Many families took advantage of the new estate tax laws last year and put significant amounts of money into trust for their children or heirs. The trusts were created where the child or heir would not have to pay taxes on the sums because the taxes were paid up front. Some Maryland parents are now worried that their children or heirs will be negatively affected by suddenly inheriting such a large tax-free lump sum payment in a trust.
Under the new estate tax laws, a couple can put up to $10.5 million into trust for their children or heirs. The funds are then released tax-free when the trust matures. The amount of money shielded in trust is more than many estate planners and wealthy individuals had anticipated.
In the process of taking advantage of this opportunity, some parents are seeking new ways to protect both their money and their heirs. To prevent the heirs from just loafing while they wait to inherit their money, some parents are putting the funds in a 'quiet' trust. The heir will only find out that they have inherited the funds when they reach the age or time of inheritance, rather than knowing all along about the inheritance.
There are other routes that parents or grantors can choose to protect their children or heirs, including preparing them to inherit through education. The funds may be gifted into trust during a parent or grantor's lifetime. This can give a parent the opportunity to educate their children or heirs about how to manage large sums of money while the parent is still around. In any case, individuals and couples in Maryland now have more ways to leave their money to heirs and protect their interests.
Source: The Wall Street Journal, "Can You Trust Your Kid With $5.25 Million?" Kelly Greene and Arden Dale, Jan. 18, 2013