Georgia residents who have put off drafting an estate plan may now be thinking about taking action due to the estate tax reforms being proposed by several leading political figures. Senators Bernie Sanders and Elizabeth Warren both support slashing exemptions to pay for programs that would expand health care, forgive student loan debt and fund infrastructure projects, which has prompted many people who do not think of themselves as rich to start worrying about estate taxes.
The current estate tax exemption is $11.4 million, but it would be lowered to just $1 million under some of the proposed reform plans. Placing assets into an irrevocable trust limits estate tax exposure, and it may be a prudent step to take even if exemptions are not reduced. This is because trusts do far more than protect against taxes.
Assets placed into an irrevocable trust are no longer owned by the grantor, which means that they are out of the reach of the grantor’s creditors. This could be a particularly valuable benefit for doctors or other professionals worried about malpractice lawsuits. Domestic asset protection trusts are becoming increasingly popular because they allow grantors to access assets that have been placed into them, but they are not currently available in Georgia. However, Georgia residents can enjoy this benefit by setting up a DAPT in one of the 17 states where they are permitted.
Attorneys with estate planning experience might recommend using trusts for several reasons. Trusts provide grantors with a great deal of control over how their assets are distributed, which could be a valuable benefit if heirs have been financially irresponsible in the past or are struggling with drug or alcohol problems. Trusts may also motivate heirs to succeed by linking disbursements to accomplishments like graduating from college or serving the community.
Source: Forbes, Georgia Governor Vetoes Domestic Asset Protection Trust Legislation, Jay Adkisson, May 13, 2018