Wealth Planning—Trusts

Wealth Planning Trusts are often designed to minimize future taxes. For 2025, the exemption amounts are $13,990,000 ( $27,980,000 for married).  Absent further congressional action this year, the exemptions will revert to their 2017 levels (adjusted for inflation) in 2026. The marginal tax rate for all three taxes remains at 40%. Also beginning in 2025, annual gifts of up to $19,000 per person also are excluded from gift tax.

Types of Wealth Planning Trusts include:

Asset Protection Trust

An irrevocable trust designed to protect your assets from creditors. Often established in an offshore jurisdiction, the asset protection trust allows confidential asset ownership and acts as a deterrent to litigation.

Generation-Skipping Transfer Trust (“GSTT” or “Dynasty Trust”)

Offers estate-tax savings to families looking to leave assets to future generations. If the children are financially secure, it makes sense to establish generation-skipping trusts for the grandchildren. While the children can sometimes access income from generation-skipping trusts, they do not own the assets, and therefore cannot lose them in a legal action. A generation-skipping trust is also a great way to pass on appreciating assets, and allow your grandchildren to reap the benefits.

Qualified Personal Residence Trust (“QPRT”)

An irrevocable trust to which you may transfer your home or second residence at a lower gift tax value. The property, including future appreciation, is no longer in the taxable estate, provided you survive the term specified in the QPRT.

Grantor Retained Annuity Trust (“GRAT”)

An irrevocable trust for a specific number of years. You may transfer assets to the GRAT, which makes an annuity payment back to you. At the end of the GRAT term, any remaining assets will be given to the named beneficiaries at a lower gift tax value due to the annuity.

Irrevocable Life Insurance Trust (“ILIT”)

A type of irrevocable trust that owns your life insurance policies, so the proceeds will not be taxable upon death.