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Can You Alter an Irrevocable Trust?

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Here in Massachusetts, smart estate planning requires the guidance of a Massachusetts estate  & trust administration attorney to help you create the documents you’ll need. Keep reading to learn the basics about Trusts, how they work, and why you likely should create a Trust as part of your estate plan. One common question is, “can an irrevocable trust be changed?”

If you have loved ones who rely on you, now is not too early to start planning your estate. Put simply, estate planning is about making wise choices and putting those choices in binding legal documents to ensure that your instructions are adhered to faithfully at the time of your death.

Wills and Trusts are key estate planning documents that perform many of the same functions, but if you have assets or real estate holdings (that are worth roughly $100,000 to $200,000), a well-drafted and adequately funded Trust ensures that your assets and properties will be handled and distributed according to your wishes.

Eventually, all Trusts become irrevocable. A Trust is irrevocable when the Donor (the person who creates the Trust) is no longer able to amend it. Some Trusts are set up as irrevocable from the start. Others start out as revocable (meaning the Donor may alter, amend, or even cancel the Trust), but become irrevocable at the death of the Donor.

 

Whichever path you choose for your Trust, it is imperative that your Trust be flexible – able to adapt to changes in the law, changes in family circumstances, or changes in the way the Trust should be managed.

What is Modification by Consent?

It is possible for an Irrevocable Trust to be amended – just not by the Donor. Over the past decade or so, multiple methods for amending Irrevocable Trusts have become popular. In Massachusetts, there is statutory authority for amending Irrevocable Trusts (Massachusetts General Law Chapter 203E § 411).

If the Donor and all the beneficiaries agree, they may petition the Probate Court for permission to amend an Irrevocable Trust. If the amendment will not frustrate the original purpose of the Trust, the Court will typically allow the amendment.

What is Amendment by Agreement?

Some Trust documents will permit amendment by other means. Irrevocable Trusts may be amended without Court approval, but only if the terms of the Trust agreement are governed by the laws of a state that allows such action or if the Trust agreement permits amendment by agreement within its own terms.

What is Amendment by a Trust Protector?

Alternatively, some Irrevocable Trusts use the role of a Trust Protector. A Trust Protector is usually an independent party, not related to the Donor or the trust beneficiaries, who is given special powers that a Trustee is not given.

Often, a Trust Protector will be permitted limited authority to amend an Irrevocable Trust. This authority might include the ability to change the Trust due to changes in tax law, or to remove a Trustee, or to take other actions that are intended to protect the Trust assets from negative outside influences.

What is “Decanting” an Irrevocable Trust?

Finally, an Irrevocable Trust may be amended by “decanting”. In Massachusetts, Trust decanting is permitted if the Trust instrument authorizes the Trustee to remove the assets from one Irrevocable Trust and place them in a new Irrevocable Trust with the same trust beneficiaries.

Some states have statutes that authorize Trust decanting, but Massachusetts does not. Instead, estate planning attorneys in Massachusetts rely on case law (the case, Kraft v. Morse, 466 Mass 92 (2013), involved the Kraft family – the owners of the New England Patriots).

Under the Kraft decision, Trustees who have authority under an Irrevocable Trust to make discretionary distributions may distribute the Trust assets to a new, Irrevocable Trust with the same beneficiaries and with terms and conditions that better fit the needs of the beneficiaries. While not exactly amending a Trust, decanting an Irrevocable Trust has the same effect.

How Does a Revocable Trust Work?

A good estate planning lawyer can help you decide if your estate plan should be based on a will, a Revocable Trust (also known as a Living Trust), or an Irrevocable Trust. With a Revocable or Living Trust, you can move assets into the Trust’s ownership while you retain control of those assets.

In order to understand how a Revocable Trust can help you and your family, you should understand what a Revocable Trust is. Essentially, a Revocable Trust is a contractual agreement among three parties: (1) a Donor – the person who creates the Trust and gives some property/asset to the Trust; (2) a Trustee – the person who will manage and control the assets of the Trust; and (3) a beneficiary – the person (or persons) who will get the use and enjoyment of the assets in the Trust.

Initially, most people set up their Trust and take on all three roles. But in order to have a valid Trust there must be at least one other person involved in the Trust. An easy way to add another person is to add a future interest beneficiary – someone to be the beneficiary after you pass away.

This is typically a spouse, if you are married, followed by the children (or whomever you wish to receive your wealth at the time of your death). This achieves your testamentary disposition needs.

What is the Role of a Successor Trustee?

Additionally, a Trust will provide for a Successor Trustee, someone to be the Trustee if you are no longer able to act in that capacity. If you are ill or unable to act as your own Trustee, your Successor Trustee may step in to manage the Trust assets on your behalf.

Eventually the Successor Trustee will manage the assets of the Trust after you pass away, making sure the inheritance is quickly and efficiently available for your heirs, the future interest beneficiaries.

You may modify or cancel a Revocable Trust as you wish, and the assets that are owned by your Revocable Trust at the time of your death will transfer to or for the beneficiaries without being subjected to the often costly and lengthy probate process.

For example, an IRA Inheritance Trust ™ is a Revocable Trust that becomes the beneficiary of your IRA (individual retirement account) after your death. It provides your beneficiaries with protection from creditors, divorce, bankruptcy and estate taxes, all while allowing for distributions over a beneficiary’s lifetime.

How Does an Irrevocable Trust Work?

Irrevocable Trusts are often created for very specific, sometimes limited purposes, such as asset protection, estate tax reduction, income tax reduction, gifting, or eligibility for certain government benefits. Often, when you create an Irrevocable Trust, you give up the ownership and control of whatever assets are placed in the Trust.

A properly designed Irrevocable Trust will consider a number of variables, such as:

1. Whether the assets of the Trust should be included in the estate of the Donor for important income tax benefits, or whether the assets should be \excluded from the estate of the Donor for estate tax savings;

2. Whether the transfer to the Trust should be a completed gift (often requiring the filing of a gift tax return – Form 709) or should be an incomplete gift – meaning the Donor may change who will ultimately receive the gift;

3. When the income of the Trust is received by a beneficiary, whether the income tax liability will stay with the beneficiary or be shifted to the Donor. When the tax is paid by the Donor, it is done so without a gift tax consequence, which can significantly increase the perceived value of the assets given to the Trust;

4. After the death of the Donor, whether the income taxes should be paid by the Trust or by the beneficiary (often Trust tax rates are quite high, so having the beneficiary bare the tax planning burden – even if the income is retained by the Trust – is a money-saving choice);

5. Where the Irrevocable Trust should be established – in Massachusetts or in a state with more favorable Trust laws;

6. The choice of Trustee – the beneficiary or a professional Trustee; and

7. What distributions should the Trust authorize? Generally the best asset protection can be achieved if the Trust is purely discretionary – so that the Trustee may decide what, if any, distributions will be made and when they will be made.

Each decision will impact how the Trust will work and the degree of benefit it can convey. But if you create an Irrevocable Trust, you must remember that it is not reversible. Generally, the assets you gift to an Irrevocable Trust cannot be given back to you.

However, in some Irrevocable Trusts, the Donor may be given the power to “swap” assets with the Trust. But possessing such a power does have income tax consequences, and it is not advisable to include a swapping power in an Irrevocable Medicaid Planning Trust.

What Are Some Specific Examples of Irrevocable Trusts?

Irrevocable Trusts can hold and then distribute assets to a beneficiary weeks, months, or even years after your death. Examples of Irrevocable Trusts include:

#1: A Capital Gains Avoidance Trust

A Capital Gains Avoidance Trust is an Irrevocable Trust to which you give highly appreciated assets. The Trust then sells the highly appreciated asset. Normally, the sale would trigger a capital gains recognition, resulting in income taxes.

But because of the way this Trust is designed, after the sale, the entire proceeds from the sale of the highly appreciated asset may be reinvested without payment of capital gains taxes. Instead, an income stream is paid to the beneficiary (who is usually the Donor), and as the income is received, capital gains taxes are paid on a portion of the income payment.

When the beneficiaries die, whatever remains in the Trust, if anything, is paid to a charity of the Donor’s choice. This Trust lets you avoid the capital gains tax when you sell appreciated real estate, stocks, or other capital assets. This type of Trust can be structured so that the capital gain is spread out over many years, thereby reducing the total tax paid. This Trust is also sometimes called a Charitable Remainder Trust.

#2: An Irrevocable Life Insurance Trust

An Irrevocable Life Insurance Trust is a Trust designed to own a life insurance policy. It controls and owns your life insurance policy while you are alive, and it manages and distributes the proceeds from the policy after your death.

Many people know that life insurance death benefits are generally not subject to income tax, but when life insurance is owned by the insured, it is a part of the owner’s taxable estate and therefore subject to estate taxes.

By having your life insurance owned by an Irrevocable Life Insurance Trust, not only will the death benefit pass free of income tax, it will also pass free of estate tax.

#3: A Domestic Asset Protection Trust (DAPT)

A Domestic Asset Protection Trust is a self-settled Irrevocable Trust that is intended to protect your assets from potential future creditors. Currently nineteen states recognize some form of a self-settled Asset Protection Trust, but Massachusetts is not one of those states.

Even though Massachusetts does not yet recognize these Trusts, the use of DAPTs can have an important role in your estate plan. These Trusts can be used to reduce the Massachusetts estate tax in addition to providing asset protection.

#4: A Spousal Limited Access Trust (SLAT)

A Spousal Limited Access Trust is another tool that may provide asset protection and estate tax reduction benefits in Massachusetts. This type of Irrevocable Trust is similar to a By-Pass or Credit Shelter Trust that is established as a lifetime gift instead of a gift to the spouse at the time of the Donor’s death. Trust assets are available for the needs of a spouse but are not owned by the spouse.

Because Massachusetts does not have a state level gift tax, and because the federal lifetime exemption is so high, using SLAT can have significant Massachusetts estate tax reduction benefits by exempting Trust assets from the estates of both the Donor and the Donor’s spouse.

#5: A Medicaid Planning Trust (MPT)

A Medicaid Planning Trust, sometimes called an Irrevocable Income Only Trust (IIOT) is a special Trust with a very limited purpose. A Donor will establish this kind of Trust if s/he intends to preserve the estate from the cost of nursing home care.

COVID-19 has certainly done some damage to this type of Irrevocable Trust – a recent article in the Boston Globe revealed that nearly 62 percent of all COVID-19 related deaths in Massachusetts occurred in nursing homes and rest homes.

Since this type of Irrevocable Trust is set up to make the Donor eligible for state-paid nursing home care, it is now less attractive to use this kind of Trust, given the deadly mix of virus-susceptible nursing home residents and COVID-19.

Unfortunately, what most people who use this Trust don’t realize is that the principal placed into this type of Trust is NEVER available for the use of the Donor or the Donor’s spouse. The Trust assets may only be used to produce income for the Donor or the Donor’s spouse. Five years after the assets are given to the Trust, the assets are protected from the Medicaid look-back rules (the “five-year look-back”).

What is the Main Problem With an MPT?

However, the problem with this type of Trust is its lack of flexibility. An MPT can not include any provisions for amending the Trust. Furthermore, it should not include any ability for the Donor to “swap” assets with the Trust.

While assets in these Trusts are protected from nursing home expenses after the five year look-back period has passed, the assets can not be used for most assisted living arrangements (which most people need before they need nursing home care).

Additionally, most people desire in-home care, but the assets in an MPT are not available to be used that way, in most cases. However, these Trusts may make sense if you have a diagnosis that will definitely require you to reside in a nursing home.

Understanding the Limitations of an MPT is Imperative

But before setting up this kind of Trust, you must understand the limitations on you and your spouse. If you die first, your spouse will need to live with the restrictions of this Trust – and the assets will still be unavailable to your spouse.

Consider this: the average cost of nursing home care in Massachusetts is approximately $130,000 to $150,000 per year (as of 2020). The average stay is approximately two years. So, the total cost is approximately $300,000.

Certainly, that is a lot of money. But what is the total value of your estate? Add up the value of everything you own – real estate, retirement accounts, investments, bank accounts, life insurance, etc. Does it make sense to you to give away the total value of your estate, making it forever unavailable for the needs of you and your spouse, to save a rough average of $300,000?

If you answer “yes,” then this type of Trust may be appropriate. The bottom line is this: if an attorney is suggesting an MPT for you, be sure to ask a lot of questions. Make sure you understand the lifetime ramifications of this kind of Trust.

If you are told there is a back door, or that there can be a tacit understanding with the kids that the assets of the Trust may somehow be returned to you, then Massachusetts (MassHealth) will take the position that the assets ARE available to pay for your nursing home care. Yogi Berra said it best: “If you don’t know where you are going, you’ll end up someplace else.”

What Steps Are Required to Create an Irrevocable Trust?

To establish an Irrevocable Trust in Massachusetts:

  1. Identify the properties and assets that you want to move into the Trust.
  2. Determine your beneficiaries.
  3. Determine who is qualified to act as the Trustee.
  4. Have a qualified Massachusetts estate planning lawyer prepare the Irrevocable Trust.
  5. Transfer the appropriate assets to the newly formed Irrevocable Trust.
  6. Let the Trustee manage the Trust – don’t try to manage it for the Trustee.

Is It Really Irrevocable?

To create an Irrevocable Trust and to take advantage of the benefits it offers, the terms of an Irrevocable Trust must prevent you from revising or amending it. Can an Irrevocable Trust ever be changed or amended? The answer is no, not by the person who creates it.

In rare cases, however, beneficiaries or the Trustee may be able to make a change to an Irrevocable Trust when such a change is in the best interests of a beneficiary and is not in conflict with the intentions of the person who created the Trust (the “Grantor” or “Donor”).

For example, if you designate assets for a child’s or grandchild’s education, but after your death the child or grandchild develops a serious medical condition that requires costly treatment, your Trustee may seek a modification that will allow the Trust’s funds to pay for necessary treatment.

Upon a Grantor’s death, a Trustee becomes responsible for the administration of the Trust. By working with the right Cape Cod estate planning attorney, a Trustee in Massachusetts can obtain the sound legal advice needed for proper administration of the Trust at every stage of the process.

What’s Right for You?

Every estate plan is unique, so an Irrevocable Trust may or may not be right for you. But without the right estate plan, the Internal Revenue Service (IRS) or the Massachusetts Department of Revenue may be able to take a significant portion of your family’s assets after your death.

A good estate plan is a smart idea for everyone, regardless of age, health, or financial status. Although no one knows what tomorrow may bring, the proper estate plan will provide for your loved ones and put them in the best possible position to deal with whatever the future holds.

The right Massachusetts estate planning attorney will answer your estate planning questions, address your concerns, and provide the legal services and personal assurances you need to help you create the best possible estate plan for you and your family.

Filed Under: Estate Planning

Cape Cod Trust Lawyers Offering Options to Protect You and Your Family

A trust is a way of protecting your assets and defining what will happen with them once you become incapacitated or pass away. Generally speaking, trusts are one of the main pieces in modern estate planning. Setting up a trust involves transferring ownership of your assets to the trust in different capacities and then establishing rules for their distribution for the next generation. Trusts have many advantages such as provisions for incapacity care, probate avoidance, and tax avoidance. A trust is a private document that typically does not need to go through a court in order for your assets to be transferred, and it is typically an easier and less costly way to pass down your wealth which can be used in conjunction with a will.

Some of the most commonly used trusts are Revocable Living Trusts and Irrevocable Trusts. Here, the term “revocable” means it can be amended or revoked at any time, and the term “living” means that it has been funded — in other words, assets have been transferred to the trust, and the title is now in the trust and no longer owned by you personally.

An Irrevocable living trust cannot be changed once it has been created, unless there is consent from the beneficiaries to do so. Assets placed in an irrevocable trust cannot be taken back. Trustmakers give up ownership and control of assets put in an irrevocable trust, and by doing so, the trust removes taxable estate from the benefactor’s assets, resulting in possible tax savings.

Some trustmakers choose to set up a Personal Asset Trust ™ . A Personal Asset Trust ™ is a different way of passing on your wealth but still retaining control over who, where, and how you wish funds and assets to be spent. You can stipulate conditions and keep the family money in the family. Furthermore, you can help insulate and protect your inheritance from creditors and lawsuits that your beneficiaries may be subject to once they receive the money.

Many families are choosing to focus on legacy continuation and add it as an objective for their Estate Planning. With that in mind, another trust option available is the IRA Inheritance Trust™. An IRA Inheritance Trust ™ is a special kind of revocable living trust designed to become the beneficiary of your IRA after you die. It has been recently approved by the IRS as a way of providing your beneficiaries with both protection from creditors and the ability to take advantage of the ability to “stretch out” RMDs (Required Minimum Distributions) over the beneficiary’s lifetime instead of being limited to 10 years. The money inside an IRA may now compound for much longer, and it is tax-deferred.

What Type Of Trust Can Be Used To Protect and Manage My Assets in Case of Disability?

With few exceptions, trusts are generally very flexible and tailored to your needs. At Boyd & Boyd, we have trusts created especially for cases in which the trust creator is in the early stages of Alzheimer’s or wants to have plans in place to ensure their care and protect their assets in case they become disabled or incapacitated. You may also set up a Special Needs Trust for yourself or a beneficiary who needs to remain eligible to receive government benefits and still get to enjoy the resources that improve their quality of life. In such cases, pre-defined rules can be added to the trust in order to protect the assets in it and stipulate how the money can be spent.

While each case is different — a loved one may currently have special needs care and no longer need government benefits in the future, or become disabled in the future and need those benefits that they may not need today — a special needs trust may provide the certainty that you or your loved one will be cared for when the need arises.

How Can I Find Out Which Type Of Trust Is Right For Me?

Navigating the different estate planning options and trusts can be overwhelming and time-consuming for most clients. Strategic planning and periodic updates to your trust and estate plan are fundamental to ensure your assets and wealth will be passed on according to your wishes. At Boyd & Boyd, we have helped many families walk through the process by providing legal advice and explanations in plain terms to assist you in making the right choices to have a strong estate plan in place, also we have best estate planning attorneys.

Talk to our legal team in Cape Cod by calling (508) 775-7800 and requesting a free initial estate planning consultation.

Charitable Remainder Trust Attorneys Helping Plan Your Family’s Future in Cape Cod and The Surrounding Area

A Charitable Remainder Trust (CRT), also commonly referred to as a Capital Gains Avoidance Trust, is an important tool in estate planning. As the name says, it allows you to avoid capital gains tax on the sale of appreciated real estate. It can also be effective to avoid taxes on appreciated stock and other personal property. It constitutes a type of tax-exempt irrevocable trust designed to reduce the taxable income of an individual by distributing income to the trust beneficiaries for a set period of time, and donating the remainder of the trust to a designated charity.

There are a few benefits associated with setting up a Charitable Remainder Trust. Besides avoiding capital gain taxes on the sale of appreciated property, it offers the opportunity to generate a lifetime income stream and diversify your investment portfolio. You are also looking at potential savings on estate taxes and the ability to benefit a charitable organization of your choice. Because it is considered a split-interest giving vehicle, it allows a trust to make contributions, be eligible for a partial tax deduction, and donate the remaining assets.

How Does a Charitable Remainder Trust Work?

Charitable Remainder Trusts have tax reduction as a main goal. Trustors donate their assets to an irrevocable trust set up to pay a beneficiary over a set period of time, and then donate what is left to charities also named as beneficiaries. Because this type of trust is irrevocable, it cannot be modified and assets cannot be taken back without permission from the beneficiaries. Appreciated real estate can be sold by the CRT instead of by an individual. Because a CRT is a tax-exempt trust, it does not need to pay capital gains tax.

This is a strategy that provides possible tax savings, and it also allows the trustor to fulfill philanthropic goals and still generate income. It may also be beneficial for retirement and estate planning.

Are There Different Types Of Charitable Remainder Trusts?

Yes, there are two main types of CRTs you can choose from depending on your goals. The first one is called CRAT or Charitable Remainder Annuity Trust. This type of trust results in the distribution of a fixed annuity each year, i.e., it pays a fixed-dollar amount of the trust assets every year.

The second option is called CRUTs, or Charitable Remainder Unitrust and it also distributes a fixed annual dollar amount, but it is based on a percentage of the balance of the trust assets. It pays an amount equal to a percentage of the trust value at the beginning of the year, usually 5 to 8%.

In either one of these, most payouts are taxed to the beneficiary and labeled as ordinary income or capital gains. Donors receive a tax deduction for their gift based on current federal income tax rules. The amount of the tax deduction varies and is based on a formula that takes into consideration the donor’s age and the payout percentage he or she chooses.

How Do Recent Changes Affect Charitable Remainder Trusts?

The Secure Act of 2019 included a new ruling that affects IRA and 401(k) beneficiaries. Typically, IRA beneficiaries were able to receive RMDs (Required Minimum Distributions) each year. The new ruling states that non-spousal IRA beneficiaries need to withdraw all the funds in no more than 10 years following the death of the original owner. The 10-year withdrawal ruling applies to all accounting, including trusts. Anyone who has questions about how this ruling affects their accounts should consult a qualified professional to gain a clear understanding of all the latest rulings and updates that may apply to their situation.

How Can I Find Out More about CRTs and Decide If It Is Right For Me?

There are many complexities and rules involved in properly setting up a Charitable Remainder Trust as a key piece of your estate plan. If you think this is an option you would like to learn more about, the best next step is to consult an estate planning professional who is knowledgeable in the area of planned giving strategies. The Law Offices of Boyd & Boyd are available to help you explore whether this specific strategy is right for you, and if that is the case, we are equipped to customize a charitable trust arrangement that takes into consideration your personal, financial, tax, estate, and succession planning objectives.

Call us at (508) 775-7800 or stop by our office to schedule a consultation with one of our estate planning attorneys.

Capital Gains Avoidance Trust Advice from Skilled Attorneys in Cape Cod

A Capital Gains Avoidance Trust is another important tool in estate planning. As the name says, it allows you to avoid capital gains tax on the sale of appreciated real estate. It can also be effective to avoid taxes on appreciated stock and other personal property. It constitutes a type of tax-exempt irrevocable trust designed to reduce the taxable income of an individual by distributing income to the trust beneficiaries for a set period of time, and donating the remainder of the trust to a designated charity.

There are a few benefits associated with setting up a Capital Gains Avoidance Trust. Besides avoiding capital gain taxes on the sale of appreciated property, it offers the opportunity to generate a lifetime income stream and diversify your investment portfolio. You are also looking at potential savings on estate taxes and the ability to benefit a charitable organization of your choice. Because it is considered a split-interest giving vehicle, it allows a trust to make contributions, be eligible for a partial tax deduction, and donate the remaining assets.

How Does a Capital Gains Avoidance Trust Work?

Capital Gains Avoidance Trusts have tax reduction as a main goal. Trustors donate their assets to an irrevocable trust set up to pay a beneficiary over a set period of time, and then donate what is left to charities also named as beneficiaries. Because this type of trust is irrevocable, it cannot be modified and assets cannot be taken back unless with permission from the beneficiaries. Appreciated real estate can be sold by the Trust instead of by an individual. Because a Capital Gains Avoidance Trust is a tax-exempt entity, it does not need to pay capital gains tax.

This is a strategy that provides possible tax savings, and it allows the trustor to fulfill philanthropic goals and still generate income. It may also be beneficial for retirement and estate planning.

Are There Different Types Of Capital Gains Avoidance Trusts?

Yes, there are two main types of Capital Gains Avoidance Trusts you can choose from, depending on your goals. The first one is called CRAT or Charitable Remainder Annuity Trust. This type of trust results in the distribution of a fixed annuity each year, i.e., it pays a fixed dollar amount of the trust assets every year.

The second option is called CRUTs, or Charitable Remainder Unitrust, and it also distributes a fixed annual dollar amount, but it is based on a percentage of the balance of the trust assets. It pays an amount equal to a percentage of the trust value at the beginning of the year, usually 5 to 8%.

In either one of these, most payouts are taxed to the beneficiary and labeled as ordinary income or capital gains. Donors receive a tax deduction for their gift based on current federal income tax rules. The amount of the tax deduction varies and is based on a formula that takes into consideration the donor’s age and the payout percentage he or she chooses.

How Do Recent Changes Affect Capital Gains Avoidance Trusts?

The Secure Act of 2019 included a new ruling that affects IRA and 401(k) beneficiaries. Typically, IRA beneficiaries were able to receive RMDs (Required Minimum Distributions) each year. The new ruling states that non-spousal IRA beneficiaries need to withdraw all the funds in no more than 10 years following the death of the original owner. The 10-year withdrawal ruling applies to all accounting, including trusts. Anyone who has questions about how this ruling affects their accounts should consult a qualified professional to gain a clear understanding of all the latest rulings and updates that may apply to their situation.

How Can I Find Out More about Capital Gains Avoidance Trusts and Decide If It Is Right For Me?

There are many complexities and rules involved in properly setting up a Capital Gains Avoidance Trust as a key piece of your estate plan. If you think this is an option you would like to learn more about, the best next step is to consult an estate planning professional who is knowledgeable in the area of planned giving strategies. The Law Offices of Boyd & Boyd are available to help you explore whether this specific strategy is right for you, and if that is the case, we are equipped to customize a Capital Gains Avoidance Trust arrangement that takes into consideration your personal, financial, tax, estate, attorney and succession planning objectives.

Call our Law Firm at (508) 775-7800 or stop by our Hyannis office to schedule a free initial estate planning consultation with one of our estate planning attorneys.

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Tariffs scare people. Yet tariffs are in the news and they impact your plan. Let me start by stating, this is not about our president. You may love him, you may hate him, or you may just not care. The same is true for his policies.

This is about your estate plan. This is about your legacy. This is about how to find opportunity in government policy. This is what we do, no matter who is in office or in control of the government, federal or state.

With that out of the way, I hope you will read to the end.

On April 2, 2025—now branded by President Trump as “Liberation Day”—a bold new trade doctrine was announced: the U.S. will impose reciprocal tariffs on imported goods. This means foreign countries will now face the same import taxes they place on American products—starting at 10% across the board, but rising to 34% for China, 24% for Japan, and 20% for the European Union.

This new trade doctrine might feel like foreign policy, but the ripple effects are domestic—and personal. At first glance, this might sound like the kind of news that only affects politicians or Wall Street analysts. But here’s the surprising truth: this policy shift could actually work in favor of your family—especially if you’ve already taken steps to protect your wealth through a comprehensive Wealth Protection Plan™. For families with trusts, LLCs, and generational plans in motion, the landscape just shifted in your favor.

Let’s unpack what’s happening—and why it matters to your family’s financial future.

Why Tariffs Matter for Your Estate Plan

Before I became an attorney, I studied economics with a focus on the intersection of law and economic behavior. My studies focused on how law shapes incentives and how incentives shape behavior. That foundation taught me something I use with every client: a good estate plan isn’t just legal. It’s economic. It’s strategic. It should anticipate change, not just survive it. Planning is not just a legal tool but a long-term economic strategy.

In fact, my family has personal experience that was impacted by trade policy. Many of you have heard me tell the story about how our firm started. Prior to opening his firm as a sole practitioner in the mid-1970s, my dad had worked with his father in the shoe manufacturing industry in Marlborough, Massachusetts. In the late 1960s and early 1970s, most shoe manufacturing moved overseas. Part of the reason for that was the fact that US goods faced tariffs in those overseas markets, but those same markets did not face tariffs on their goods in the US. Consequently, the US shoe industry, including my grandfather’s and father’s company, faced stiff competition – some of it unfair competition from overseas resulting from one-way tariffs. After overseeing the sale of his father’s company, the local factory was closed, and some jobs were transferred to the Carolinas (many jobs were lost). My dad had the opportunity to move south, but instead he chose to open the law firm that has become Boyd & Boyd, P.C.

These experiences help me to recognize that your plan doesn’t exist in a vacuum. It lives and breathes in the real world—impacted by markets, government policies, and global events. Reciprocal tariffs are one of those events that may quietly boost your family’s future financial position.

What Are Reciprocal Tariffs, in Plain English?

Here’s the concept in plain English: other countries will now be treated the way they’ve treated us for years. If China imposes a 34% tariff on American goods, we’ll match that when their products enter our markets.

This isn’t about isolationism. It’s about leverage. And for the first time in decades, it puts the U.S. in a position to reset unfair trade dynamics that have quietly undermined American industries.

The result? A rebalancing of power—and potentially, a resurgence of domestic growth.

How This Policy Could Strengthen Your Wealth Protection Plan™

If you’ve worked with us on a Wealth Protection Plan™, you already know its core mission: to protect, preserve, and pass on your wealth.

That includes shielding it from lawsuits, long-term care costs, and estate taxes—but it also means being ready to seize opportunities. Right now, one of those opportunities may be emerging from an unexpected place: the global trade arena.

A Wealth Protection PlanTM differs than a traditional estate plan. It includes components that do more than pass wealth at death, avoid probate and minimize estate taxes.  While it will do all of those things, a Wealth Protection PlanTM also addresses minimizing income taxes while providing long term asset protection for you and for your heirs. It is a multi-generational plan that will leave a lasting legacy. While traditional estate plans include documents like wills, powers of attorney and simple trusts, a Wealth Protection PlanTM uses multigenerational trusts like the Personal Asset TrustSM and the IRA Inheritance TrustTM, Limited Liability Companies (LLCs), Legacy LettersTM, Values VideosSM , and a Contract to Plan.

 

 

 

 

 

If you’ve worked with us to put a Wealth Protection Plan™ in place, you already understand the “why”: to protect what you’ve earned, preserve it for the long haul, and pass it on efficiently and securely.

But that plan isn’t static. It’s built to respond to change. And right now, change is knocking.

Here are four ways this trade policy shift could work to your family’s advantage:

  1. A Lift for American Industries = A Lift for Your Portfolio

Tariffs make foreign goods more expensive, pushing demand toward U.S.-made products. When domestic companies grow, markets follow. And if your family’s trusts or LLCs are holding assets in those sectors, you could see increased value without lifting a finger.

  1. A Stronger Dollar Means More Purchasing Power

When capital flows back to the U.S., the dollar strengthens. That means more value per dollar in retirement income, lifetime gifts, and legacy distributions. Your money goes further—whether you’re investing, spending, or giving.

  1. Tariff Revenue May Open Doors for Future Tax Relief

Tariffs generate revenue, plain and simple. And while we can’t predict every move Congress will make, more revenue can mean more room for reform. Think: incentives for domestic investment, or expanded exemptions for estate transfers. In short: good planning could get even better.

  1. A More Predictable Environment for Long-Term Planning

An estate plan isn’t just about today—it’s about where things will be in ten, twenty, or even fifty years. A strengthened domestic economy provides the kind of stability and predictability that allow families to plan boldly and act with confidence.

What To Do Next: Three Smart Moves

No estate plan should ever be frozen in time. The strongest families aren’t just prepared; they’re nimble. If this policy direction holds—and domestic markets gain steam—here are three smart adjustments worth considering:

  • Revisit Your Investment Allocations
    Trusts and family LLCs should reflect where the opportunity is. If domestic sectors are poised to grow, don’t miss the wave. Remember: Today may represent a buying opportunity.
  •  Review Asset Valuations
    A rising tide lifts many boats—but that can also raise tax exposure. Make sure your valuations are current so your plan stays efficient.
  • Accelerate Strategic Gifting
    If values are increasing, gifting now locks in today’s lower valuation. That’s a tax-savvy move, especially while discounting and exemption levels remain favorable.
  • Consider ROTH Conversion
    Market jitters and downturns create a tremendous opportunity to make Roth conversions of your traditional IRA. Traditional IRAs trap unpaid income taxes trapped inside them. By converting to a Roth IRA you can prepay taxes when market declines occur.  Be sure to consult your accountant, financial advisor and estate planning attorney to develop a strategy that will get the most “bang for your buck.”  Be warned: Roth conversions will increase your income and the taxes due for the year. You may wish to avoid bumping yourself into a higher tax bracket. Conversions can also increase your Medicare premiums. So it is best look at all the costs before converting. But generally, a Roth conversion will create more wealth than remaining in a traditional retirement account.

Your Shield Is Already in Place

Tariff battles can lead to retaliation—that’s true. But this is exactly why we design Wealth Protection Plans™: to weather volatility, to create options, and to protect against the unexpected.

When markets move, your plan doesn’t panic. It pivots.

The Takeaway: Legacy Favors the Prepared

President Trump’s trade policy is drawing lines in the global sand. That may cause tension abroad—but it may also create unique domestic opportunity. For families who’ve done the hard work of planning—who’ve built legal and financial infrastructure designed to adapt and endure—the next few years could offer real, measurable gains.

If you’ve already built your Wealth Protection Plan™, now’s the time to review and refine. If you haven’t yet started, this is your signal.

As always, we’re here to help you think long-term, act strategically, and protect what matters most.

Filed Under: Estate Planning

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A Personal Asset Trust℠ Offers Flexible Options to Protect Your Children’s Inheritance

When people engage in estate planning, they often want to protect their legacy and the gift they leave their loved ones. They may want to ensure those assets are protected for the use of their children and grandchildren. While basic estate planning with a will or a typical trust may make your wishes known, it doesn’t offer much asset protection, if any. Specially designed trusts provide better protection. Find out more about a specific trust tool, the Personal Asset Trust℠, below, including how it can help you protect your kids’ inheritance.

Traditional estate planning techniques leave an inheritance “to” a child or a grandchild. If some kind of protection was needed because the child was a spendthrift or was receiving needs-based government benefits, someone other than the child can be placed in charge of the inheritance as the trustee. Modern techniques, like the Personal Asset TrustSM, leave assets “for” the child or grandchild. With a Personal Asset TrustSM, it is possible to allow the child to be the trustee, and only when there is a problem will a co-trustee be added or used to replace the child as trustee. Once the problem is resolved, the child may be reinstated as the sole trustee.

What Is a Personal Asset Trust?℠

A Personal Asset Trust℠ is a unique type of trust that is built into and springs out of your own living trust. This allows ownership of the inherited assets to remain in the trust, to be controlled by the beneficiaries for their own use and enjoyment. The Personal Asset Trust℠ gives an heir more protection than if they received the inherited assets outright. Typically, a Personal Asset Trust℠ owns non-retirement assets.

To understand this concept, it’s best to compare the method of inheritance via a Personal Asset Trust℠ versus inheritance through a traditional trust:

  • When you create a traditional trust, you place assets in the ownership of the trust. You also create provisions for how those assets will pass to your heirs upon your death. Generally, the assets that are to be inherited are distributed outright “to” your heirs upon your death. Some families use a stepped distribution where ownership is transferred when the beneficiary reaches certain specific age milestones — for example, typical ages for a stepped distribution might be something like one-third at 25, the second third at 30 and the final third at 35. But once the assets are distributed out of the trust, and the child owns the assets, any problem the child has can take the assets away from the child. For example, if the child was sued, the entire inheritance could be seized and taken from the child.
  • With a Personal Asset Trust℠, ownership of the assets doesn’t move from the trust to the individual. Instead, ownership moves from the trust to a separate trust that is only for the benefit of that child. Your child can be the trustee and manage the assets. Additionally, the child will be the beneficiary and can use the trust assets as they need. The child can take money out of the trust to spend on consumables – pay bills, take a vacation, etc. But if they want to invest the assets (buy a house, invest in stocks & bonds, or to start a business) the child has the trust make the investment and own the investment for them. The key is that the trust continues to own the inheritance and because of that the inheritance will be protected from problems like a divorce, a lawsuit, a bankruptcy, tax liens or other creditor claims.

How Does a Personal Asset Trust℠ Add Protection for Heirs?

By leaving an inheritance in a trust for the benefit of your child you can give all the benefits of the inheritance without the risks of outright ownership. In fact, all fifty states recognize the concept of a third party settled asset protection trust. In this case you are the third party establishing the trust for the benefit of your child. Any existing or future creditors of your child will not be able to access the trust’s assets as long as your child honors the trust as a separate entity. If your child is going to be the sole trustee over the inheritance, it is also important for your child to use features like a trust protector that are built into the Personal Asset Trust℠. This method provides extended protection for your heirs because they never own the assets. The ownership remains with a trust. That means your heirs can benefit from the assets, but they don’t have the risks of ownership.

One example of a risk of ownership is a lawsuit. Imagine the following scenario:

  • You have one adult child and they have two children.
  • You leave assets to the adult child with hopes that there will be some left for the grandchildren.
  • Your adult child is involved in an auto accident that was their fault, and they are sued.
  • If your adult child owns the assets you left for them, those assets are at risk in the lawsuit.
  • It’s possible that your adult child could lose all of the assets you left; there would be nothing for them and nothing left for your grandchildren.

However, if you had opted for estate planning that included a Personal Asset Trust℠, the assets you left are owned by the trust, not your child. The inherited assets can be protected from the lawsuit, so that the inheritance won’t be taken from your grandchildren.

When you create a Personal Asset Trust℠ for your child, you create a barrier for their assets against:

  • Creditors. Creditors can’t sue them for the assets or attempt to take the assets, because your child does not own the assets in the trust.
  • Lawsuits. As mentioned above, anyone suing your child can’t try to take assets that your child does not actually own.
  • Spouses and ex-spouses. Because your child doesn’t own the assets, they aren’t considered marital property and can’t be targeted in property divisions as part of a divorce.
  • Estate Taxes. If your child does own assets at death the government cannot assess an estate tax against the assets. That way an inheritance may pass from generation to generation without transfer taxes, potentially preserving hundreds of thousands of dollars for your family’s needs.

Can You Add a Personal Asset Trust℠ to an Existing Trust?

Yes, you can add this option to an existing revocable trust via an amendment. If you’ve already invested time and money into creating a living trust, amending it in this way can be a cost-effective way to provide future asset protection for your heirs.

What If You Have Large Qualified Retirement Accounts like IRAs or 401(k)s? Can they be protected by a Personal Asset Trust℠?

First, you should never try to change the ownership of a retirement account into any kind of trust. The tax code treats a change of ownership of a retirement account as a complete withdrawal of all of the retirement funds, which makes the full balance of the retirement account taxable income. So, can you name a Personal Asset Trust℠ as the beneficiary of a retirement account? Because the rules governing IRAs are so complicated, it is not recommended that Personal Asset Trust℠ be the beneficiary of retirement plans.

Instead, there is a specialized trust, designed to be the beneficiary of retirement plans and it gives the same kind of asset protection as a Personal Asset Trust℠. This type of trust, called an IRA Inheritance TrustTM is built to comply with all of the IRS’s regulations. In fact, the IRS has reviewed this type of trust in a Private Letter Ruling (PLR 200537044). An IRA Inheritance TrustTM gives asset protection to the heir and allows for the most tax deferral of the inherited IRA. Essentially, the IRA Inheritance TrustTM has a Personal Asset Trust℠ built right into it.

What if You Have an Irrevocable Trust?

While you might have heard that an irrevocable trust cannot be modified, that’s not true. There are a number of methods available to modify irrevocable trusts. In some states, you can often do so with the consent of the donor and all heirs. Of course, obtaining court approval is possible. It is often easier and less expensive to use a Trust Protector if the trust provides for one. Finally, decanting in irrevocable trust may be possible. Decanting an irrevocable trust involves moving assets from one irrevocable trust to another irrevocable trust. Both trusts must have the same beneficiaries, but the second trust can have different terms and conditions than the first.

If you already have an irrevocable trust and you are interested in learning how you can make changes to provide more asset protection for your heirs, reach out to the Law Office of Boyd & Boyd, P.C. to find out how we can help. We’re experienced in amending trusts, including irrevocable trusts, and can work with you to ensure your trusts and estate plans best serve your needs and support your goals for the future.

Filed Under: Estate Planning