- Jurisdiction
- Maryland
My Uncle passed away in England. A sum of money has been offered to my children if the money is held in trust. It could be paid to me and I gift it to my children, or paid directly into the formed trust. Inheritance tax is not applicable. UTMA/UGMA will not work for us as we do not want our children to have unfettered access to several hundred thousand at age 21.
We have spoken to several lawyers and received wildly different advice ranging from Irrevocable/Grantor/Discretionary trust to Revocable/Non-Grantor/Discretionary trust. Our goal is to keep the money safe from predators, for the benefit of our children (trustee will have no entitlement to benefit from the trust), and to make sure they do not receive a large payout before they are mature enough. Our estate is not valued anywhere near the threshold for death duty, this is not an estate planning effort.
I have read about the difference between Revocable versus Irrevocable, and also Grantor/Non-Grantor and I believe we need an irrevocable trust (this is not some investment protection vehicle for us). But for Grantor vs Non-Grantor...I want the trust to pay the tax, so if we go Grantor and I pay extra taxes, the trust can reimburse me. As I understand Non-Grantor means money distributions can be made to reduce paying tax at the compressed trust rate (which would then be taxed at the beneficiary tax rate - but in reality this means it will be subject to the kiddie tax).
I have also read Irrevocable trusts set up by a Grantor who is also a Trustee is not allowed as it would look like I still had some degree of ownership of the trust. However, if the trust stipulates for my children only, why would this be an issue?
Any advice would be greatly appreciated!
We have spoken to several lawyers and received wildly different advice ranging from Irrevocable/Grantor/Discretionary trust to Revocable/Non-Grantor/Discretionary trust. Our goal is to keep the money safe from predators, for the benefit of our children (trustee will have no entitlement to benefit from the trust), and to make sure they do not receive a large payout before they are mature enough. Our estate is not valued anywhere near the threshold for death duty, this is not an estate planning effort.
I have read about the difference between Revocable versus Irrevocable, and also Grantor/Non-Grantor and I believe we need an irrevocable trust (this is not some investment protection vehicle for us). But for Grantor vs Non-Grantor...I want the trust to pay the tax, so if we go Grantor and I pay extra taxes, the trust can reimburse me. As I understand Non-Grantor means money distributions can be made to reduce paying tax at the compressed trust rate (which would then be taxed at the beneficiary tax rate - but in reality this means it will be subject to the kiddie tax).
I have also read Irrevocable trusts set up by a Grantor who is also a Trustee is not allowed as it would look like I still had some degree of ownership of the trust. However, if the trust stipulates for my children only, why would this be an issue?
Any advice would be greatly appreciated!
