How business, doctors and journalists prey on your food anxieties I

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stroke, by Alzlteimer's, %'ou name it . One more big reason
to ha% e a trust . Without a trust, vour assets fail into the
control of the court . That's %N hat happened to Groucho
Marx uhea he was in his 80s . A legal battle bemeen his
compauion-secretan' <strong>and</strong> his son o\ 'er the management of
his assets \s,as finallv settled %shen a gr<strong>and</strong>son was appoinc
ed his personal conserator . Had he created a trust spelling
out conditions for a successor rrustee, he could have been
spared the embarrassment ofa public court proceeding .
Nash~ille artoraey b4ichel Kaplan has as client a 72-pearold
CPA <strong>and</strong> lifelong bachelor who is moving all ofhis assets
into a revocable trust . His client is the trustee, <strong>and</strong> three
nephews-all <strong>business</strong>men-are the successor trustees . If
nvo <strong>doctors</strong> declare the uncle mentally or physicallv
incapacitated, the nephews will step in .
The next most common trust is the Grpass trust . This is
the la%tcers' ansner to the estate tax laa enacted b•
Congress in 1981 . That law gives husb<strong>and</strong> <strong>and</strong> wife a
5600,000 exemption apiece for transfers to other heirs .
If ~ou are married <strong>and</strong> fairlr prosperous but not extremeh,
~cealthv, then the tbllowing strategy, as described
be Gideon Rothschild, the New York artornev, is probabl yright for }'otr
. First %'ou arrange your assets so that vou <strong>and</strong>
your spouse each ha\e at least 5600,000 to x -our names .
Then rou both ~rrite wills providing that the first
$600,000 goes into a bvpass trust <strong>and</strong> the remainder
outright to the other spouse .
Income goes to the sun°iving spouse during his or her
lifetime, after which principal goes to other heirs . The
sun'Mng spouse can also get at the principal under fairlv
liberal (but not unlimited) conditions .
Protect your heirs from needless
estate tax on your life insurance .
Set up a trust to buy the policy .
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Inflation has made the tax problems of the
wealthy into the tax problems of the upper
middle class . Trusts help solve the problems .
Example : You <strong>and</strong> your husb<strong>and</strong> have S2 million <strong>and</strong>
can live on the income . You neglect to set up trusts . Your
mate dies first <strong>and</strong> you get all the assets outright . No estate
tax is due then, but when you die the children have to pay
estate tax on all but the 5600,000 protected by your own
eNemption ; your husb<strong>and</strong>'s exemption went to waste .
W ith a bypass trust, however, vour children would ha% e
the benefit of $1 .2 million in estate tax exemptions . After
aour husb<strong>and</strong>'s death, Vou would have the same incomethe
income from vour $1 .4 million held outright plus dte
income from the $600,000 trust . Then, when vou dic, the
kids would get the 52 million but oue estate tax on only
S800,000 . That's because the $600,000 sitting in the trust
(plus anv appreciation ) would bypass your estate .
You can create a b%,pass trust with a%~ ill . You can also
create one under the terms of a revocable liN ing trust .
Another popular item on the menu : a life insurance
trxist. You create one ifvou want heirs to collect insurance
on vour life estate tax free .
In the p'pical case, you pae the insurance premiums, but
keep the polinout of your estate by having the trust o«n
it . The premiums are subject to gift tax, but the gift tax
exclusion (510,000 per year per bcnetician,) enables vou
to bu , a fairly large polict' without owing tax .
The trust gets a little tricky . To avail yourself of the
510,000 exclusion, vou have to give each beneticiary' the
right every rear to grab his share of die premium as it's on
its way to the insurance compane . OFcourse, vou make it
clear that if he takes the cash, bad things cvill happen to
him . This little charade is callcd a Crummey provision, in
honor ofa tazpaver «ho beat the Internal Revenue Sen•ice
in a 1968 court case .
Next we have the charitable remainder trust-used bv
o rhrs . Au g LlS tl4 .lyy5
204G6-r3426 F
http://legacy.library.ucsf.edu/tid/agf97d00/pdf