Planning Potpourri: Revocable Trusts; Seed Gifts; SNTs

Revocable trusts. These trusts, not merely a will, should be the default approach to estate plans for many. Consider replacing your current will with a revocable trust and “pour- over” will. Revocable trusts have been touted for decades as a tool to avoid probate. While that might be beneficial, there are many more im- portant uses of this document. A rev- ocable trust, especially if combined with a trust protector and other checks and balances, can be a useful technique to protect you as you age or in the event health challenges worsen. Trusts for heirs formed under a revo- cable trust may be easier to move to trust friendly jurisdictions.
■ Special needs trusts. The provisions that are required in New Jersey differ than those required for trusts under New York because of what is known as the New Jersey trust buster provi- sion. The trigger mechanism should

 be incapacity and the definition should track the definition provided under the law. If your document has not been reviewed, your special child moved to NJ, or your document silent (can anyone assure they won’t have a special needs descendant), review them.

■ Seed Gifts: Sales of assets to grantor trusts have become a common estate planning technique for larger estates. Some commentators have long sub- scribed to a mythical requirement that before assets can be sold to a trust that trust should have assets/ value equal to 10% of the value of the assets to be sold. That Chimera never really comported with applicable law, but had become de rigueur as com- mentators kept repeating the myth. Other commentators have suggested instead that a reality of sale construct be used (whether or not the 10% seed gift is addressed). Under this ap-

proach the buyer should be able to demonstrate a reasonable likelihood that it will be able to make the pay- ments required. There are other points to consider. Although taxpay- ers have had a recent victory on a note sale transaction, other tech- niques, such as a sale to a disregard- ed LLC followed by a contribution to a GRAT might warrant considera- tion instead. Also, with so many wealthy clients having created trusts in prior years (especially 2012) it may be feasible to engage in transac- tions with trusts that already have significant assets and perhaps assets unrelated to the asset being sold. 
source http://shenkmanlaw.com/uploads/2016/06/Practical-Planner-Apr-Jun-2016.pdf