How to Create an Estate Plan that can be Quickly Modified

Market value and tax laws are the things that never stay consistent. Hence, you also need to be prepared to amend your estate plan according to the variations.

Talking specifically about the COVID era, we have experienced and are still experiencing uncertainty in politics and markets. To help you with the current circumstances, this article reviews the tips and strategies you need to accommodate changing market valuation and tax laws.

#1 Intentionally Defective Irrevocable Grantor Trusts

Intentionally defective grantor trusts are considered grantor trusts with intentional flaws to make the trust creators pay income taxes continuously. These can be utilized to lower estate taxes.

Here is how it works. The grantor is the one who creates the trust and then passes the investment assets to the trust. They retain the power to reacquire the assets by substituting the other property of similar value.

The grantor has to pay income tax on increasing the trust’s value and gift tax on the transfer.

#2 Jurisdiction with Favorable Modification Rules

If your estate has connections to multiple states, it is better to choose the most advantageous jurisdiction for you to incorporate modifications.

Under most jurisdictions, if you are the creator of the trust, you are required to obtain the written consent from all the trust beneficiaries to make modifications. 

If one of the beneficiaries does not consent to the changes, passes away, or becomes incompetent, it becomes impossible for you to make any amends.

#3 Substitution Clause in Terms of Trusts

Considering the trust has a clause allowing the grantor to substitute the assets with other assets of similar value, the trust will be categorized as a grantor trust.

Grantor will possess this “swap” power without acquiring consent from anyone else.

If you need further assistance in this regard, experienced estate planning can help you. Contact Keystone Estate Planning and Asset Protection and decide the best for yourself.