trust situs for dynasty trusts & dapts - aicpa ?· trust situs for dynasty trusts & dapts...

Download Trust Situs for Dynasty Trusts & DAPTs - AICPA ?· Trust Situs for Dynasty Trusts & DAPTs Presented…

Post on 29-Jul-2018

212 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

  • Trust Situs for Dynasty Trusts

    & DAPTs

    Presented by:

    Steve Oshins, Esq., AEP (Distinguished)

    Eido Walny, Esq., AEP, EPLS

  • American Institute of CPAs Personal Financial Planning Section

    Introduction

    About the PFP Section & PFS Credential

    The AICPA PFP Section provides information,

    resources, advocacy and guidance for CPAs who

    specialize in providing estate, tax, retirement, risk

    management and investment planning advice to

    individuals and their closely held entities

    The CPA/Personal Financial Specialist (PFS)

    credential distinguishes CPAs as subject-matter

    experts who have demonstrated their financial

    planning knowledge through experience, education

    and testing

    2

  • American Institute of CPAs Personal Financial Planning Section

    Todays Speakers

    Steven J. Oshins, Esq., AEP (Distinguished)

    Law Offices of Oshins & Associates, LLC

    Eido M. Walny, Esq., AEP, EPLS

    Walny Legal Group LLC

    3

    http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=fWkgNTdqLCpHHM&tbnid=_8thmsPnYFM85M:&ved=0CAUQjRw&url=http://photographyatelier.zenfolio.com/&ei=SR-BUoWBCIfI4APgiYGYDw&bvm=bv.56146854,d.dmg&psig=AFQjCNGcGmiCeoskYllN9EKaBRfMgdt4YQ&ust=1384280254926369

  • American Institute of CPAs Personal Financial Planning Section

    Dynasty Trust

    The Dynasty Trust should be the centerpiece of nearly EVERY

    estate plan!

    4

  • American Institute of CPAs Personal Financial Planning Section

    Staggered Distribution Trust

    Nearly every trust you see from most every law firm

    is drafted as a staggered distribution trust

    A staggered distribution trust is a trust that makes

    mandatory distributions to the beneficiary at

    staggered ages (i.e., 25/30/35)

    This subjects the trust assets to potential estate

    taxes, creditors and divorcing spouses

    5

  • American Institute of CPAs Personal Financial Planning Section

    Staggered Distribution Trust

    Ask yourself: How much are we really helping our

    clients by executing trusts this way?

    Are we creating maximum benefits?

    Are we kicking problems down the road?

    Is there a better way? Yes.

    6

  • American Institute of CPAs Personal Financial Planning Section

    Beneficiary Controlled Trust

    Rather than make mandatory staggered

    distributions, why not just pick an age to give the

    beneficiary control?

    Very few attorneys understand this which is why

    nearly every trust has the same drafting error

    Once the client understands that the trust can be

    drafted as a beneficiary controlled trust, there is no

    reason to ever terminate the trust

    7

  • American Institute of CPAs Personal Financial Planning Section

    Dynasty Trust

    A Dynasty Trust is an irrevocable trust that is not

    subject to estate taxes for as long as state law

    allows

    It can also be drafted to be protected from creditors

    and divorcing spouses

    Rule against perpetuities limitations

    8

  • American Institute of CPAs Personal Financial Planning Section

    Pot Trust

    for Descendants

    Child #1

    Child #2

    Child #3

    Staggered Distribution Trust

    Distributes at 25, 30 and 35 Distributions at 25, 30 and 35 Distributions at 25, 30 and 35

    9

  • American Institute of CPAs Personal Financial Planning Section

    Pot Trust

    for Descendants

    Child #1

    Child #2

    Child #3

    Grandchild #1

    Grandchild #2

    Grandchild #3

    Grandchild #4

    Grandchild #5

    Grandchild #6

    Dynasty Trust

    10

  • American Institute of CPAs Personal Financial Planning Section

    $1 Million Example: Dynasty Trust vs. 40%

    Estate Tax every 30 Years

    After-Tax Growth

    Value of Dynasty Trust

    After 120 Years

    Value of Property

    if No Trust

    3.00% $34,710,987 $4,498,544

    4.00% $110,662,561 $14,341,868

    5.00% $348,911,561 $45,218,993

    6.00% $1,088,187,748 $141,029,132

    7.00% $3,357,788,383 $435,169,374

    8.00% $10,252,992,943 $1,328,787,885

    9.00% $30,987,015,749 $4,015,917,241

    10.00% $92,709,068,818 $12,015,095,319

    11

  • American Institute of CPAs Personal Financial Planning Section

    $1 Million Example: Two-Generation Trust

    vs. 50% Estate Tax in 30 Years

    Simple example Just two generations

    Assume 7.2% after-tax growth

    Rule of 72 Doubles every 10 years

    Results

    With trust = $8M to grandchild

    Outright = $4M to grandchild / $4M to IRS

    12

  • American Institute of CPAs Personal Financial Planning Section

    Key Dynasty Trust States

    Characteristics

    Term

    Taxes

    3rd Party Spendthrift Protections

    DAPT Status

    13

  • American Institute of CPAs Personal Financial Planning Section

    Key Dynasty Trust States

    (in alphabetical order)

    Alaska

    Delaware

    Nevada

    New Hampshire

    Ohio

    South Dakota

    Tennessee

    Wyoming

    14

  • American Institute of CPAs Personal Financial Planning Section

    Key Dynasty Trust States

    Perpetuities

    The leading Dynasty Trust states either allow

    perpetual trusts or allow trusts to last significantly

    longer than the traditional rule against perpetuities

    will allows

    15

  • American Institute of CPAs Personal Financial Planning Section

    Key Dynasty Trust States

    Perpetuities

    Alaska- Perpetual (1,000 if exercise POA)

    Delaware- Perpetual for personal property / 110

    years for real estate

    Nevada- 365 years

    New Hampshire- Perpetual

    Ohio- Perpetual

    South Dakota- Perpetual

    Tennessee- 360 years

    Wyoming- 1,000 years

    16

  • American Institute of CPAs Personal Financial Planning Section

    Which Would You Rather?

    Option 1: Staggered

    Distribution Trust

    Benefits of the trust last

    less than 1 generation

    17

  • American Institute of CPAs Personal Financial Planning Section

    Which Would You Rather?

    Option 2: Dynastic

    Trust

    Benefits of trust to last

    dozens of generations - up

    to forever

    18

  • American Institute of CPAs Personal Financial Planning Section

    Key Dynasty Trust States

    State Income Tax

    The leading Dynasty Trust states dont have a

    fiduciary income tax (or dont apply it to trusts set

    up by an out-of-state settlor)

    19

  • American Institute of CPAs Personal Financial Planning Section

    Key Dynasty Trust States

    State Income Tax

    Alaska- None

    Delaware- None (except residents)

    Nevada- None

    New Hampshire- None (except dividends, interest on

    residents)

    Ohio- None (except residents)

    South Dakota- None

    Tennessee- None (except dividends, interest on

    residents)

    Wyoming- None

    20

  • American Institute of CPAs Personal Financial Planning Section

    Key Dynasty Trust States

    Third-Party Spendthrift Trust Protection

    Divorcing Spouse/Child Support

    The leading Dynasty Trust states have spendthrift

    trust laws protecting third-party trusts from

    Divorcing spouses

    Child support

    Many states make exceptions by statute or by case

    law

    Discretionary trusts vs. Support trusts

    21

  • American Institute of CPAs Personal Financial Planning Section

    Key Dynasty Trust States

    Third-Party Spendthrift Trust Protection

    Divorcing Spouse/Child Support

    Alaska- Protected

    Delaware- Not protected from either (by case law)

    Nevada- Protected

    New Hampshire- Not protected from either (by

    statute)

    Ohio- Not protected from child support (by statute)

    South Dakota- Protected

    Tennessee- Protected

    Wyoming- Not protected from child support (by

    statute)

    22

  • American Institute of CPAs Personal Financial Planning Section

    Which Would You Rather?

    Option 1: Staggered

    Distribution Trust

    Spendthrift protections lost

    incrementally until age 35,

    then no protection.

    23

  • American Institute of CPAs Personal Financial Planning Section

    Which Would You Rather?

    Option 2: Dynastic Trust

    Spendthrift protection to last

    dozens of generations - up to

    forever

    24

  • American Institute of CPAs Personal Financial Planning Section

    Key Dynasty Trust States

    DAPT State Ranking

    The leading Dynasty Trust states also have

    favorable Domestic Asset Protection Trust

    legislation

    Many trusts include the settlor as a discretionary beneficiary (or

    give a Trust Protector the power to add the settlor in as a

    discretionary beneficiary)

    25

  • American Institute of CPAs Personal Financial Planning Section

    Overall Dynasty Trust State Rankings

    (as of Oct. 2013)

    South Dakota- #1

    Alaska- #2 (tie)

    Nevada- #2 (tie)

    Tennessee- #4

    Ohio- #5

    Wyoming- #6

    Delaware- #7

    New Hampshire- #8

    26

  • Amer