $500,000, as long as they file a joint return, if they then sell it.

If you want to stay in your home, one option is to leave it to your child or grandchild in your will, rather than gifting it now. If your child inherits the house, then their basis in the inherited house would then be its fair market value on the date of your death instead of your original $250,000. This increased basis in the home would decrease the amount of any future capital gains if the daughter subsequently sold the home.

Another option would be to sell the house now to a third party, leverage the capital gains tax exclusion and then gift the money, instead of the home itself, to your child.

The best financial outcome would depend on the individual financial circumstances, future plans, and income tax brackets of the parent and child. There are additional factors to consider, such as the age of the house, its location and condition, whether your child would use it as their primary residence or as a rental and whether you anticipate that the house will increase in value over time.

One final note: if you gift the house to a grandchild, the generation-skipping transfer tax (GSTT) would apply in addition to the gift tax. This is a separate tax system that applies when gifts or bequests are made to a person who is two or more generations below the person making the gift or bequest, like a grandchild or great-grandchild. However, many of the same exclusions that apply for gift tax purposes, also apply for GSTT purposes. So, the odds are you won’t have to pay any GSTT for this specific transfer.

Talk to an experienced estate planning attorney to help you find the best strategy for you and your family.

Reference: nj.com (October 28, 2019) “What should I know about taxes before I gift my home?”

What Estate Planning Do I Need with a New Baby?

Congratulations parent! You have a new baby. There’s a lot to think about, but there is a vital task that should be a priority. That is making an estate plan. People usually don’t worry about estate planning when they’re young, healthy and starting a new family. However, your new baby is depending on you to make decisions that will set them up for a secure future.

Motley Fool’s recent article, “If You’re a New Parent, Take These 4 Estate Planning Steps” says there are a few key estate planning steps that every parent should take to make certain they’ve protected their child, no matter what the future holds.

  1. Purchase Life Insurance. If a parent dies, life insurance will make sure there are funds available for the other spouse to keep providing for the children. If both parents die, life insurance can be used for a guardian to raise the child or to fund the cost of college. For most parents, term life insurance is used because the premiums are affordable, and the coverage will be in effect long enough for your child to grow to an adult.
  2. Draft a Will and Name a Guardian for your Children. For parents, the most important reason to make a will is to name a guardian for your children. If you designate a guardian, you can select the person that you think shares your values and who will do a good job raising your children. This way, it’s not left to a judge to make that selection. Do this as soon as your children are born.
  3. Update Beneficiaries. Your will should say what happens to most of your assets, but you probably have some accounts with a designated beneficiary, like a 401(k), IRA, or life insurance. When you have children, you’ll need to update the beneficiaries on these accounts for your children to inherit these assets as secondary beneficiaries, so they will inherit them in the event of your and your spouse’s death. Be careful, however, to designate a custodian to take care of those funds while your children are still minors.
  4. Look at a Trust. If you die prior to your children turning 18, they can’t directly take control of any inheritance you leave for them. This means that a judge may need to appoint someone to manage assets that you leave to your child. Your child could also wind up inheriting a lot of money and property free and clear at age 18. To have more control, like who will manage assets, how your money and property should be used for your children and when your children should directly receive a transfer of wealth, ask your estate planning attorney about creating a trust. With a trust, you can designate an individual who will manage money on behalf of your children and provide instructions for how the trustee can use the money to help care for your children, as they age. You can also create conditions on your children receiving a direct transfer of assets, such as requiring your children to reach age 21 or requiring them to use the money to cover college costs. Trusts are for anyone who wants more control over how their property will help their children after they’ve passed away.

When you have a new baby, working on your estate planning probably isn’t a big priority. However, it’s worth taking the time to talk to an attorney for the security of knowing your bundle of joy can still be provided for, in the event that the worst happens to you.

Reference: Motley Fool (September 28, 2019) “If You’re a New Parent, Take These 4 Estate Planning Steps”

The Biggest Estate Planning Errors

The Biggest Estate Planning Errors
Young woman making a mistake on a pink background

Nobody likes to plan for events like aging, incapacity, or death. However, failing to do so can cause families burdens and grief, thousands of dollars and hundreds of hours. Fox Business’ recent article, “Here are the top estate planning mistakes to avoid,” says that planning for life’s unexpected events is critical. However, it can often be a hard process to navigate. Let’s look at the top estate planning mistakes to avoid, according to industry experts:

1. Failing to have a will (or one that can be located). The biggest mistake is simply not having a will. Many people wait for “a more appropriate time” to put a will together. The truth is, we all need estate planning, no matter the amount of assets a person may have. In addition to having a will prepared and executed, it needs to be findable. The Wall Street Journal says that the biggest estate planning error is simply losing a will. Make sure your family has access to any estate planning documents you create.

2. Failing to name and update beneficiaries. An asset with a beneficiary designation supersedes any terms in a will. Review your 401(k), IRA, life insurance, and any other accounts with beneficiaries after any significant life event. If you don’t have the proper beneficiary designations, income tax on retirement accounts may have to be paid sooner and your heirs will have to pay a lump sum tax immediately. Without a life insurance policy, the proceeds will have to go through probate, which means they are subject to creditors’ claims.

Another mistake that impacts people with minor children is naming a guardian for minor children and then naming the guardian as the outright beneficiary of their life insurance. If money is left to the guardian, then the proceeds are now considered the assets of the guardian and do not transfer to the minors. The cash also now faces exposure to the creditors and spouse of the guardian named as a beneficiary Instead, parents should leave the money to a trust for the children and name the guardian, or another trusted and responsible person, as the trustee of the trust.

3. Failing to consider powers of attorney for adult children. When your children reach age 18, they’re adults in the eyes of the law. If something unfortunate happens to them, you may be left without any say in their treatment or even access to their medical records. In the event that an 18-year-old becomes ill or has an accident, a hospital won’t consult with their parents if a power of attorney for health care isn’t in place. Further, without a financial power of attorney, a parent may not be able to take care of bills, make investment decisions or pay taxes without the child’s signature. This could create an issue when your child is in college—especially if he or she is attending school abroad. It is very important that when your child turns 18 that you have powers of attorney put into place.

Reference: Fox Business (October 15, 2019) “Here are the top estate planning mistakes to avoid”

How Does the IRS Know if I Give My Grandchildren Money?

A recent nj.com recent post asks, “Will the IRS know if I gift money to my grandchildren?” The article explains that federal and state tax agencies do not have any direct way of knowing how much is being gifted. They rely on taxpayers self-reporting gifts. It’s the honor system.

However, the tax authorities may discover these transfers when you or the recipient are audited, by matching transactions reported for certain assets, or because banks are required to report cash transfers in excess of $10,000. Because it’s pretty simple to avoid paying gift tax, it doesn’t seem worth the risk of getting caught trying to skirt the rules. Understanding the gift tax and working within the system is the best way to avoid issues.

The IRS stipulates that a gift is “the transfer of property by one individual to another while receiving nothing, or less than full value, in return.” A gift is never taxable to the recipient, so only the person making the gift has to consider the gift tax.

The amount you can give will not be subject to gift tax if the gift amounts are less than the annual and lifetime exemptions. The annual gift exemption is currently $15,000 per recipient, which means that you can give up to $15,000 each year to an unlimited number of people with no reporting requirement at all.

You’re supposed to complete a U.S. Gift Tax Return (IRS Form 709) if you exceed the exemption, but don’t panic. Although you are required to file a gift tax return, it is highly unlikely any gift tax will be due. That’s because gifts in excess of the annual exemption must first offset your lifetime exemption before any gift tax is due.

Keep in mind, however, that the IRS can impose penalties if they discover that you failed to file a gift tax return, even if no gift tax was due. Also note that the gift tax is integrated with the estate tax, which applies to amounts transferred upon your death in excess of your remaining lifetime exemption.

If you’re planning on making a gift to help pay a grandchild’s college costs or medical expenses, make the payment directly to the educational or healthcare institution. By making the payment directly to the institution, that payment will not be considered a gift and will not go towards the $15,000 exemption and also will not decrease your lifetime exemption.

Ask your estate planning lawyer about any state gift, estate and inheritance tax implications for any significant transfers you want to make.

Reference: nj.com (October 1, 2019) “Will the IRS know if I gift money to my grandchildren?”

Why Are the Daughters of the Late Broncos Owner Contesting His Trust?

Beth Wallace and Amie Klemmer, the two oldest daughters of the late owner of the Denver Broncos, Pat Bowlen, filed a lawsuit in a Denver area court challenging the validity of their father’s trust. Specifically, they are arguing that their father didn’t have the mental capacity to properly execute documents and was under undue influence when he signed his estate planning documents in 2009, according to Colorado Public Radio’s recent article “Pat Bowlen’s Kids Are Still Fighting Over Inheritance As 2 Daughters File Lawsuit.”

Dan Reilly, a lawyer for the Patrick Bowlen Trust, said in a statement that it is “sad and unfortunate that Beth Bowlen Wallace and Amie Bowlen Klemmer have elected to contest their father’s plan and attack his personal health,” adding the lawsuit was the “latest effort in their public campaign to circumvent Pat Bowlen’s wishes.”

Bowlen died in June at age 75 after a long battle with Alzheimer’s. He put the trust in place hoping that one of his seven children would succeed him in running the Broncos, a team he purchased in 1984. In addition to the two daughters, he had with his first wife, Sally Parker, Pat Bowlen had five children (Patrick, Johnny, Brittany, Annabel, and Christianna) with his widow, Annabel.

Wallace said in 2018 that she wanted to succeed her father, but the trustees said she was “not capable or qualified.” Likewise, Brittany Bowlen said last fall that she wanted to become the next controlling owner of the Broncos team. She will become part of the team in November in a management position to begin that process.

Reilly said that Wallace and Klemmer never raised the issue of mental capacity until after 2014 “when Ms. Wallace was privately told by the trustees that she was not capable or qualified to serve as controlling owner.”

Last month, Arapahoe County Court Judge John E. Scipione dismissed a lawsuit filed by Bowlen’s brother, Bill. That suit that sought to oust team president and CEO Joe Ellis, team counsel Rich Slivka, and Denver lawyer Mary Kelley as trustees. Bill argued that they weren’t acting in good faith or in Pat’s best interests.

The judge ruled in a separate case over the trust that the court and not the NFL would decide the question of Pat’s mental capacity at the time he updated his estate planning documents 10 years ago.

The trust also has a no-contest clause. In electing to challenge the validity of the trust in court, Wallace and Klemmer are putting themselves at risk of being disinherited, if they’re found in violation of the no-contest clause, and the 2009 trust is upheld in court. Their rights as beneficiaries would bypass them and go to their children.

Reference: Colorado Public Radio (September 14, 2019) “Pat Bowlen’s Kids Are Still Fighting Over Inheritance As 2 Daughters File Lawsuit”

Can I Keep a Loved One’s Inheritance From Their Spouse?

A recent nj.com article asks, “How do I protect my niece’s inheritance from her husband?” The article asks about a scenario where someone plans to leave most of her estate to her niece but wants to keep the niece’s estranged husband from getting his hands on the money. Although the default laws may vary state by state, no matter where she resides, she must be proactive and intentional about her gifting to make sure the funds go where she intends them to go.

First, there are tax consequences to consider and keep in mind. In states like New Jersey, the money may be subject to the New Jersey inheritance tax, which is assessed if the decedent is a New Jersey resident, regardless of where the beneficiary resides. The tax is levied based on the relationship of the deceased to the beneficiary. In this case, the niece’s inheritance would be subject to an inheritance tax of 15 to 16%.

Next, the aunt needs to decide the manner in which she wants to leave the assets. One option is for the aunt to leave the assets to the niece outright.

The laws in many states, like Missouri, South Carolina, and New Jersey, say that unless the parties otherwise agree, upon divorce there will be equitable distribution of their marital property. Marital property generally doesn’t include the property received by gift or inheritance, as long as that person didn’t commingle it (in other words, mix it up and combine it) with the marital property.

Because there will be no administrative costs, the most economical way to transfer the property to the niece is for the aunt to leave it to the niece in her will, with instructions for her to keep it separate and apart from her marital property. However, this may not be the best way to leave property to the niece, because once it is given to the niece, it is out of the aunt’s control and it may be mixed up with the marital property, in which case the niece’s husband may be able to have access to it.

If, however, the aunt leaves the inheritance in trust, she can make certain the property isn’t commingled with marital assets by drafting a trust that will keep it separate from the rest of the niece’s property. Further, if the trust is properly prepared by an experienced estate planning attorney, the income from the trust will likely not be used to decrease any spousal support to which the niece may otherwise be entitled from her spouse, in the event that they divorce down the road. The trust can also protect against other events, by instructing to whom funds should be paid upon the premature death of the niece. For instance, the trust can state specifically that the funds should then be held in trust for the niece’s children. That would further prevent her estranged husband from ever being able to make a claim against the funds.

If you are concerned about leaving property to someone you love, but that person is married to someone that you don’t, a trust can help you make sure that the inheritance goes to the actual person you want to receive it. Talk to an estate planning attorney who can provide you with some options.

Reference: nj.com (August 21, 2019) “How do I protect my niece’s inheritance from her husband?”

What Do I Need to Do Financially, When We Have a Baby?

In addition to all the logistics involved with a new baby, new parents should also take care of financial and legal matters in the months leading up to the big day.

U.S. News & World Report’s recent article, “Financial Steps to Take When You’re Pregnant” reminds us that pregnancy is a terrific time to review your financial life. It’s a great time to assess your budget, emergency savings, estate planning documents, and insurance needs to see if anything needs to be refreshed.

Here are a few things to do to prepare for a new baby:

Employee Benefits. Take a look at your employee benefits or have a conversation with HR to determine how much time you can take off and whether you’ll be paid your salary while on parental leave. This is important because many families are faced with higher living costs by the presence of a new baby, which is often combined with taking parental leave that may cut their take-home pay. New parents may have to use the Family and Medical Leave Act (FMLA), which offers eligible employees 12 weeks of unpaid leave, or tap into short-term disability insurance, which typically only replaces a portion of your salary. The amount you receive in short-term disability will also be impacted by whether you pay premiums with pre-tax or post-tax dollars. If you pay with pretax, your benefit will be subject to taxes, which will decrease the overall amount received.

While reviewing these policies, look at your health insurance and see what kind of prenatal visits and pediatric care are covered. You should also look at the terms of your health insurance policy since you could be liable for health insurance premiums during periods where you are taking leave from work. Also, remember that you’ll need to add your baby to your medical insurance within 30 days of the birth.

Budget. Create a new budget that takes into account changes in your income from taking leave and new expenses from having a new baby. You may have to survive several weeks without your normal level of income, so be sure that you have enough saved up to get through that period. After that, create another budget that considers more long-term expenses associated with the new one, such as the cost of childcare, diapers, and formula, all of which can add up.

Life Insurance. Determine if your current life insurance will meet your needs. If you need more, look at term life insurance. It’s usually affordable and expires after a set term, typically anywhere from 10 to 30 years. This policy payout would help a surviving parent or guardian care for your child.

Estate Planning. Consider who would care for your child if both parents were to die before they turn 18. Talk to family or close friends about who you’d like as the guardian of the child. Talk to an estate planning attorney to update (or create) a will and guardianship choices. In addition, ask about formulating a plan for how inheritance, insurance, and other assets will be handled and disbursed if you die while the child is a minor. A revocable living trust can be one way to direct a future inheritance. You can designate your child as the beneficiary and a relative or close friend as the trustee. The trustee will help decide how the money is spent. This trust is usually included in the will and activates after the death of the person who created it.

Beneficiary Designations. Update any beneficiary designations on your retirement and insurance accounts to include your child, but make sure and ask about meeting requirements for how minors can own property.

529 College Savings Account. You should also look into funding a 529 college savings account but don’t feel pressure to contribute a lot. Making certain that your budget, estate, and insurance needs are tailored to meet your new family dynamic are more pressing concerns.

Reference: U.S. News & World Report (August 29, 2019) “Financial Steps to Take When You’re Pregnant”

What is the Latest With the Fight Over John Steinbeck’s Estate?

A three-judge panel of the Ninth U.S. Circuit Court of Appeals will be in Anchorage, Alaska to hear arguments in an appeal by the estate of Steinbeck’s late son Thomas over a 2017 jury verdict that took place in California. There, a federal jury awarded the author’s stepdaughter Waverly Scott Kaffaga $13 million. She claimed that Steinbeck’s son and daughter-in-law, Gail Steinbeck, hampered motion picture adaptations of his iconic works. A jury in Los Angeles was asked to decide if Thomas and Gail Steinbeck interfered with deals and should pay. Kaffaga sued her stepbrother, his widow, Gail, and their company.

AP News published a story last week, “Judges to hear appeal in lawsuit over John Steinbeck works,” reporting that Attorney Matthew Dowd, who represents the Thomas Steinbeck estate, said part of the appeal claims that the 1983 agreement was in violation of a 1976 change to copyright law that gave artists or their blood relatives the right to terminate copyright deals. The appeal also disputes the jury award, maintaining it was not supported by “substantial evidence.”

Kaffaga, who is the executor for the estate of her mother, Elaine Steinbeck, the author’s widow and third wife, had alleged that long-running litigation over the author’s estate kept her from making the most of his work, when big names like Steven Spielberg and Jennifer Lawrence wanted to bring the classics, “The Grapes of Wrath” and “East of Eden,” back to the screen. Kaffaga said the movie deals instead fell apart over the years.

Kaffaga claimed that Thomas secretly signed a $650,000 deal with DreamWorks to be an executive producer on a remake of “The Grapes of Wrath,” that originally starred Henry Fonda and won two Oscars. She also said that Gail learned of projects that Kaffaga was involved in and threatened moviemakers, arguing she and her husband possessed the legal rights to the novels. Attorney Dowd said Thomas, who died in 2016, conveyed his intention to exercise those rights, prompting Kaffaga to claim a contract breach. He said Thomas was within his right to do so under the 1976 “termination rights” clause.

In the same action, a judge ruled the couple breached a contract between Kaffaga’s late mother, Thomas Steinbeck, and his late brother, John Steinbeck IV. The brothers’ mother was the author’s second wife, Gwyndolyn Conger.

“We would like the court to rule that the 1983 Agreement violates the statute and, therefore, cannot prevent the heirs from exercising their termination rights,” Dowd said. “Relatedly, we are asking for a new trial and that the damages awards be vacated because they are too speculative and there is no legal basis for awarding punitive damages under California law.”

Kaffaga’s attorney, Susan Kohlmann, argues on appeal that several courts have already upheld the contract as legally binding. The agreement, which resolved earlier litigation, gives Elaine’s estate the “exclusive power and authority to control the exploitation and termination” of some of Steinbeck’s works, in exchange for the sons getting a greater piece of domestic royalties.

Even so, the attorney wrote that “Appellants again seek to hijack this lawsuit and use it as a mechanism to relitigate the issue of the validity of the 1983 agreement, by arguing that it is an ‘agreement to the contrary’ under the Copyright Act.”

“The District Court properly excluded such argument, evidence, and testimony that sought to undermine the holdings of multiple courts confirming the validity of the 1983 agreement,” they argued.

The lawsuit comes after decades of fighting and litigation between Thomas and Kaffaga’s mother over control of the author’s works. Thomas lost most of the court battles, including a lawsuit he and the daughter of his late brother, John Steinbeck IV, brought that made Kaffaga countersue in the case being appealed.

Reference: AP News (August 5, 2019) “Judges to hear appeal in lawsuit over John Steinbeck works”

How Do I Correctly Title My Property for My Estate Plan?

The way you title your real and personal property and who you name as your beneficiaries is just as important in your estate planning as your trust says The Black Hills Pioneer’s recent article, “Titling of property is just as important as your Will or Trust.”

There are some kinds of property that, depending on how they are titled or who’s the named beneficiary, will flow outside of the control of your trust.

For instance, if you designate a beneficiary to your life insurance policy or on your retirement account, that money goes directly to the named beneficiary at your death. This process completely bypasses the terms of your trust unless you named your estate or trust specifically as the beneficiary.

Beneficiaries show up on other types of accounts as well. You could designate another person as payable on death (POD) designee or transfer on death (TOD) designee on your investment account or your bank account. These types of accounts also transfer automatically to the named designee and similarly is not controlled by your trust if your trust is not the designee.

This principle applies to real property too. If title to real estate is taken in a certain manner, then jointly owned real estate would automatically flow to the surviving joint owner, not pursuant to your trust. Generally, if language lists multiple individuals on the property as “joint tenants with rights of survivorship,” then the survivor(s) will automatically inherit the decedent owner’s share. Keep in mind, however, that this isn’t automatic just because the property is owned jointly, rather it depends on how the property is titled.

You can, therefore, see how critical it is that you discuss these issues with your estate planning attorney. In addition to questions about trusts, you should also be discussing the titling of your property and the beneficiaries you’ve named on your life insurance and retirement accounts, along with any POD and TOD designees you’ve named on your investment accounts or bank accounts.

If you don’t, you could create problems for your family and loved ones.

Reference: Black Hills Pioneer (August 5, 2019) “Titling of property is just as important as your Will or Trust”

Do I Need a Spendthrift Trust for a Relative?

Newsday’s recent article, “What to consider when creating a ‘spendthrift’ trust,” explains that a spendthrift trust can protect people from themselves. In particular, it can be great protection for those with an issue with drugs, alcohol, gambling or even a person who’s married to a wild spender.

A spendthrift trust—also called an “asset protection trust”—gives an independent trustee the power to make decisions as on how to spend the funds in the trust. The beneficiary might get trust benefits as regular payments or need to ask permission from the trustee to access funds at certain times.

A spendthrift trust is a kind of property control trust that restricts the beneficiary’s access to the money that a beneficiary might otherwise be able to access at his or her own will. This restriction protects trust property from a beneficiary who might waste the money, and also protects against collections by any of the beneficiary’s creditors.

Remember these other items about asset protection trusts:

  • Be sure that you understand the tax ramifications of a spendthrift trust.
  • If the trust is the beneficiary of retirement accounts, the trust must be designed to have the RMDs (required minimum distributions), at a minimum, flow through the trust down to the beneficiary.
  • If the trust accumulates the income, it could be taxable. In that case, the trust would have to pay the tax at a trust tax rate. That’s substantially higher than an individual rate.

It’s critical that you choose your trustee carefully. You may even think about going with a professional corporate trustee. If the wrong trustee is selected, he or she could keep the money from the beneficiary, even when the beneficiary legitimately needs it. If you have someone that you are thinking of taking care of who also has spending issues, be sure to talk to an estate planning attorney about creating a spendthrift trust.

Reference: Newsday (June 23, 2019) “What to consider when creating a ‘spendthrift’ trust”