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A Better Partnership

Legacy Matters

March 23, 2021

2020 Planning Is Only Useful if It Is Completed

Anticipating the possibility of tax law changes in 2021, we helped clients throughout 2020 to create new trusts, modify existing trusts and utilize a variety of planning strategies that allowed them to take advantage of currently high transfer tax exemption amounts, use wealth transfer techniques that might not be available in the future, and protect assets for generations to come.
So, if you made changes last year, are you done with this planning? Perhaps not. You may still have some wrap-up items to take care of. The best planning in the world can be undermined by not seeing it through to completion.
2020 Planning Wrap-Up Tasks: 

  • Prepare new trustees to serve. Many first-time trustees were appointed. Now is the time to make certain they understand their duties and responsibilities, what the terms of the trusts require and best practices for serving as a trustee. A meeting among your estate planning attorney, CPA, investment advisors and other professionals will be time well spent to make certain that the full benefits of the planning are realized, and the trust administration gets off to a good start.

  • Share information about new trusts with adult beneficiaries. In most circumstances, the existence of a new trust must be disclosed to the beneficiaries. If this has not occurred, a plan should be put in place to do so.

  • Adopt an investment strategy. Make certain an investment strategy is developed that reflects the purposes of the trust, the fiduciary duties imposed upon the trustee by the trust instrument and by state law, the tax environment in which the trust will operate and the foreseeable needs of the beneficiaries. No one should assume that the investment strategy of the donor is necessarily the right strategy for the trust.

  • Prepare tax returns. Do not overlook gift tax returns that must be filed or tax elections that will need to be made for trusts on various returns. New income tax returns may be required as well. Informational statements such as Forms 1099 from new financial accounts owned by grantor trusts need to be provided to CPAs so the information is included in the grantor’s tax return.

  • Calendar administration dates. New gift trusts, GRATs and grantor trusts that acquired assets in exchange for a promissory note all come with a number of administration “to do” items and dates by which they will need to be completed. Be sure to identity the crucial dates that affect administration and calendar them for timely completion. This includes due dates for annuity payments, note payments, trust accountings, tax returns, estimated tax payments, and asset valuations for unitrusts where annual distributions are a percentage of trust values. Also calendar dates when beneficiaries are entitled to receive notices or to exercise withdrawal rights or to receive mandatory distributions.

  • Use your additional 2021 exemption. The new year brought with it an increase in the gift tax basic exclusion amount from $11,570,000 to $11,700,000. If you used all of your exclusion by the end of last year, you now have an additional $130,000 ($260,000 for married couples) of gift tax exclusion that you can use in 2021. 

Push Your Planning Over the Finish Line
It is important to finish the work you started last year, so your plan will carry out your current wishes and take advantage of current large transfer tax exemption amounts. Your estate planning attorney can help fund your trusts, prepare your trustees to serve and complete other tasks necessary to wrap up your planning. If you have estate planning items to complete in 2021, please contact your estate planning attorney or Mark Harder, at or 616.396.3225.

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