Use of Trusts in New Jersey
for Gifting

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Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Trust Attorney

Gifting to a Trust makes a lot of sense

Gifting a Life Insurance Policy to an Irrevocable Life Insurance Trust as an Estate Planning Tool

In appropriate estate planning situations, use of an irrevocable trust can serve as a powerful New Jersey and Federal tax savings tool. Life insurance proceeds that are kept outside of the taxable estate through proper planning can provide liquidity to estate heirs for a host of purposes.

There are two ways that an irrevocable life insurance trust (ILIT) can be effectively implemented: (1) the trust can be established initially and the trustee can subsequently take out and own the life insurance policy on the insured individual, or (2) an existing, or in-force, life insurance policy can be transferred to the trust. However, in the latter case, the insured must survive the policy’s transfer to the trust by a period of three years or the insurance proceeds will be included in his or her gross estate for estate-tax purposes (IRC Sec. 2035).  This is tricky material.  Feel free to contact Fredrick P. Niemann, Esq. at fniemann@hnlawfirm.com or call him toll-free at (855) 376-5291 for a low cost consultation to better the use of Life Insurance Trusts.

Maximize Tax Free Gifting and Creditor Protection with the Use of a Trust

Grantor Trusts for Gifting as Part of NJ Estate Planning

An individual can also make tax-advantaged lifetime transfers to a loved one through a grantor trust.

A grantor retained annuity trust (GRAT) can be set up to pay the grantor a fixed annuity for a term of years. Thereafter, the remaining trust principal passes to the trust’s beneficiaries.

Then there is a GRIT (grantor retained interest trust (GRIT)) which differs from a GRAT in that, instead of paying a fixed annuity to the trust grantor, the grantor receives all the trust’s annual accounting income.  At the end of the term, the remainderman receives the remaining trust property.

Using a Trust in New Jersey as a Charitable Gifting Strategy

Lifetime gifting or testamentary transfers of property to a qualified charity are two types of strategies used commonly in the estate planning of a donor’s assets. Charitable gifts or charitable testamentary transfers can achieve a number of objectives. The most common reasons for gifting property to a qualified charity include the following:

  1. The satisfaction of knowing the charity will enjoy and benefit from the property.
  2. Lifetime gifts of appreciating property to a qualified charity remove all future appreciation of the property from your gross estate.
  3. Thereby preventing the donor’s estate tax liability from increasing.
  4. Lifetime gifts of income-producing property can reduce your income tax liability.
  5. You can reduce gift tax liability or avoid gift tax liability altogether by making lifetime gifts to a qualified charity.

If you want to reduce estate, gift, and income taxes, you can establish an estate plan that combines both lifetime gifts and testamentary gifts. Testamentary gifts to qualified charities can reduce or avoid estate tax liability. A careful examination of both types of techniques can maximize tax savings in all three areas. Before making gifts to qualified charities as part of your estate plan, a qualified New Jersey estate planning attorney needs to analyze your financial position to determine whether you can afford to make a gift to a donee charity.

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—Teresa Vincitore, West Paterson, NJ

Conclusion

Fredrick P. Niemann, Esq., NJ Trust Attorney

Fredrick P. Niemann, Esq., NJ Trust Attorney

A single individual who has a taxable estate needs to look beyond the common solutions that are appropriate for a married person; the same applies to a married person. The use of various gifting techniques can help a client accomplish estate goals, while minimizing exposure to transfer taxes.

If you should have additional questions, Contact Fredrick P. Niemann, Esq.

by email at fniemann@hnlawfirm.com or call him toll-free at
(855) 376-5291